CITY COUNCIL STAFF REPORT
Meeting: June 6, 2023
Subject
Consider approval of the renewal (with no increase) of the 1992 Storm Drain Fee and renewal of the 2019 Clean Water and Storm Protection Fee with a 3% increase.
Recommended Action
Adopt and approve:
Resolution No. 23-XXX (Attachment A) approving the renewal and collection of the 1992 Storm Drain Fee with no increase in rates for Fiscal Year (FY) 2023-24; Resolution No. 23-XXX (Attachment B) approving the renewal and collection of the 2019 Clean Water and Storm Protection Fee with a 3% increase in rates for FY 2023-24; Adjust the annual budget allocation for the cost-share program from $14,000 to $2,000 to better fit the realistic need for new applicants receiving 20% refunds in a single year; Adjust the re-certification period to be four years for all approved participants with an attestation protocol to affirm continued cost-share eligibility; and Discontinue the $12,500 per year pervious pavement rebate program for lack of participation and use the funds for support of required activities.
Reasons for Recommendation
City of Cupertino’s Stormwater Pollution Prevention Program The City’s Stormwater Pollution Prevention Program (also known as the Nonpoint Source Program) is mandated by State of California (State) and United States (US) Environmental Protection Agency (EPA) regulations implementing the Federal Clean Water Act. Regulations by the EPA and the State require cities to take specific actions to eliminate or control pollutants in water that belongs to the State. These regulations are implemented locally by the California Regional Water Quality Control Board, San Francisco Bay Region (Water Board) through the Municipal Regional Stormwater National Pollutant Discharge Elimination System (NPDES) Permit, commonly referred to as the Municipal Regional Permit (MRP.) The MRP was issued to 76 agencies whose stormwater systems and creeks drain to San Francisco Bay. To assist with compliance, the agencies under this MRP have assembled into more localized groups. The City and 14 other co-permittees in Santa Clara County (County) are members of the Santa Clara Valley Urban Runoff Pollution Prevention Program (SCVURPPP) which works collaboratively to maintain compliance with State and Federal requirements. The SCVURPPP provides technical and administrative guidance to permittees, interfaces with the Water Board on permittees’ behalf, and coordinates compliance activities that benefit all, such as far-reaching outreach and education activities, water quality assessments, and watershed monitoring.
Information about the City’s stormwater pollution prevention program is available at www.cupertino.org/cleanwater, which includes links to a variety of resources and guidance including an interactive creek map, a link to the City’s most recent annual report submitted as required to the Water Board, information for developers and contractors, and education on less toxic pest control.
The City complies with MRP requirements through a variety of activities, including:
Mandatory inspections and data tracking to prevent illegal connections and discharges to the City’s storm drain system Updating the City Municipal as necessary to ensure enforcement capability with new iterations of the MRP, such as the recent amendments to CMC 9.18.
Review of planned development and construction activities Development of a Green Stormwater Infrastructure Plan
Tracking pesticide use
Enforcing screening requirements for Polychlorinated Biphenyls (PCBs,) (a class of organic compound that does not degrade easily) during building demolition Litter reduction measures
Installation of screens and trash capture devices in drain inlets Cleaning and maintenance of drain inlets and installed devices Maintenance and repair of the storm drain system
Street sweeping
Local outreach and education
Support of third-grade Creek Education Program provided at McClellan Ranch Preserve Participation in SCVURPPP-led work groups and committees Two property-based fees have been established to help cover the costs of compliance:
1992 Storm Drainage Service Charge Fee (Storm Drain Fee) In 1992, the City established the Storm Drain Fee to help cover the cost of complying with stormwater pollution prevention requirements that were then in effect. The Storm Drain Fee is applied to each property in the City, with exceptions for those owned by certain entities, such as properties owned by the government, utility agencies, and schools, which were exempt under the laws at the time the fee was approved. The fee is collected by the Santa Clara County Tax Collector on behalf of the City and is subject to annual review by the City Council. The Fee consisted of three rates, which were based on type of land use of each parcel as follows: 1) $12 for residential parcels; 2) $144/acre for apartments, commercial and industrial parcels; and 3) $36/acre for unimproved and recreational parcels.
The Fee has no mechanism to enable an annual increase. As such, the revenue collected from the Storm Drain Fee has not increased since it was established and has remained at approximately $370,000 per year. However, regulatory requirements, stormwater system maintenance expenses, wages, and permit fees have not remained static, and the cost of compliance has risen over the years. When the first MRP was approved in 2009, and again when the second permit was adopted in 2015, permit requirements increased significantly. The third reissuance of the Municipal Regional Permit (MRP 3.0) was adopted on May 11, 2022, with an effective date of July 1, 2022, further increasing requirements. Certain requirements within MRP 3.0 become effective July 1, 2023, and the City is making edits to the City Municipal Code (CMC) to reflect those changes. While existing language in the CMC already states that “All requirements in the Municipal Regional Permit are required and enforceable by the City,” staff performed additional code cleanup to clarify and streamline CMC section 9.15. Those edits were approved by first reading on May 16 with a second reading scheduled for June 6, to be effective July 6, 2023. While revenues from the Storm Drain Fee at one point covered expenses related to compliance with the MRP, by 2019 the cost of compliance exceeded the fee and was creating a significant draw upon the City's General Fund of over $600,000 per year. Renewal of the Storm Drain Fee is recommended in FY 2023-24. 2019 Clean Water and Storm Protection Fee (Clean Water Fee) The Clean Water Fee, a property-related fee subject to Proposition 218, was approved by Cupertino parcel owners in 2019 and was authorized by Council on July 17, 2019, for inclusion on the 2019-2020 Property Tax bills. The Clean Water Fee was calculated starting from the average acreage of a median single-family residential parcel and a benchmark amount of impervious surface. Details of the rate structure analysis can be found in the Fee Report attached to the Clean Water and Storm Protection Fee Ordinance (Attachment C.) Proposition 218 requires that all property owners pay in proportion to the benefit received; therefore, exceptions provided under the 1992 Storm Drain Fee (which predates the adoption of Proposition 218) for parcels owned by certain public entities, such as government, utilities, and schools, are not permissible. The Clean Water Fee may be increased annually by Council to meet expenses of the Nonpoint Source Program. The potential increase is tied to the annual change in Consumer Price Index (CPI) as of December each year, up to a maximum of 3% in any single year.
The CPI change for the period December 2021 to December 2022 was 4.88%. Pursuant to the Clean Water and Storm Protection Ordinance, fees can only be increased if actual program expenditures increase, and the Clean Water and Storm Protection Fund 230 balance is insufficient to cover expenditures more than revenues. Expenses associated with the Nonpoint Source Program were projected to exceed revenue for FY 2022-23; however, there is sufficient balance in Fund 230 to cover the difference. Balance in Fund 230 accrued due to a transitional subsidy from the General Fund in 2019, delayed staffing allocation adjustments, and lower expenditures due to the COVID-19 pandemic. As a result of that fund balance, staff has not asked for an increase to the Clean Water Fee since its adoption in 2019. However, that balance will be exhausted during FY 23-24. For that reason, staff recommends an increase in the Clean Water and Storm Protection fee for 2023-24. An increase by CPI with a 3% cap as allowed by the ordinance will increase the overall revenue to the City by approximately $33,000. This is an increase of $1.33/year for the most common (medium) sized single-family parcel. Current rates and the proposed increased rates are shown in the tables below.
Current Annual Rates:
Annual Rates With 3% Increase:
Discussion
2019 Clean Water and Storm Protection Fee Rebate Programs Discontinue the Permeable Pavement Project Rebate Program On August 20, 2019, Council approved rebates for permeable pavement installations at single-family homes and duplexes at a rate of $3/sf with a $900 (300 sf) maximum. An average two-car driveway is 300 square feet (sf.) While the measure generated some early inquiries, no applications for the rebate were received, despite outreach. In 2021, following consideration of various options for the program, City Council approved increasing the maximum rebate to $1,800 (600 sf.) To date only one driveway project has been submitted and approved for the rebate in the amount of $1,434. Similar programs in Palo Alto and San Diego have also had minimal participation. Staff recommends ending this rebate program and letting $12,500 in allocated funds return to Fund 230 to be used toward required activities as described above.
Rain Garden and Rain Barrel Installation Rebate Programs On August 20, 2019, Council allocated funds to support rebates to match and supplement Valley Water programs for installation of rain barrels, cisterns, or rain gardens, all of which assist in preventing runoff from properties and preventing pollution. Three rain gardens and two rain barrels earned rebates in Calendar Year (CY) 2021, for a total rebate amount of $1,061.30. In CY 2022 there were four rain barrel projects, eight rain garden projects, and one rain cistern project, which altogether earned $2,876 in rebates. $12,500 is budgeted each year for this rebate support from the Nonpoint Source program. The rebates are promoted through Valley Water’s outreach materials as well as through Cupertino’s Climate Victory Garden pilot program. A recent extension and increase of funding for the Valley Water agreement was approved by Council in January 2023 and while the $12,500 from Nonpoint Source remained unchanged, the use has been expanded to contribute to landscape conversions as well, since removing turf and replacing it under the Valley Water guidelines reduces use of pesticides and fertilizers which can contribute to runoff pollution. Staff recommends continuing with no change to the allocation of $12,500 to fund landscape conversions and rainwater capture project rebates. 2019 Clean Water and Storm Protection Fee Incentive Programs Continue the Cost-Share Program for Low-Income Residents but reduce the subsidy amount from $14,000 to $2,000 and lengthen the verification cycle for eligible participants from 2-year to 4-year While there are no exemptions for property owners, City Council did authorize a 20% cost-share program for low-income residents. During the 2019 Clean Water and Storm Protection ballot process, 1,565 residents were estimated to qualify as extremely low or very low-income based on the Comprehensive Housing Affordability Strategy (CHAS) data released by the US Department of Housing and Urban Development (HUD) in June 2018. During 2019-2020, 100 residents took part in that program, which was promoted via direct mail, articles in the Cupertino Scene and 50+ Scene, and on the City’s website. Once eligibility is determined, it is automatically factored in for the following year’s Assessor Parcel Number (APN) fee and is shown at the reduced rate on the property tax bill. Outreach continued, and to date 271 residents have received a cost-share refund and have lower rates on their property tax bills. Of the residents who successfully applied for the City’s cost-share program, the majority had medium parcels charged $44.42/year with the 20% cost-share reimbursement amount at $8.88. The City coordinates with Silicon Valley Clean Energy to reach residents who participate in PG&E’s reduced rate program as well as promoting the availability in the Cupertino Scene and 50+ Scene to attempt to boost enrollment in the program. The cost-share program is funded by the General Fund because revenues from the Clean Water and Storm Protection Fee are restricted from being used for a cost-share (e.g., funding a reduced rate for others property owners). As approved by City Council in August 2019, residents who are approved for the 20% reduced fee should be re-verified every two years if they have variable income or four years if they are on fixed incomes. Due to the high administrative burden associated with managing the applications and the low dollar amount saved per property, staff is shifting the re-verification process to a four-year cycle for all approved residents using an attestation process (as opposed to requiring re-submittal of documentation).
Fee Reduction for Commercial and Multi-family Low Impact Design Features - Update As allowed by the Clean Water and Storm Protection Fee Ordinance, 267 commercial and multi-family properties that had already installed low-impact design (LID) elements such as bioswales, capture basins, and bioretention facilities, were assigned a 25% fee reduction, consistent with the fee schedule, after the fee was adopted. Installation of new LID features under the requirements of C.3 in the MRP (stormwater treatment measures in new development and redevelopment projects) qualifies additional properties for the same reduction. There is no change to this fee reduction for qualifying properties.
Audit Committee Review of Programs
Pursuant to the Clean Water and Storm Protection Fee Ordinance, expenses and revenues are audited annually by an independent auditor. On July 7, 2020, City Council approved assigning the Audit Committee the task of reviewing externally audited findings regarding the Nonpoint Source program on an annual basis. The City’s annual external audit for FY2021-22 was completed and was reviewed by the Audit Committee on March 27, 2023, and no issues were raised about the Nonpoint Source Program transactions. An additional Agreed-Upon Procedures (AUP) Audit, specific to the Nonpoint Source Program, was developed to further assess this program using a calendar year cycle, which was completed for calendar year 2021 with no exceptions noted. The final AUP report is included as Attachment D. Staff requests that the AUP process be completed for each prior calendar year ahead of this annual fee renewal process so that Council may have the most recent year’s AUP report to review. For this cycle, the 2022 report was not made available in time for Audit Committee review. As such, the City anticipates that the AUP audits of calendar years 2022 and 2023 will be completed and reviewed by the Audit Committee before these fees are brought to Council for renewal in 2024.
Sustainability Impact
The Storm Drainage Fee supports water pollution prevention and water conservation (NPDES) activities. Significant sustainability benefits include the reduction or elimination of pollutant discharges, which could degrade local creeks and threaten the supply of clean water, as well as the capture of rainwater, which can be used as a resource. Green Stormwater Infrastructure uses engineered features to mimic natural processes that allow stormwater to infiltrate the groundwater system instead of entering the storm drain system, enhancing climate change resilience.
Fiscal Impact
The combined revenues from the 1992 Storm Drainage Service Charge and 2019 Clean Water and Storm Protection Fee will generate approximately $1,476,808 for FY 2022-23, received into Fund 230. Projected expenses by the end of the fiscal year are approximately $2,025,222, which is 5% under the approved budget but exceeds revenues by approximately $548,400.
The proposed budget for FY 2023-24, with the proposed 3% increase of the Clean Water Fee, anticipates the cost of the Nonpoint Source Program to be $2,068,209, which reflects full staffing, adjusted staffing allocations, maintenance projects on aging infrastructure for storm protection, installation of drain inlet treatments, and the other activities that ensure compliance with the MRP. Without an increase, the expected revenues from the two fees are approximately $1,477,239. The projected expense for the Nonpoint Source Program for FY 23-24 is $590,970 beyond the expected revenue from the fees.
In recent years, the shortfall between the APN fee revenues and the program expenses has been covered by the balance in Fund 230 330-301. The available balance of Fund 230 330-301 after FY 2022-23 is projected to be $369,400. With a projected shortfall of $590,970 in FY23-24, Fund 230 330-301 is expected to be exhausted mid fiscal year with the remainder covered by the General Fund.
The Clean Water and Storm Protection Fee may be increased up to 3% each year if need is determined. If increased by 3%, the cost to the average residential property owner would be an additional $1.33 per year and would accrue an additional $33,000 in fee revenue. While the increased revenue would not resolve the shortfall, it would reduce the draw on the General Fund by that amount to ensure ongoing MRP compliance.
Nonpoint Source Program Revenue and Expenses (estimated) FY 2022-23
FY 2023-24 (proposed)
Fund Balance (previous FY)
$ 917,878
$ 369,464
Revenue 1992 Fee
$ 375,569
$ 375,569
Revenue 2019 Fee
$ 1,101,239
$ 1,101,239
3% increase to 2019 Fee
$ -
$ 33,037
General Fund
$ -
$ 590,970
Total Program Funding
$ 2,394,686
$ 2,470,279
Program Expenses*
$ 2,025,222
$ 2,068,209
Remaining Fund Balance at end of FY
$ 369,464
$ -
*Program expenses include $38,700 in cost reductions as discussed below.
To further reduce the draw on the General Fund, staff recommends the following:
Discontinue the pervious pavement rebate program and return the allocated $12,500 to be used to cover Nonpoint Source Program costs more broadly.
Adjust the budgeted amount for the low-income cost-share program from $14,000 down to $2,000. The $14,000 originally budgeted for the cost-share program would have covered refunds for all applicable residents in one year, but the reality is that applications are incremental.
The following operational reductions are included in the proposed FY23-24 budget:
As part of the annual compliance required by the MRP, the annual stormwater inspection has been conducted by a third-party consultant. Going forward, such inspection will be conducted by city staff. Annual cost savings will be $3,200.
Discontinue the agreement with Grassroots Ecology for citizen science fieldtrips to do water sampling in Stevens Creek. While the program is popular among the community, the collected data is beyond the testing required by the MRP and outreach and education are already occurring regionally through SCVURPPP-funded projects and through the City’s third grade creek education field trips at McClellan Ranch Preserver. Cost savings will be $20,460.
Discontinue providing transportation service to CUSD to McClellan Ranch Preserve for annual third-grader fieldtrips. CUSD has confirmed that the schools would be able to continue the fieldtrip and to supply with District transportation. This would be an annual cost saving of $14,900, although the actual expense associated with the fieldtrip was much lower due to a reversal of COVID-related seat spacing on the buses which required more buses to be used.
Purchase of a remote-controlled rover with a camera to provide more cost-effective evaluation of storm drain system pipes. While the initial purchase would be approximately $131,000, purchasing this remote camera system would allow the storm drain inspection operations team to expand their scope of work to perform proactive inspections inside the pipes and identify obstructions and damage that need to be addressed quickly and without having to bring in an outside service provider. The ongoing expected annual savings on hired contract costs could be $160,000 per year. s, California Environmental Quality Act (CEQA)
Not applicable.
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Prepared by: Ursula Syrova, Environmental Programs Manager Reviewed by: Chad Mosley, Interim Director of Public Works Reviewed by: Matt Morley, Assistant City Manager
Approved for Submission by: Pamela Wu, City Manager
Attachments:
A – Draft Resolution 1992 Fee
B – Draft Resolution 2019 Fee
C - Clean Water and Storm Protection Fee Ordinance with Fee Report D – Calendar Year 2021 Storm Drain AUP Reports