Royal Oak stormwater utility off the table, for now

By: Sarah Wojcik | Royal Oak Review | Published December 23, 2019

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ROYAL OAK — Despite the Royal Oak City Commission’s approval of a first reading of a stormwater authority ordinance Nov. 11, Interim City Manager and City Attorney David Gillam recommended that the city wait at least six months before moving forward during the Dec. 9 City Commission meeting.

“Up until probably a couple weeks ago, I fully intended to bring back the stormwater utility ordinance to City Commission for a second reading tonight,” Gillam said. “I am not asking to move forward with the stormwater utility ordinance at this time for a couple reasons.”

He said the first and foremost reason is that city staff had a number of questions or issues with the preliminary analysis and figures regarding the fee calculations.

“We anticipated, being very candid, a greater offset in terms of a reduction in water bills with the increase in the stormwater fee, and in a lot of cases, we weren’t seeing that,” Gillam said. “We’re working to figure out why. We’ve got some ideas why that is.”

He said he also would prefer to hold off for some time in order to establish the most accurate and up-to-date information regarding a budget for the stormwater utility. Some budget figures that staff was working with are outdated — from when the utility was first proposed last year.

“I’m not comfortable with establishing a utility and proposing fees now based upon (water and sewer) rates that inevitably will increase when they come from the county a little bit earlier next year,” Gillam said. “We would like to have some additional conversation with the commission about what the components of the budget for that utility should be.”

Had the City Commission approved the second reading of the stormwater utility ordinance, it would have shifted the way the city calculates and collects fees for the treatment of its stormwater. The calculation would have been based on the square footage of property owners’ stormwater runoff.

The stormwater fees are currently a component of the city’s water and sewer rates.

The second reading of the stormwater utility would have established a fee schedule, as well as a credit program for increasing the amount of permeable surface on residential and nonresidential properties.

Having been approved, the stormwater utility would have been established by Jan. 1, and initial stormwater utility fee bills would have started around April.

“We are not asking to do that,” Gillam said. “We want to establish a fee that’s fair and accurate to everybody that’s involved.”

He added that proposed legislation — House Bill 4691, or the Stormwater Utility Act — is pending in the House Committee on Regulation. If signed into law, it would provide for a stormwater utility like the one the city is entertaining.

The city of Detroit established its own stormwater utility based on impervious surface. While it was upheld twice against challenges in appellate court, Gillam said the Michigan Supreme Court has yet to decide if it will hear the case.

“Obviously, as the city attorney, I’m very interested in what the Supreme Court has to say about what the city of Detroit is doing, if what we’re talking about doing is in any way similar to what the city of Detroit is doing, and it is,” he said. “I think it behooves us to wait at least a little bit longer and see what the Supreme Court has to say.”

He said he still feels that the stormwater utility is something the City Commission should strongly consider doing in terms of equitable allocation of costs of stormwater treatment in the future.

Gillam said that when he proposed postponing the stormwater utility, staff “breathed a sigh of relief.”

“At the end of the day, putting stormwater into the water bill is not going to be the way forward,” Mayor Michael Fournier said. “It’s got to be assessed and paid for in a different way. That’s just the reality of it, and so we have to figure out how to do it, and do it best so it’s fair and equitable to everybody.”

While the city does have the authority to continue to assess stormwater fees as part of its water and sewer rates, pursuant to a $2 million settlement reached in a class-action lawsuit against the city, the city must change how it bills residents for debt service on the Oakland County Water Resources Commission’s George W. Kuhn Drain.

In 2018, the city imposed an ad valorem tax based on property value for the debt service, instead of including the debt service fee in sewer charges; however, Gillam said the city does not want to continue financing the debt service or other stormwater costs through such a tax.

“The disconnect is there is really no rational relationship between the amount of water that goes into your taps and the amount of water your property is dumping into the stormwater system, so that’s the fundamental issue that we’re trying to address with the utility,” Gillam said. “We’re trying to assess the costs of operating the stormwater system against property owners based upon the amount that their individual property is contributing to that stormwater system.”

To date, the city has worked with consultants at Livonia-based OHM Advisors and spent $270,200 for the implementation of a stormwater utility. Gillam said city staff will now take over the rest of the work.

“I think it’s prudent to pause to make sure we’re doing this right,” Commissioner Kyle DuBuc said. “There’s two reasons we’re doing this. One is equity. … Equally important is sustainability.”