How Stormwater Services was created, and how it protects its reserve fund by borrowing
Fourth in a series
By Roger McCredie-The durable and controversial Harlem politician Adam Clayton Powell, Jr., famously remarked that the first duty of a congressman was to get himself re-elected. Critics of governmental expansion have paraphrased Powell’s dictum to say that bureaucracies seem to operate under the principle that their first duty is to grow more bureaucracies. As an example, some locals maintain, look no further than the creation and evolution of the City of Asheville’s Stormwater Department.
As previous instalments in this series have noted, the City of Asheville carefully (and frequently) states that its stormwater treatment program was created in order to comply with “a federal mandate” that requires cities with a population of between 50,000 and 100,000 to adopt measures to monitor and maintain water quality according to national standards. The mandate in question, research revealed, is the Federal Clean Water Act, passed by Congress more than 40 years ago. In the late 1980’s, this act morphed into an arrangement called the Clean Water State Revolving Fund (CWSRF), a federal “partnership arrangement” which in fact placed most of the responsibility for water policing on state governments. In turn most state governments, including North Carolina’s, played kick-the-cat and tossed implementation of the CWSRF’s provisions into the laps of towns and cities.
This the State of North Carolina did on a tiered basis, beginning in 2001. The first tier of cities required to initiate stormwater cleanup policies – and taxes to fund them – were those with populations of 100,000 or more: Durham, Raleigh, Charlotte, Greensboro, Fayetteville and Winston-Salem. It was not until 2005-06 that this requirement reached the next tier – cities of between 50,000 and 100,000 people. This embraced a dozen other municipalities, including Asheville. Accordingly, in September of 2006, the city created the ordinance that established the stormwater tax, which has been an integral feature of city water bills since that time.
In other words, the only “federal mandate” driving Asheville’s stormwater program is/was the decades-old CWA, with its broad goals and provisions. As in the eleven other cases applying to cities of similar size, the boots-on-the-ground methodology for financing and maintaining a stormwater program was created and is carried out entirely by the City of Asheville.
In August of 2010 the city repealed Section 7 of its Unified Development Ordinance (UDO) under which stormwater activities had been operating and replaced it with a new Section 7, which created the position of Stormwater Administrator, currently occupied by McCray Coates. And whereas such stormwater compliance duties as the city carried out had previously been under the general umbrella of the UDO as administered by the Department of Public Works, the city now had, in effect, an entire new department with its own chain of command, agenda and budget.
According to Coates, there are presently 31 employees doing work “associated with stormwater.” However, Coates says, “of those, the total number of Full Time Equivalent is 29 that is charged to the stormwater budget.
“An example of that would be an employee who works at night and part of their job duties include street sweeping down town and the other portion involves picking up the trash. In that case, the employees [sic] salary is split between stormwater and the general fund,” he says.
A six-year analysis shows that salaries make up approximately 38% of the stormwater department’s budget. A category titled “other direct” includes expenditures for “all operating costs in the Stormwater Fund except for personnel expenses … it’s for things like materials, contracted services, professional services, fleet maintenance, fuel, street cut charges, tipping fees, etc.,” according to Coates. That item also averages about 38% of the total budget. When construction costs are broken out separately, they average about 3%. The remainder, which historically has ranged between 19% – 21%, goes into a reserve fund, at an average of $660,000 per year.
In last week’s instalment, “Set Aside for a Rainy Day,” Coates explained that the reserve fund “is for stormwater project over-runs and unexpected emergency stormwater related projects such as we have experienced this year. It is also a one-time source for capital improvements, we have planned to gradually draw down the fund balance over the next few years by using the money to help fund additional stormwater projects.”
According to an explanatory note accompanying the 2011 budget figures, “standards for enterprise funds suggest that the Stormwater Fund should have about $500,000 in reserves,” but Coates said the reserve fund’s current balance is $1.4 million, nearly triple the amount “suggested.” And although the budget for last fiscal year anticipated “a significant increase in capital spending,” the budget notes also mentioned the department was contemplating borrowing $430,000 for the purchase of several new pieces of capital equipment, including a backhoe.
Which begs several questions: If the reserve fund is “a one-time source for capital improvements,” does the purchase of capital equipment count as such an improvement? At any rate, with a $1.4 million ready balance, why could new equipment not be purchased directly from reserve funds? Why borrow the money, thus putting an already cash-strapped city further in debt – especially when the money is not only already there, but us constantly being replenished by revenue from stormwater taxes?
In an e-mail, Coates confirmed that the city did indeed purchase the equipment last year, and that it did so with borrowed money; in fact, he said, the stormwater purchases were bundled with several other items (not enumerated) for which the city borrowed money.
“The City issued debt for a number of projects in FY 2011-12, and the stormwater equipment was bundled with this larger debt package – which allowed us to receive a very favorable interest rate. Because of this low interest rate environment, we felt that it was a better use of resources to borrow money for equipment replacement and preserve the stormwater reserve fund for larger future capital projects,” Coates said.
Coates did not indicate what “larger future capital projects” would be used to “draw down” the balance in the reserve fund … nor why “a very favorable interest rate” trumped paying cash for its new equipment.