Is a Stormwater Fee a Rain Tax?

Abstract

Activists who oppose local government spending can defeat creative stormwater programs, often by using the slogan “rain tax” to convince the public that the financing plan is a tax increase. Use of fees is part of a general movement by local governments to operate like businesses through management processes. Stormwater programs are multifaceted and can package local improvements to help integrate urban water services and support the vitality of cities. Ultimately, this requires a mixture of funding sources, but reliance on runoff fees has attracted many legal and political challenges. Economic theories and public finance practices can clarify whether the fees are really taxes in disguise. Outcomes of legal developments in states show that either taxes or fees can be used for stormwater programs, and the differences may be smaller than expected. Ultimately, whether stormwater fees are taxes or not depends on nuanced differences as tested in courts under state law. Engineers and public works managers can use the experiences from litigation to sharpen their pencils and show that stormwater funding goes toward the purposes intended.