Communicating with Ratepayers: Getting Past Paying More for Less

Communicating with Ratepayers: Getting Past Paying More for Less

WaterNow Alliance's workshop on communicating with ratepayers provides actionable answers/strategies for connecting with customers about rates while also asking them to use less water and helps water leaders to begin to build a vision around communications opportunities for their utility. The workshop materials are reinforced and expanded on with the "Communicating with Ratepayers Toolkit."

A few workshop highlights and key takeaways:

It’s worth investing in a long-term communications and outreach strategy with utility ratepayers rather than going to them only “when you need something”
Utility leaders, staff, and board members may think they know intuitively what messages resonate, but the better strategy is to test messages with polling and focus groups
Social media is here to stay – at least for now – so it’s prudent to go beyond bill inserts and meet people where they are
The public is bombarded by between 4-10K ads per day, so breaking through the noise with any kind of communication requires a steady effort and compelling message
Communications does not require a big budget or large staff – Moulton Nigel Water District has had incredible success turning its staff of 139 into “brand ambassadors” in the community
The paying more for less conundrum is actually not that hard once you unpack it – the compelling message is that their “water rates are much lower than they would have been in the absence of [conservation].”

The workshop slides and toolkit can be downloaded by WaterNow members through the member portal linked below. Click here to read about a past workshop held in Denver, Colorado.

The Public Needs to Support Proactive Officials

The Public Needs to Support Proactive Officials

In a recent article for the Environmental Law Institute, David Zimmer writes about the importance of public support for innovative water management. David is the executive director of the New Jersey Infrastructure Bank, which partners with the N.J. Department of Environmental Protection to administer the state revolving fund Water Bank. Reach the article by clicking the link below.

Marketing Financial Incentive Programs

Marketing Financial Incentive Programs

Busy homeowners or commercial property owners may not be focused on how water is used or managed on their property. This makes marketing and getting the word out about financial incentive programs key to motivating individuals and businesses to make the investment in localized infrastructure.

Check back soon for an overview of marketing strategies and examples from cities and utilities across the country.

In the meantime, you can learn about communities diving into localized infrastructure and motivating private parties to employ these resilient strategies here and you can explore the Tap into Resilience resource library here.

Taxability of Financial Incentives: State Tax Issues

Taxability of Financial Incentives: State Tax Issues

Forty-one states collect personal income taxes, so it is possible that rebates or other financial incentives for water efficiency or stormwater programs to be subject to state income taxation in these 41 states. The nine states that do not tax personal income where this issue would not arise are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

In an effort to bring some clarity to this tax question, California has updated its tax code to provide that some water efficiency rebates are not taxable. Specifically, California has established that rebates for water efficient toilets and clothes washers, and certain plumbing for recycled water are exempt from both personal and corporate taxes. (Cal. Rev. & Tax Code §§ 17138, 17138.1, 24308.1.) California has also amended its Constitution to exclude from property tax assessment the construction of systems to harvest and reuse rainwater systems. (Constitution Article 13A, Sec. 2(c)(5) and Revenue & Tax Code § 74.5 (Proposition 72 (2018))(effective 1/1/2019 and sunsets 1/1/2029).)

Other states use their tax code to incentivize water efficiency and onsite stormwater management in various ways:

Georgia
- Revenue & Tax Code § 48-7-40.29 -- Income tax credit of 25% of the cost of the qualified equipment or $2,500.00, whichever is less, for purchasing energy/water-efficient equipment for residential or business use including rainwater capture and greywater reuse systems.
Maryland
- Tax-Property Code § 9-224 -- Authorizes a county or the City of Baltimore to establish a property tax credit against the county or municipal property tax when a sediment control pond or stormwater management structure was required by law to be built on that property.
Texas
- Tax Code: Property § 151.355 -- Sales tax exemption for equipment, services, and supplies used solely for rainwater harvesting, water recycling, desalination, brush control, or precipitation enhancement.
- Tax Code: Property § 11.32 -- Exemption from property tax reassessments for the implementation of "approved water conservation initiatives, desalination projects, or brush control initiatives" where the local taxing entity has approved eligible projects by ordinance.

Water managers interested in starting or scaling up a localized water infrastructure financial incentive program should check their state’s tax codes for similar provisions.

However, often times, these types of tax exemptions and credits come with expiration dates and some states have allowed previous income tax exemptions or credits aimed at encouraging localized water solutions to lapse:

Arizona
- Taxation of Income § 43-1090.01 -- Income tax credit for up to 25% of project cost or $1000 for installing residential greywater conservation system expired on January 1, 2012.
- Taxation of Income § 43-1176 -- Income tax credit for up to $200 per house for installing water conservation plumbing stub-out to collect greywater expired on January 1, 2018.
Georgia
- Revenue & Tax Code § 48-7-40.10 -- Income tax credit for investments over $50,000 in qualified water conservation projects resulting in at least 10% reduction in annual permitted water usage expired December 31, 2016.
New York
- Real Property Tax Law § 499-aaa to 499-ggg -- Property tax credit for installing a green roof on certain properties in New York City expired on March 15, 2018.

State legislatures may be amenable to renewing these tax incentives or exclusions if their constituent cities and utilities highlight the importance of these programs in implementing decentralized water strategies.

WaterNow: State Gift Prohibitions Database

State Gift Laws Database

All states prohibit “gifts” of public funds to private individuals or groups. However, most states have also developed extensive exceptions allowing public funds to be directed to private parties when these funds are deployed for primarily public benefits. These constitutional provisions were adopted in the wake of the public debt crisis of the 1830s – when eight states defaulted on debt incurred to build public infrastructure through private partnerships – nearly every state adopted a constitutional amendment to prohibit the use of public bonds and credit for private projects that do not benefit public interests. Together the amendments have formed the “public purpose” doctrine, which provides that public dollars must be allocated for public purposes and government interests and cannot only be used to aid private persons.

Because of these exceptions state gift prohibitions should not be viewed as barriers to implementing localized infrastructure on private property with public capital. Most states allow expenditures that incidentally benefit private interests, as long as they primarily serve and effectuate a public purpose. Some states choose to apply narrow interpretations of terms like “public purpose” and “private benefit” to limit the scope of the prohibition. Other states, however, have not extended an exemption as broadly as others.

If you’re curious about your state’s relevant constitutional sections, potential exceptions to prohibitions against the use of public funds for private purposes, and any potentially relevant state-specific case law, attorney general opinions or other local agency opinions on the subject you can search WaterNow’s 50-state database below. Simply choose the state from the dropdown menu and the relevant information will be provided. You can also select multiple states by clicking the “Search Another State” button. And select the “Email this to Me” option to receive a record of your search.

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DISCLAIMER: These materials are not offered as or intended to be legal advice. Readers should seek the advice of an attorney when confronted with legal issues. Attorneys should perform an independent evaluation of the issues raised in these materials. By providing these materials WaterNow does not endorse, either expressly or by implication, their accuracy or legality and expressly disclaims any and all liabilities and warranties related to use of these materials.

MMSD: Bond Counsel Opinion

MMSD: Bond Counsel Opinion

Milwaukee Metropolitan Sewerage District has considered debt-financing its financial incentive programs aimed at motivating private property owners to install green stormwater infrastructure on their property. Click below to download a copy of MMSD's bond counsel opinion on this issue.

MMSD: Conservation Easement

MMSD: Conservation Easement

Milwaukee Metropolitan Sewerage District enters into conservation easements with private property owners that install green infrastructure on their property and receive a reimbursement from MMSD for doing so. This ensures the green infrastructure is properly operated and maintained and allows MMSD to rely on these localized solutions to manage rainwater where it falls.

Click the link below to download a copy of the easement.

MMSD: Green Infrastructure Partnership Program

MMSD: Green Infrastructure Partnership Program

Milwaukee Metropolitan Sewerage District's Green Infrastructure Partnership Program offers incentive funding on a per-gallon captured, reimbursement basis for a range of green infrastructure strategies installed on private property (and public non-utility property) designed to capture and clean rainwater where it falls. Eligible green infrastructure strategies include:

Constructed wetlands
Native landscaping
Porous pavement
Rain barrels
Cisterns
Stormwater trees
Rain gardens
Green roofs
Soil amendments

MMSD competitively scores applications based on criteria focused on the applicant's ability and commitment to implement, maintain, and promote the project. Accepted projects enter into a conservation easement with the utility to ensure the green infrastructure is operated and maintained going forward. Click here to download a copy of MMSD's conservation easement.

Currently, MMSD pays for this program out of their operating budget. The utility did, however, consider using bond proceeds to finance financial incentives for private property green infrastructure installations. MMSD's decision not to debt-finance was based, at least in part, on the fact that it had sufficient cash in its operating budget to fund the program although the utility is aware that using bond proceeds is an option. To read MMSD's bond counsel opinion on this issue click here.

To read more about MMSD's successes in deploying widespread localized water infrastructure you can find their Tap into Resilience case study here. You can learn about about the Green Infrastructure Partnership Program here.

Motivating Private Property Owners: Rates, Fees, Incentives

Motivating Private Property Owners: Rates, Fees, and Financial Incentives

Consumer Incentives

The central tool at the disposal of public utilities for deploying onsite, localized and other distributed sustainable water management strategies is consumer incentives. While there will always be a certain number of early innovation adopters, or people who “want to do the right thing,” for the most part, significant, rapid and widespread deployment of onsite systems will require public utility investment.

Drinking water rates, stormwater fees, and other payments customers make to water utilities can play an important role in incentivizing private property owners to employ localized water infrastructure strategies. In the water supply and stormwater contexts, financial incentives include a broad range of rebates, reduced fees, or grants to encourage residential and non-residential customers to install a wide range of localize infrastructure strategies, including those shown in the box to the right.

Many utilities, including nearly all of the TiR Case Studies, have financial incentive programs that provide rebates for one or more of these solutions. For example, incentives for turf replacement with xeriscape implemented by the MNWD ranging from $3.00 to $3.50 per square foot with a total program budget of $2.5 million annually have helped the District change out 5 million square feet of turf saving 500 million gallons of water since 2012.150 SAWS’ WaterSaver Landscape Coupon Program, has replaced over 2 million square feet of water-intensive grass with low water-use plants and permeable patios. Tucson Water has invested $10 million in customer rebates and incentives over the past 10 years installing approximately 58,000 high efficiency toilets and clothes washers, 2,000 rainwater harvesting and graywater systems conserving a total of 2.1 billion gallons (6,446 acre-feet) of water to date. Austin Water’s program that offered rebates for all types of water efficient appliances and fixtures as well as a free efficient toilets that began in 1992 achieved 92% market saturation by 2010, and the utility intends to expand these rebates to include outdoor efficiency and conservation. Philadelphia implements a residential rebate and education program to incentivize homeowners to install green infrastructure on their property where homeowners can receive nearly 50% of the cost for installing downspout planters, rain gardens, or permeable pavers and for de-paving impervious surfaces as well as free rain; as of 2018, PWD has budgeted $25 million on incentives to residential customers for these private property retrofits and “greened” 980 acres of private property.

These “carrots” are proven implementation tools, and can be combined with conservation based rate structures and local ordinances or other legal mandates to further advance a local utility’s sustainability and water management goals.

Leveraging Rates & Fees

Virtually all public water resource management entities, whether special districts, commissions, city or county governments, are legally empowered to establish rates for drinking and/or wastewater services. Stormwater is often in a distinct category; some local entities have the legal authority to establish rates or fees to manage stormwater but many do not and are therefore dependent on the public’s willingness to enact stormwater fees.

Drinking Water Rates

Drinking water utilities set rates, i.e., the amount the water provider charges its customers to cover the costs of treating and delivering drinking water. These rates can be collected in a variety of ways, including as flat fees, uniform volumetric rates, or block or tiered rates. Historically, volumetric rates were the most common. These rate structures can be set to promote conservation, i.e., “conservation pricing.” While water—an essential resource—is “inelastic,” conservation pricing can yield on average a 15% reduction in water consumption and up to a 22% reduction in per capita use. There are several rate structure options cities and utilities have increasingly put into practice, including those shown in the box to the left. Finding the right price and rate structure can be challenging as utilities rely on rate revenues to operate and decreased water consumption can mean reduced funds for delivery and treatment of water; certainly, this is not a novel issue. Responding to this reality has been the subject of many convenings and reports since the mid-1990s. Indeed, pricing policies making water more expensive, at least at higher tiers, inherently incentivizes business and residential consumers to use water more efficiently, either through technology or behavior changes. For example, SAWS uses a tiered rate structure to incentivize lower water consumption, together with other efficiency programs. Over the past 25 years, SAWS customers have reduced their consumption by nearly half from 225 gallons per capita per day (GPCD) to 117 GPCD. And communicating with ratepayers early and often about rate increases and conservation efforts is essential.

Wastewater Rates

How wastewater utilities approach rates varies widely. Many utilities establish consumer rates; others collect all or part or of their revenues via property taxes. Another common practice is to impose a fee based on parcel-size or amount of water put into the wastewater system. Approaches can also differ within a city or utility depending on whether a customer has metered or non-metered use or according to the type of property i.e., residential or commercial, being charged. The University of North Carolina School of Government’s Environmental Finance Center has created a “Rates Dashboard” designed to help utility managers and local officials compare and analyze water and wastewater rates against multiple characteristics, including utility finances, system characteristics, customer base socioeconomic conditions, geography, and history.

The amount of wastewater flowing through the system is an important factor in the cost of collection, transport and treatment of wastewater discharges. Accordingly, in the context of sustainable water management, it is important to consider the question of how wastewater rates will be impacted by reduced water use or onsite reuse through advanced localized treatment. Depending on the governance and rate structure, this may mean that drinking water and wastewater utilities will need to coordinate rate planning because reduced water use leads to less wastewater.

Stormwater Fees

Cities and towns employ a variety of funding mechanisms to operate stormwater systems in their service areas, including general funds, bond proceeds, and stormwater fees—a user fee charged to property owners within the municipality’s service area specifically to finance the cost of stormwater program implementation. Stormwater fees can be structured in several ways, including those listed on the right.

Residential property owners generally support a “imperviousness-based fee models” taxes based on assessed property value according to some research. Impervious area-based stormwater fees may be generally more preferable from a policy perspective because they link the use of the stormwater system with the cost of operating and maintaining it and can more readily be coupled with financial incentives designed to encourage reduced impervious areas in exchange for reduced fees.

Some analysts maintain that “stormwater fees are the best option to fund stormwater-related improvements [because a] properly calibrated fee can provide a dedicated, long-term funding stream for stormwater management.” It also and “creates fewer accounting and planning hurdles than debt financing and provides steadier funding than a municipal general fund.” As of 2018 there are an estimated 1,400 to 2,000 cities across the country that have established a stormwater fee that is collected and administered either by a separate stormwater utility or as a stormwater department of an existing Public Works department. This funding mechanism is still emerging and 41 of 50 states authorize municipalities and counties to establish stormwater fees. Stormwater utilities and fees appear to be gaining momentum, however. These are proven tools for implementing localized water strategies, as they motivate ratepayers to conserve water or create a dedicated revenue source that can be leveraged for deploying distributed infrastructure projects on both public and private property.

As with rebates and other financial incentives, pricing mechanisms can also be combined with local ordinances or other legal mandates to further advance a local utility’s sustainability goals. To read more about local ordinances, check out the TiR Toolkit module on Mandates.

Seattle: Saving Water Partnership

Seattle: Saving Water Partnership

The City of Seattle and other water utilities that participate in the Saving Water Partnership offer a broad range of commercial businesses resources to help maximize water efficiency and cost savings, including rebates for:

Multi-family toilet replacement
Sprinkler system upgrades
Flush valve toilets and urinals
Tank toilet replacements
Refrigeration and cooling upgrades
Kitchen equipment upgrades
Commercial laundry upgrades

According to testimonials and case studies gathered by Saving Water Partnership, a multi-family building program participant saved 30-40% on their water bills and a commercial building that installed 236 high-efficiency toilets, 74 WaterSense urinals, and 250 upgraded aerators saves $114,424 in utility bills a year.

To finance water conservation programs like this, Seattle Public Utilities uses its capital budget dollars.

More information about the Save Water Partnership is available here.