Time bomb: city's stormwater fees

By: 
Dec. 16, 2010

Palm Coast’s existing stormwater ordinance could not withstand a legal challenge. Even the city recognizes the problem.
 

The system comprises a series of swales, ditches, canals and control devices (to regulate flow and control levels). It was designed and implemented to handle the original 45,000 Palm Coast residentially platted lots. Its performance during last year’s storm, which dumped a record 28 inches on the county within a few days, attests to the quality of its design. But it is aging. The utility’s budget exceeds $7 million. More than $5 million comes from user fees.
 

More than two-and-a-half years ago, a group of property owners challenged the legality of the 2004 ordinance, which created a stormwater management utility and imposed user fees upon city landowners. Utility fees are supposed to be based on the level of benefit or use of the system. Those who don’t use or benefit from the system shouldn’t be charged. Otherwise, the fee looks like a special assessment or an unconstitutional tax.
 

A legal analysis of the ordinance’s problems was presented to the city two-and-a-half years ago. Owners of undeveloped land were being charged as soon as their land was platted. How could land benefit from the system simply because plat maps had been filed? Other landowners within the city but outside the area served by the system were also being charged.
 

The city agreed to devise a new ordinance. But new revenue would be needed to fund rebates and to make up for lost revenue from exempted land. Still, the city took two years to float a revised ordinance.
 

Meanwhile, communities like Grand Haven, which has its own self-contained stormwater management system, realized that they, too, should be exempted. Grand Haven’s cumulative “overcharge” amounts to several hundred thousand dollars.
 

The city’s dilemma: The stormwater system is becoming more expensive to operate. A new, legally sound ordinance would exempt several properties. How should the city make up for the lost revenue?
 

Raising the monthly fee for residents by $2 would generate about $1.3 million of additional revenue. But that would affect thousands of property owners (most of whom are voters). The city’s first proposed revision placed the burden instead on owners of vacant and undeveloped land. City Council shot it down when it was shown that the proposal was poorly crafted.
 

The issues are complex. Crafting an equitable ordinance will not be easy, but the city’s exposure is large and growing daily. Palm Coast may be liable for overcharges going back up to four years. Failure to devise a fair fee structure may result in a legal challenge, potentially invalidating the ordinance. If that happened, all money collected under the ordinance since 2004 would have to be returned.
 

How much money is that? More than enough to build a new City Hall or two.