As previously reported on Conduit Street, legislation (SB 863) to repeal the 2012 stormwater remediation fee mandate placed on the 10 counties subject to a National Pollutant Discharge Elimination System (NPDES)Phase I Municipal Separate Storm Sewer System (MS4) Permit passed the General Assembly on Sine Die with nearly unanimous bipartisan support. Governor Larry Hogan is expected to sign the bill.  The 10 affected local jurisdictions include: Baltimore City and Anne Arundel, Baltimore, Carroll, Charles, Frederick, Harford, Howard, Montgomery, and Prince George’s Counties.  The requirements of SB 863 will also apply to any jurisdiction that is subsequently required to obtain a Phase I MS4 permit.

The bill was heavily amended and below is a summary of the many changes SB 863 will make to the stormwater fee law.

“Repeal” of the Stormwater Fee Mandate

The bill repeals the requirement that a Phase I jurisdiction enact a stormwater remediation fee and instead authorizes enactment of a fee.  All affected jurisdictions must still create and maintain a local watershed protection and restoration fund (restoration fund) as required by the 2012 law.

A Phase I jurisdiction that established a stormwater fee prior to July 1, 2013 may repeal or reduce its fee before July 1, 2016, if: (1)the jurisdiction identifies dedicated revenues, funds, or other sources of funds that will be deposited into its restoration fund and utilized to meet its Phase I MS4 permit requirements; (2) the jurisdiction has filed a financial assurance plan (see below) with the Maryland Department of the Environment (MDE); and (3) MDE determines the financial assurance plan demonstrates good faith toward achieving sufficient funding to meets its permit requirements.

A jurisdiction that reduces or repeals its fee on or after July 1, 2016, must comply with the financial assurance plan and MDE approval requirements described below.

Annual Reporting Requirement

A Phase I jurisdiction must annually report to MDE on: (1) the number of properties subject to a stormwater remediation fee, if any; (2) any stormwater funding structure developed by the jurisdiction, including the amount of money collected from each classification of property assessed a fee, if any; (3) the amount of money deposited into the restoration fund in the previous year by source; (4) the percentage and amount of funds in the restoration fund spent on each type of purpose allowed under the restoration fund; (5) all stormwater management projects implemented in the previous fiscal year; and (6) any other information that MDE determines necessary.

These requirements replace the 2-year reporting requirement in current law.

Financial Assurance Plan

By July 1, 2016, and every 2 years thereafter on the anniversary of the date of issuance of its Phase I MS4 permit, a jurisdiction must file a financial assurance plan with MDE the clearly identifies:

1. Actions that will be required of the jurisdiction to meet its permit requirements;
2. Projected annual and 5-year costs for the jurisdiction to meet the impervious restoration plan requirements of its permit;
3. Projected annual and 5-year revenues or other funds that will be used to meet the costs of the jurisdiction to meet the impervious restoration plan requirements of its permit;
4. Any sources of funds that will be utilized by the jurisdiction to meet the requirements of its permit; and
5. Specific actions and expenditures that the jurisdiction implemented in the previous fiscal years to meet the impervious surface restoration plan requirements of its permit.

The plan shall demonstrate that the jurisdiction has sufficient funding in the current fiscal year and subsequent fiscal year budgets to meet its estimated costs for the 2-year period immediately following the filing date of the plan.

A jurisdiction’s local governing body must hold a public hearing and approve a financial assistance plan before it can be submitted to MDE.

MDE shall make a plan publicly available on its web site within 14 days after the plan has been submitted.

Approval of Financial Assurance Plan By MDE

MDE must decided whether a jurisdiction’s financial assurance plan demonstrates sufficient funding within 90 days after receiving the plan. For a plan filed on or before July 1, 2016, funding in the plan is sufficient if the plan demonstrates that the jurisdiction has dedicated revenues, funds, or sources of funds to meet 75% of the projected costs of compliance with the impervious surface restoration requirements under its permit for the 2-year period immediately following the filing date of the plan.  For the filing of a second or subsequent plan, funding in the plan is sufficient if the plan demonstrates that the jurisdiction has dedicated revenues, funds, or sources of funds to meet 100% of the projected costs of compliance with the impervious surface restoration requirements under its permit for the 2-year immediately following the filing date of the plan.

Penalties For Inadequate Funding in the Financial Assurance Plan

If MDE determines that the funding in a financial assurance plan is insufficient, MDE shall:

• For a plan filed on or before July 1, 2016, issue a warning and engage with the jurisdiction on the development of a plan for meeting the projected costs of compliance
• For a second or subsequent filed plan, impose an administrative penalty of: (1) up to $5,000 a day for a first offense until the funding in the plan is determined to be sufficient; or (2) up to $10,000 a day for a second or subsequent offense until the funding in the plan is determined to be sufficient.

The administrative penalties are in addition to any other remedy available to MDE. Any administrative penalties collected shall be paid into an escrow account to be used by the jurisdiction for stormwater management projects pending a determination by MDE that funding in the plan is sufficient.

Municipal Tax Offset

Beginning in FY 2017, if a county funds the cost of stormwater remediation by using general revenues or through the issuance of bonds, the county shall meet with each municipality within its jurisdiction to mutually agree that the county will: (1) assume responsibility for the municipality’s stormwater remediation obligations; (2) for a municipality that has established its own stormwater fee, adjust the county property tax rate within the municipality to offset the municipality’s fee; or (3) negotiate a memorandum of understanding with the municipality to mutually agree upon some other action.

Exemption for Veterans’ Organizations

A veterans’ organization that is tax exempt under Section 501(c)(4) or (19) of the Internal Revenue Code may not be charged a stormwater fee. Regularly organized volunteer fire departments also remain exempt under existing law.

Overriding Veterans’ Organization & Volunteer Fire Department Exemptions

A Phase I jurisdiction may charge a stormwater fee to property owned by a tax exempt veteran’s organization or a regularly organized volunteer fire department if: (1) the jurisdiction determines that the creation of a nondiscriminatory program for applying the fee is necessary in order to collect stormwater remediation funding from federal properties; and (2) the veteran’s organization or fire department are given a chance to apply for an alternate compliance plan (see below) instead of paying the stormwater fee.

Alternate Compliance Plan

A Phase I jurisdiction must allow a charitable nonprofit group or organization that is tax exempt under Section 501(c)(3) or (D) of the Internal Revenue Code  and can demonstrate substantial financial hardship to implement an alternate compliance plan in lieu of paying a stormwater fee.  MDE may adopt regulations to establishing the requirements of alternate compliance plans, but the regulations would not apply in a county that has implemented its own alternate compliance plan before July 1, 2015.

Charging a Stormwater Fee on the State

Property owned by the State or a unit of State government may be charged a stormwater fee by a Phase I county only if: (1) the State or unit of State government and the county agree upon a fee that is based on the share of stormwater management services related to the property; (2) the county agrees to appropriate into its restoration fund an amount of money that is based on the share of stormwater management services based on the share of stormwater management services related to county property on an annual basis; and (3) the county demonstrates to the satisfaction of the State or unit of State government that the collected fees and appropriated money were deposited into the county’s restoration fund.

A county may not charge a stormwater fee to State property specifically covered by a current NPDES MS4 permit or an industrial stormwater permit.

Required Statement About the Stormwater Fee

A Phase I jurisdiction that charges a stormwater fee must include the following statement on the bill or on an accompanying insert: “This is a local government fee established in response to federal stormwater management requirements.  The federal requirements are designed to prevent local sources of pollution from reaching local waterways.”

Deletion of Existing Funding Language

The bill deletes a provision of existing law stating that funds disbursed through a jurisdiction’s restoration fund “are intended to be in addition to any existing State or local expenditures for stormwater management.”  The provision caused issues with jurisdictions that wanted to channel restoration fund monies into already existing local stormwater programs.

MDE Report to Governor and General Assembly

Starting September 1, 2016, and ever year thereafter, MDE must submit an annual report to the Governor and environmental committees of the Maryland General Assembly evaluating the compliance of Phase I jurisdictions with the requirements of the stormwater fee law.

Montgomery County “Grandfathering”

As Montgomery County had a stormwater fee in place prior to the 2012 legislation (the only county to do so), the county is now no longer subject to many of the provisions of the 2012 legislation and SB 863. The County is subject to separate provisions of law that are identical or similar to SB 863’s provision regarding: (1) exempting veterans’ organizations, volunteer fire departments, and certain roads owned by a homeowners association from the fee; (2) overriding the exemption for veterans’ organizations and volunteer fire departments in order to have properties owned by the federal government pay the fee; (3) charging State property a stormwater fee; (4) establishing a program to exempt property owners demonstrating a substantial financial hardship from the fee; and (5) setting its fee based on the share of stormwater management services being provided to a property by the County.

Additionally, the SB 863 provisions relating to the submission of financial assurance plans (including approval and MDE and applicable penalties) also apply to Montgomery County.

Application to Non-Phase I Jurisdiction Stormwater Fees

The bill requires a county or municipality that is not a Phase I jurisdiction but still has a stormwater fee to:

1.  Set its fee based on the share of stormwater management services provided to the property by the county or municipality;
2. Set its fee based on a flat rate, a graduated rate based on the property’s impervious service, or another method of calculation selected by the county or municipality; and
3. Have policies and procedures, as approved by MDE, to reduce the fee to account for systems or activities that reduce or treat stormwater discharged from a property.

Modifications to Funds Managed By the Maryland Water Quality Financing Administration and the Chesapeake and Atlantic Coastal Bays 2010 Trust Fund

The bill modifies several definitions under the Maryland Water Quality Financing Administration.  The definitions pertain to the various funds managed by the Administration, including the Maryland Water Quality Revolving Loan Fund, Maryland Drinking Water Revolving Loan Fund, Bay Restoration Fund, and the Chesapeake and Atlantic Coastal Bays Nonpoint Source Fund.

• “Person” now includes a nonprofit entity.
• “Wastewater facility” now includes: (1) any equipment, plant treatment works, structure, machinery, apparatus, interest in land, or any combination of these, which is acquired, used constructed, or operated to improve water conservation, reduce energy consumption, or increase security; (2) any programs and projects for managing, reducing, treating, recapturing, abating, or controlling nonpoint sources of water pollution, including stormwater or subsurface drainage water; and (3) any programs and projects for improving estuarine conservation and management.

The bill changes the payback duration of interest free loans made under the Maryland Water Quality Revolving Loan from 20 years maximum to the lesser of 30 years or the projected useful life of the project.

Finally, SB 863 provides that it the intent of the General Assembly that when possible, moneys in the Chesapeake and Atlantic Coastal Bays 2010 Trust Fund provide up to 25% in matching funds for agricultural, forestry, stream and wetland restoration, and urban and suburban stormwater nonpoint source pollution control projects to Phase I jurisdictions that have enacted a stormwater remediation fee.