Consideration and Adoption of Resolution No. 2022-41:  A resolution of the Flagstaff City Council adopting a Notice of Intention to increase stormwater rates or rate components, fees or service charges and establishing a date for a public hearing on the proposed changes for November 15, 2022

1. Read Resolution No. 2022-41 by title only
2. City Clerk reads Resolution No. 2022-41 by title only (if approved above)
3. Adopt Resolution No.2022-41

This action adopts a Notice of Intention, which is required by Arizona Revised Statues Section 9-511.01 prior to a municipality increasing water/stormwater rates, rate components, fee or service charges. 

Arizona Revised Statutes require a Notice of Intention be adopted by City Council at least 60 days prior to the public hearing and published a copy of the Notice of Intention in the local newspaper not less than 20 days before the public hearing. A written report must be filed with the City Clerk and posted on the City website at least 30 days prior to the public hearing. This report will be filed and posted by September 16, 2022. 

The City is recognizing the need to establish stormwater rates that will allow the Water Services Division to address the capital improvements needed in our community and an increase in operations to include flood response. An increase in stormwater rates is needed in order to meet current expenditures, provide for an increased capital improvement program and provide sound fiscal management to the Stormwater Fund. 

The new stormwater rates and services fees would go into effect on January 1, 2023.

Policy impacts include a staff recommendation to remove the residential cap of 5 Equivalent Rate Units (ERUs) to provide greater community equity of stormwater rate fees.

Additional discussion of suspending the 2009 Stormwater Credit Manual to increase community equity will be presented but is not actionable for this Notice-of-Intention (NOI) item.

COUNCIL GOALS:  

Safe & Healthy Community:  Provide public safety services with resources, staff & training responsive to the community’s needs 

Innovative Infrastructure:  Deliver outstanding services to residents through a healthy, well maintained infrastructure system 

Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics. 
 

REGIONAL PLAN:  

Policy E&C.3.1. Develop and implement a comprehensive and proactive approach to prepare the community for and to minimize the impacts of climate change induced hazards. 

Policy E&C.3.4 Increase the region’s preparedness for extreme climate events. 

Policy WR.5.4. Develop any necessary stormwater infrastructure improvements consistent with City of Flagstaff stormwater master plans or studies as adopted by the City 

Policy WR.5.1. Preserve and restore existing natural watercourse corridors, including the 100-year floodplain, escarpments, wildlife corridors, natural vegetation, and other natural features using methods that result in a clear legal obligation to preserve corridors in perpetuity, where feasible 

Policy WR2.2 Maintain and develop facilities to provide reliable, safe and cost-effective stormwater services. 

Stormwater service charges were amended on December 4, 2018, and new service charge went into effect on January 1, 2019. Ordinance 2018-40 

Stormwater service charges were amended on December 19, 2017, and new service charge went into effect on February 1, 2018. Ordinance 2017-32 amended section 12-02-002-003, Schedule of Stormwater Management Utility Service Charges and Fees within the Flagstaff City Code. 

Adopt Resolution 

Do not adopt Resolution and provide staff direction on future considerations of service charge increases or service level decreases. This will leave the Stormwater Fund operations and capital project program unchanged. The Fund will have a negative balance within three (3) years without action. 

The Flagstaff community has a large list of needs as it relates to Stormwater. Recent wildfire activity around Flagstaff has resulted in more regular flood response and the need for stormwater infrastructure upsizing in the Spruce Wash and Schultz Creek drainages.  The City of Flagstaff has spent in excess of $2 million in the last 2 years in response to this post-fire flooding.  Additionally, the North East Area Master Drainage Study (2010) has identified 37 projects which have a current cost estimate of $74.4 million. The current funding for Stormwater capital improvements is $600,000 per year which is insufficient to address the 2010 needs analysis.

To meet the community need and current Stormwater expenditures, an increase in Stormwater fees is recommended.  This Notice of Intent is the first requirement set forth in ARS 9-511.01 which sets forth requirements for a Stormwater service charge increase. 

In accordance with the adopted City of Flagstaff Water Policies: 

Utility rates and revenues should generate sufficient revenues to meet operational costs, capital program requirements, debt service obligations, and maintain adequate reserves consistent with sound financial management practices. 

Utility rates should be set proportionate to the cost of providing the water service to each customer class to promote fairness and equity. 

A financial plan that follows the water policies and goals established by City Council on April 1, 2014. 

The current Stormwater Fund rate is $3.74/ERU, set in 2018 to provide debt servicing for the Rio de Flag Flood Control Project and to supplement the Stormwater Capital Improvement Program (set up in 2006). The current stormwater rate does not reflect post-fire flood mitigation needs, climate change impacts, nor the rapid increase in construction materials and labor. The current rate is low on the national level based on the complexity of the Stormwater Section (Western Kentucky University Stormwater Utility 2021 Survey).

Regular rate reviews and modification are necessary to maintain a stable financial position for the Stormwater Fund. 

A new rate assessment will help provide long term flood response, a new level of service for the Stormwater Section.

A public hearing will be advertised to be held at the November 15, 2022, City Council meeting.