How to set a stormwater utility rate, line by line

The five steps

Each step produces a document, and the documents are the evidence a rate can be defended with. A rate that appears without the steps behind it will be challenged at the first public hearing, and the challenge will succeed, because the arithmetic is the only part nobody disputes.

1. Build the revenue requirement from operations, capital, reserve and debt service, less any non-rate revenue.
2. Decide the billing basis and the billing unit, and write the measurement rule into the ordinance.
3. Survey the billing base: measure the impervious area of every billed parcel, and record what was excluded.
4. Divide the requirement by the base, then test the result against a typical bill and against the largest ratepayers.
5. Adopt the rate, and state the next review date, because a rate without a review date is a rate that will be raised in a hurry.

Where the arithmetic is not the problem

The division is trivial. The two inputs are not. A revenue requirement depends on a programme that a council has to approve, and a billing base depends on a measurement rule that a council also has to approve, and both of those are policy. The rate is the last step and the least controversial part of it.

A rate is not the same as a bill. The rate is a price per billing unit; a bill is the rate multiplied by the units a particular property has. Two properties on the same street with the same rate can receive bills that differ by a factor of five, and the difference is entirely in the survey.

Where this posting stops

This page covers the procedure. The fee itself is owned by the fee account, the billing basis by the impervious area account, the reserve line by the reserve account, and the borrowing line by the bond account.