A rate study recommends shifting the lion’s share of the costs for Franklin’s stormwater utility to the largest ratepayers. The study doesn’t recommend any change to the current $5 per month rate that homeowners pay.
The rate study by Christopher B. Burke Engineering, of Indianapolis, has been ongoing for nearly a year and the Franklin Board of Public Works and Safety approved the new fee schedule last week. The Franklin City Council is expected to hold a public hearing and vote on the rates at their next meeting on Aug. 21.
The stormwater utility is responsible for inlet and pipe cleaning, ditch maintenance, stormwater pond maintenance, and the repair of all stormwater infrastructure, as well as sweeping city streets. The utility also maintains vehicles and equipment needed to maintain infrastructure and has administrative costs.
What the fees will facilitate
The current rate structure leaves very little money to do anything outside of basic compliance with state law. The bulk of the money pays the city’s MS4 coordinator and his required inspections, with what little is left over going toward small stormwater projects, said Mark Richards, Franklin city engineer.
The current stormwater master plan that was approved in 2015 has 12 projects and 10 are still outstanding. However, some projects that were not on the list were completed by necessity, Richards said.
The total cost of the master plan projects is estimated to be $16.2 million, while the current stormwater budget would only bring in $3 million over the next 10 years, the study says.
Recognizing that it is necessary to raise revenue significantly, the goal of the study was to keep the rates low for homeowners while raising enough money for the utility to complete projects, Richards said.
The utility has been underfunded since it began in 2009 under a state mandate. The goal was to put a utility in place because the state was requiring it, but now it is clear there is a need to raise money to offset the costs of stormwater projects in the growing city, officials said.
The rate structure
Currently, there is a flat fee of $5 per month for single-family residential, $2.50 per month for multifamily residential, $5 per month for non-residential properties equal to or less than 40,000 square feet and $15 per month for non-residential properties greater than 40,000 square feet, according to the rate study.
“That is insufficient to allow the city to really do any capital projects. It also severely limits any equipment the city can buy supporting the stormwater utility,” Richards said.
Under the new rate structure, businesses would pay based on an ERU, or equivalent residential unit. An ERU was determined to be 3,500 square feet, based on an averaged random sample of homes in Franklin. Each business’s bill would be based on how many ERUs of impervious surface it has, which includes both buildings and parking lots.
To come up with the fee, the utility would calculate how many ERUs of hard surface the property has and then multiply that by the residential rate of $5. This makes the business share equivalent to the homeowner’s share.
“Making this change is all about fairness and charging those users who are the biggest users a higher amount than residents,” Richards said. “The way we charged in the past would be like if an industrial sanitary sewer user that discharged millions of gallons a month (and) was paying the same or just a slightly higher rate than what a residential user was that was discharging 3,000 gallons.”
Several types of rate structures were considered, but the ERU-based system was deemed to be the best fit. This type of funding formula is being used by about half of the communities that have a stormwater utility around the state, the study shows.
“I know we always hear from taxpayers that when businesses get tax breaks, it doesn’t seem to be fair for the residents,” Mayor Steve Barnett said. “This is another one of those situations where we’re going to make it fair for the residents and make the businesses pay their share. We should have been doing this a long time ago.”
The new rates would be competitive with or lower than nearby communities. For example, Greenwood charges based on a 2,700-square-foot ERU, meaning businesses pay 30-40% more than they would in Franklin, Richards said.
“We are at the low end of rates not only in the county, but also in the state,” he said.
Pushback from large ratepayers
The rates for businesses vary widely, with the largest ratepayer, Sunbeam Development Corporation, paying $53,000 per year. Sunbeam is developing a group of warehouses and logistics buildings at Interstate 65. Other large ratepayers include the city itself, Johnson County and Franklin schools.
The city is giving Franklin schools a break on rates because several schools don’t discharge into the city’s stormwater system. For, example, Franklin Community High School has a detention wetland area on-site to handle the school’s runoff, Richards said.
In recognition of that, Franklin schools will pay half of the normal business rate, effectively $2.50 per ERU instead of $5. Even with the discounted rate, Franklin schools is still the second highest ratepayer at $35,000 per year, Richards said.
At the Board of Works meeting, member Tina Gross, who is the chief financial officer for Franklin schools, voted no in the 2-1 vote to adopt the rates. The other board members, Mayor Steve Barnett and City Council President Ken Austin, both voted yes.
Gross said businesses didn’t get enough notice and that’s why she chose to vote against adopting the new fee schedule.
“This is going to be a surprise, from what I understand, to a lot of these businesses. My understanding is that the plan is to go out and talk to these companies and organizations over the next few weeks,” Gross said.
Barnett pushed back and told her the study was first discussed almost a year ago at a meeting on Sept. 6, 2022. The city also notified ratepayers via public notice that a rate increase would be discussed this month.
“I think that it’s been out there and we have talked to people,” Barnett said. “You have a school hat and a city hat, and right now that school needs to go over here and the city hats need to be right here.”
Gross asked about a phased approach for the stormwater rates. But Barnett countered that the city council expressed that they didn’t want a phased approach last year when trash fees were shifted to residents.
For the past week, city officials have been reaching out to a subset of the largest ratepayers to discuss the rate changes prior to the council’s vote, Richards said. The plan was to get the word out prior to the city council’s vote, he said.
Large ratepayers aren’t necessarily stuck with their larger bills. They will also have the opportunity to lower their bills by completing stormwater mitigation projects in exchange for bill credit, Richards said.
Information about the credit system and the entirety of the study is available online at franklin.in.gov/egov/documents/1691089254_46834.pdf
