Affordability Impacts of Alternative Funding Schemes to Finance the Costs of Meeting MS4 Permit Regulations

• In Event: State Policy, Local Water Systems: Affordability, Conservation, and Infrastructure Finance

Abstract

This research aims to evaluate the impacts of various funding strategies on covering the estimated costs required to meet the requirements of the Clean Water Act’s Municipal Separate Storm Sewer System (MS4) Permit regulations. Under these regulations, local governments are responsible for regulating and reducing the amount of pollution caused by stormwater runoff from public storm drainage systems, including roadways, gutters, and storm drains. Within California, which is the focus of empirical analysis of our analysis, to ensure that municipalities meet all the requirements, the Regional Water Quality Control Boards (RWQCB) and the State Water Resources Control Board (SWRCB) are responsible for enforcing these permits. The costs to municipalities to meet different MS4 requirement can be significant, and include activities such as illicit discharge detection, construction and post-construction runoff controls, pollution prevention practices, and public education campaigns.

To cover these costs, municipalities may rely on state and federal funding, however, the majority of expenses are typically covered by local ratepayers. For instance, to meet the permit requirements in the City of Riverside, California, the city will need approximately $10 million annually to cover the costs of the program.The focus of this study is to evaluate and compare the impacts of different revenue generation methods by the City of Riverside to cover the MS4 permit program costs with particular attention to affordability. The two measures include a parcel-based fee that distributes the costs of the program across ratepayers based on the amount of impervious surface on their property, and a property-based tax that distributes program costs based on property value.  A particular focus of the analysis is on the additional costs residential households confront under the different schemes. The particular measure we calculate for comparison is akin to an affordability ratio (i.e., the fraction of income that would be used to cover the additional expenditures a household would confront). Given that such additional expenditures may burden lower-income households, we use two income measures: median household income and 20th percentile income.

After developing estimates of the costs per property based on the two general schemes, the study examines the affordability of such schemes by evaluating the variation in household financial burden towards stormwater treatment under each. To achieve this, spatial data such as parcel-level land use and socioeconomic variables from the U.S. Census Bureau were used. Furthermore, to account for the effects on middle-class families and those in the lowest income bracket, affordability is measured using both the Median Household Income (MHI) and the 20th percentile income. Our findings indicate that aligning funding mechanisms with equity and environmental objectives is crucial. Moreover, although all techniques produce comparable average affordability outcomes, systems that consider impervious areas and property value provide a more equal allocation of costs for the City of Riverside.

Authors

• Niloofar Shoja Razavi, University of California, Riverside
  Presenting Author

• Kurt Schwabe, University of California, Riverside
  Non-Presenting Co-Author

• Mehdi Nemati, University of California, Riverside
  Non-Presenting Co-Author

• Andrew William Crosby, University of California, Riverside
  Non-Presenting Co-Author