Real Estate & Land Use and Zoning Alert: Philadelphia’s Stormwater Management-New Charges are now in effect

August 2, 2010

Within the last month, the City of Philadelphia has begun to implement a change in the method of calculating a property owner’s contribution toward the City’s costs of conveying and treating stormwater runoff. Because the change focuses on the size and impervious coverage of a property instead of the size of the water meter serving the property, the change will be especially noticeable to owners of properties with no water meters and/or properties with large areas of impervious surface, such as parking lots and industrial and distribution facilities with large building footprints. Moreover, the change will impact property owners regardless of whether they are obligated to pay real property taxes (i.e., both for-profit entities and tax-exempt organizations), and will impact tenants whose leases obligate them to pay for water and sewer charges.

Stormwater Management Service Charges  

The flow of stormwater across the ground and impervious surfaces, such as buildings, driveways, parking lots, streets and sidewalks, can cause flooding, erosion and sewer backups, and can carry sediments, debris and other pollutants that adversely affect water quality.  In addition, throughout much of the City, stormwater is collected by a combined stormwater and sanitary sewer pipe system.  As a result of the City’s manner of stormwater collection and the effects of the stormwater, and in order to comply with applicable laws governing stormwater management, the City is required to undertake stormwater management services, such as maintenance of stormwater pipes and inlets and stream restoration and other projects, which are designed to reduce overflow and pollution and to alleviate the negative impact of stormwater on the quality and quantity of the water supply. The annual cost to the City for collecting stormwater and performing stormwater management services exceeds $100 Million.  The City collects a Stormwater Management Services (“SWMS”) Charge as part of the water/sewer bill in order to pay for the costs of providing stormwater management services.   

Change in Calculation of SWMS Charges  

Prior to July 1, 2010, stormwater management services were funded from charges levied against a property based solely on the size of the property’s water meter, such that those properties that were served by the largest meters were assessed the highest service charges. In addition, those properties that did not have a water meter (such as vacant lots and parking lots that are not connected to the City water supply), were not assessed any service charge at all and thus did not pay any portion of costs incurred by the City for stormwater management services.

Believing that it needed to allocate more equitably the cost of treating stormwater runoff to those properties that contribute most heavily to the volume of water treated, beginning July 1, 2010 the City instituted a separate SWMS Charge based on a property’s size and impervious coverage.  Over a four-year phase-in period, an increasing portion of the SWMS Charge will be based on the gross area and impervious area of the property (the “Parcel-Based Charge”)  as opposed to the size of the water meter, if any, serving the property (the “Meter-Based Charge”).  For the year beginning July 1, 2010, 75% of the SWMS Charge will be a Meter-Based Charge and 25% of the charge will be a Parcel-Based Charge. For the year beginning July 1, 2011, 50% of the SWMS Charge will be a Meter-Based Charge and 50% will be a Parcel-Based Charge. For the year beginning July 1, 2012, 25% of the SWMS Charge will be a Meter-Based Charge and 75% will be a Parcel-Based Charge, and for years beginning on and after July 1, 2013, the entire SWMS Charge will be a Parcel-Based Charge.

Under the City’s methodology, the Parcel-Based Charge consists of a charge for each 500 square foot Unit of Gross Area (or total square feet) of the property, plus a charge for each 500 square foot Unit of Impervious Area (or total square feet of plane surface that prevents or restricts the absorption of water, such as pavements, roofs and driveways). The City has established per Unit charges for Gross Area and for Impervious Area for the next four years. Owners of properties with a water meter will see the SWMS Charge on their water/sewer bill as a separate line item in addition to the usual charges for water usage and sewer.   

Credits and Appeals

The City believes that the new SWMS Charge represents a more accurate way to allocate the cost of stormwater management services among property owners because it endeavors to assess charges against those properties whose stormwater volume has the greatest impact on stormwater management services, while leaving in place the current methodology of charging for water and sanitary sewer usage based on the size of a property’s water meter. While the City describes the new SWMS Charges as being revenue neutral, there are many property owners whose water bills will increase substantially. Properties that do not have a water meter and properties that have large impervious areas but small water meters (such as parking lots and shopping centers) will be especially hard hit.

Notwithstanding the changes, a property owner may receive credits against the amount of SWMS Charge applicable to its property and may thereby reduce its water bill by reason of improvements and retrofits that are already in place and by making certain alterations to its property that are designed to reduce the amount of impervious surface and that the Philadelphia Water Department considers approved stormwater management practices, such as conversion of lawns to meadows and installation of systems designed to keep water out of the stormmwater facilities, such as rain gardens, infiltration trenches, porous paving, flow-through planter boxes, tree trenches, green roofs and dry extended detention basins.

A property owner also may dispute or appeal the SWMS Charges assessed against its property for a variety of reasons, including that it believes it is being billed for an incorrect parcel, that the property has been incorrectly classified (as non-residential instead of residential) or that  the Gross Area or Impervious Area is incorrect.    More detailed information regarding the City’s changes in how it charges for stormwater management services is available on the Philadelphia Water Department’s website here.

Should you have questions about any of these changes, or if you would like to discuss the manner in which your property is being assessed for SWMS Charges or the ways in which you may be able to receive credits or take appeals from your SWMS Charges, please contact us.