Fee Credits as an Economic Incentive for Green Infrastructure Retrofits in Stormwater-Impaired Urban Watersheds

Abstract

Low participation rates in existing US stormwater utility fee credit programs indicate that the benefits attributed to credits are not being realized, most notably, the financial incentive for private property owners to control stormwater on their sites. This is problematic if credits are to be used to achieve the level of private property participation in green infrastructure (GI) retrofits necessary to effect stream quality improvements in stormwater-impaired urban watersheds. This paper examines economic and policy issues related to the use of stormwater fee credits as a market-based incentive strategy for private commercial property owners to invest in GI retrofits. The City of Charlotte, North Carolina, stormwater user fee and credit program is assessed relative to the direct use and investment value of GI retrofits, and an economically efficient configuration is defined that will provide both the stormwater utility and private commercial property owners with adequate incentive for investment. The results indicate that a stormwater fee and credit combination for a stormwater utility based on the cost of capital and credits for GI retrofits, and credits to property owners equal to the cost of annual maintenance for GI retrofits, can provide adequate incentive for investment by both groups. The fee magnitude and credit structures of several other existing US municipal stormwater programs were evaluated relative to these results. This research can be used to address policy questions regarding the role of stormwater utility fee and credit programs in promoting sustainable urban water infrastructure goals in stormwater-impaired watersheds and in making beneficial connections between the seemingly disparate goals of water quantity and water quality management policies.