Green Infrastructure Toolkit

Local Funding

Overview

Local governments have multiple options for using local funding to pay for green infrastructure projects. If resources are sufficient, local governments can include green infrastructure programs and projects in capital budgets.^{See footnote 1} If local governments want a dedicated source of funds just for green infrastructure and stormwater management, municipal and stormwater utility fees may also provide an important source of revenue.

Coordinating Across Multiple Agencies

Local governments can increase the efficiency of green infrastructure programs and expand the pool of available funding by coordinating funding across municipal agency budgets. Such coordination can reduce project costs by ensuring that projects are installed at the most cost-effective times – for example, when street or sidewalk construction is already scheduled. In addition to improving cost effectiveness, encouraging collaboration among agencies may enable sharing of green infrastructure costs among agency budgets.  For example, in Los Angeles, CA, the Bureau of Street Services and the Bureau of Sanitation collaborated to implement the Oros Street project – a $1 million installation of bio-retention areas in the street parkway and a large infiltration basin underneath a nearby park.^{See footnote 2}   Boulder, Colorado’s Greenways program is funded by equal contributions from the City’s Transportation Fund, Stormwater and Flood Control Utility Fund and the state’s Lottery Fund, with additional funding by the Urban Drainage and Flood Control District.^{See footnote 3} 

Local Funding Options

Municipal Budgets

Many local governments fund green infrastructure and stormwater management programs through the general fund, which in most local governments is primarily funded through income and property taxes. A local government using funds from general tax revenue for green infrastructure will not need to set up new revenue collection and appropriation systems, but funding for green infrastructure programs may not be stable year-to-year if other spending obligations are seen as higher priorities. Additionally, the use of general funds could be seen as inequitable, because some property owners that contribute to stormwater runoff (such as public facilities, universities, and churches) may be exempt from the income or property taxes used to fund the program.^{See footnote 4} 

The Ramsey-Washington Metro Watershed District in the Twin Cities in Minnesota provided initial funding for its green infrastructure program with the watershed district’s Capital Improvements Budget.^{See footnote 5}   The project received additional support from property tax revenue and state grant funding.^{See footnote 6} 

Permit Fees

Local governments can assess permit fees to provide additional revenue for green infrastructure programs. The fees allow local governments to raise revenue directly from any proposed development or construction that might worsen stormwater impacts.  Portland, Oregon, has established a “One Percent for Green” Fund, which requires that all construction projects in the public right-of-way that do not include “green street facilities” (including curb extensions and porous pavement) must contribute one percent of project costs to a city fund for other green infrastructure projects that exceed city requirements.^{See footnote 7} 

However, assessed fees may not provide sufficient funding for full program implementation, and likely would need to be combined with additional funding sources. Additionally, fees may not be a consistent source of revenue, as they may decrease during a time of slow construction.^{See footnote 8} 

Stormwater Utility Fees

Local governments may choose to assess stormwater utility fees as a reliable means of paying for green infrastructure programs. This approach is advantageous because it provides a dedicated funding stream with sustainable and predictable revenue over time.

A stormwater utility fee may be seen as a more equitable way to pay for stormwater management, compared to general funds, because local governments or utilities may be able to raise money in a way that is directly related to a property’s stormwater impacts. Many local governments allow property owners to offset stormwater user fees or earn incentives and credits by managing stormwater onsite through best management practices such as reducing impervious surface area. For example, the programs in Prince William County, Virginia, and Lenexa, Kansas, provide fee reductions or credits to property owners who manage stormwater onsite.^{See footnote 9} 

However, establishing utility fees may face regulatory and legal limitations, including sometimes approval of a legislative body. An entity (local or regional government or utility) that decides to establish a stormwater user fee must first determine its legal authority to do so, and must structure the user fee in a way that meets all applicable state legal requirements. State law sets the parameters for what types of local or regional entities are allowed to establish fees or taxes, and local governments must be extremely clear that they meet their own states’ definition. While these requirements vary by state, they can include procedural questions (e.g., whether a vote by the local elected body or the voters is necessary) and substantive questions (e.g., whether the fee is structured in such a way as to fairly relate to the amount of impervious surface on a particular property).

A number of local governments have faced legal challenges following the imposition of utility fees, including stormwater fees.^{See footnote 10}  One of the most commonly litigated issues is whether an assessed utility fee is considered a fee or a tax. Because some jurisdictions require voter approval to assess a tax, this distinction can be critical. In the event of a legal challenge, courts commonly look to several elements to distinguish between a tax and a fee. These elements include: the relationship between the assessed fee and the service provided by the local government, the purpose of the fee, the uniformity of application of the fee, and whether the fee benefits those who pay.^{See footnote 11}  Similarly, lawsuits have been filed challenging the authority of a local government to establish a utility.  Local governments should carefully consider all applicable legal requirements and relevant case law before implementing a stormwater utility fee.

Establishing and assessing a utility fee requires upfront administrative costs, including a feasibility study, stakeholder outreach, and fee structure design and implementation. Additionally, there have been a few high-profile examples of public resistance to the stormwater user fee model.^{See footnote 12}  However, through effective outreach, local governments may be able to establish strong community support for stormwater user fees. The City of Orlando, Florida, funds its stormwater management activities through a stormwater utility fee, and successfully built public support for fee implementation by linking the fee to citizens’ concerns about flooding and clean waterbodies.^{See footnote 13}