• Runoff Costs May Hit City Developers
  • June 27, 2003 | Authors: Eric M. Braun; Christine Carlisle Odom
  • Law Firms: Womble Carlyle Sandridge & Rice - Research Triangle Park Office ; Womble Carlyle Sandridge & Rice - Raleigh Office
  • Controlling stormwater runoff and improving water quality continue to influence local government politics. As federal and state regulators mandate increasingly stringent stormwater runoff controls and water quality standards, local governments will continue to seek ways of passing the costs of meeting these standards to private property owners. Stakeholders from the development community, as well as neighborhood groups, need to stay alert to proposed changes in stormwater policies to ensure that implementation is done in a reasonable and equitable fashion.

    The City of Raleigh is currently dealing with these issues and the outcome of two particular policy initiatives could have a significant impact on property owners.

    After months of futile negotiations with the North Carolina Department of Environment and Natural Resources, Raleigh enacted a new ordinance mandated by the State of North Carolina that requires that all new development reduce the amount of nitrogen leaving a site through the construction of stormwater impoundment devices. This will inevitably impact developers by reducing overall lot yields and useable office and retail space in new development proposals.

    In addition, homeowners associations will be required to maintain these detention basins after construction and obtain annual certifications from engineers stating that the devices are working properly.

    Raleigh was not able to gain approval of an alternative proposal to allow regional stormwater management that would permit a group of developers and/or property owners within a particular drainage area to build a regional detention basin to serve multiple properties.

    That approach would have created fewer ponds, reduced maintenance costs, improved safety and provided amenity-like water features rather than small basins scattered across individual properties.

    With the regional approach rejected, all new development approved after May 2001 must comply with the new state rules. The additional costs associated with the nitrogen reduction requirements will likely be passed on to consumers and business owners through higher new home costs and increased rent for businesses occupying new commercial buildings.

    In an effort to soften the financial impact on developers who had projects under way or approved prior to May 2001, the Raleigh City Council enacted a new policy that allows staff to make a case-by-case determination as to whether a particular developer has obtained a vested right to complete its project as approved. For example, a developer implementing an approved master plan that has spent substantial money on engineering and construction of infrastructure required by the master plan may be exempt from the new rules. On the other hand, a master plan that was approved 10 years ago, but has had little or no construction or engineering activity will likely be required to meet the new rules.

    Raleigh is also considering the creation of a stormwater utility fee to further address stormwater issues. Such a fee provides local governments with a dedicated source of funds for its stormwater program. Charlotte, Greensboro, Winston-Salem, Durham, Fayetteville, High Point and Wilmington have such fees in place now. The Town of Chapel Hill has been considering a utility fee for the last two years and appears close to making a decision. Utility fees generally range from $1.00 to $5.32 per month per house. Commercial properties are generally charged a fee based on the number of parking spaces or a percentage of impervious surface. Raleigh estimates that the fee would generate between $2 million and $6 million if implemented. Wake County is also reviewing its stormwater program and may enact a utility fee as well.

    Should the City of Raleigh decide to implement such a fee, citizens need to be aware of the structure of the program and what activities it will finance. Will the city use the money to take over maintenance of all public and private drainage systems or just public ones? Will the city provide new services or will it use the new revenue to off-set projected budget shortfalls by shifting the funding source for existing municipal activities such as soil and erosion control? Will there be a formal mechanism for citizens to provide input regarding which projects and activities the city undertakes?

    Charlotte decided to take over maintenance of all private and public drainage systems at an estimated cost of $100 million. In light of the current economic downturn and the resulting decrease in municipal revenue, it is unlikely that Raleigh will choose this route. More likely, it will use the revenue to upgrade existing public drainage systems, and add new public systems, while keeping the existing city storm drainage policy.

    The existing policy allows residents to petition the city to enter into a cost sharing agreement in a particular area to improve a specific drainage problem. The city could use a portion of the fee revenue to increase the amount it contributes to such projects.

    Although questions remain unanswered, it is important for the city to develop a proposal that identifies specific needs that are not being addressed adequately by the current policy and ensure that a sufficient amount of revenue from the proposed fee be designated by ordinance to address such needs. This will ensure that the new revenues will provide direct benefits to citizens rather than serving as an off-set to potential revenue shortfalls.