Stormwater Utility Cost of Service and Strategic Plan updates
 

The City of Flagstaff Stormwater Utility was created in 2003, the first stand-alone Stormwater Utility in the State of Arizona. The utility was moved from Community Development to the Water Utility (now known as Water Services) before 2010. The Stormwater Utility has grown through time, both in responsibility as well as in costs and revenue. In 2023 there were two significant occurrences, a Stormwater rate adjustment to increase revenue to meet the cost of service of both operations and CIP needs and a Stormwater 5-year strategic plan.

The purpose of this agenda item is to provide City Council with a mid-term status update on both the financial health of the utility as well as the strategic plan. The first half of the presentation will be provided by Water Resources Economics (WRE), a leading consulting firm in utility rates and the same firm that assisted the utility with the 2023 rate assessment. WRE has met with the Budget Team and Stormwater staff over the last year to conduct a cost-of-service assessment. Their presentation will cover current revenue and costs and compare with the modeled (assumed) revenues and costs provided in the 2023 rate assessments. The results indicate that the utility has brought in slightly more funding than anticipated, partly due to out-sized growth within the city between 2023 to 2025 and partly due to an adjustment in the Stormwater ERUs charged due to new system-wide data collected in 2022-2023 through a new survey. Additional revenue was off-set by out-sized increases in construction inflation that has increased the cost of CIP. Operational costs have remained in-line with expectations. The study indicates that the Stormwater fund is appropriately funded for the level of service outlined in the 2023 rate assessment.

The second half of the presentation will be provided by Stormwater staff and will be focused on providing updates to the 2028 Stormwater Strategic Plan. The plan outlined nine (9) strategic objectives with actionable items and goals. Staff will provide an update based on the list providing completed objectives as well as a roadmap for areas that will be addressed in the second half of the performance period (2025-2028).
 

There is no financial impact of this mid-term update of both the Stormwater Utility cost of service and the 2028 Strategic Plan.

This update is provided to increase transparency to Council and the public on the operations and finances of the Stormwater Utility.

The Stormwater Utility rate was adjusted in 2023 through Council direction (Ord. 2007-26, Amended, 04/17/07; Ord. 2016-23, Amended, 04/19/16; Ord. 2017-30, Amended, 12/19/17; Ord. 2018-40, Amended, 12/04/2018; Ord. 2023-03, Amended, 02/21/2023)

The 2028 Stormwater Strategic Plan 2028 was also adopted by Council in 2023 through a separate Resolution (2023-14).

This update is informational only.

The Stormwater Strategic Plan and the rate adjustment memorandum can be found on the City's website at https://www.flagstaff.az.gov/3626/Stormwater. 

• Sustainable, Innovative Infrastructure: Deliver outstanding services to residents through a healthy, well maintained infrastructure system
• High Performing Governance: Enhance the organization’s fiscal stability & increase efficiency & effectiveness

• Goal WR.2.2 Maintain and develop facilities to provide reliable, safe and cost-effective stormwater services.

• Community Resilience: Ensure all mitigation actions improve Flagstaff’s ability to adapt to the future.
• Community Resilience: Strengthen existing community systems to create resilience to both short-term shocks and long-term change.

None

This update aligns with the 2025 Water Services Division Strategic Plan and the referenced 2028 Stormwater Section Strategic Plan, specifically related to communications and transparency.