Will Water Dept. Send Businesses Down The Drain?

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BY TONY WEST/ Kerry Pacifico, Sr. opened his water bill earlier this month and his jaw dropped. In 2010, it had carried a line item of $13.22 for a “stormwater charge.” Now that same line read “$538.54.”

It will get worse. And none of it pays for the water his company, Pacifico Ford in Southwest Philadelphia, is using. It pays for the rainwater that flows down his storm drains instead. By 2014, Pacifico will be paying $1063.41 a month for those drains.

This could mean stormy weather indeed for Pacifico and many other businesses.

Water rates have been rising for years. That’s because of fundamental changes in the way the Philadelphia Water Dept. handles and accounts for stormwater. This process has been slow, and alerts went out long in advance. But the rise for some classes of customers is accelerating.

Now, a dam of popular reaction is about to burst. This month, a round of new assessments was mailed out. Commercial rate-payers with large acreage of impervious paved surface cry they are being clobbered by water charges that have already quadrupled – with more to come and no end in sight. They charge they are being discriminated against and they warn entire industries may wink out of existence if they don’t get relief. Some contend their properties are now unsellable.

City Council President Darrell Clarke heard these complaints and took action. Two weeks ago, he introduced legislation that would allow for a change in the way water rates are charged. “Right now, PWD can petition for a raise in rates every four years, pretty much at their own behest,” explained Clarke’s aide William Carter. “The Council President would like to see more participation in this process by the public and by elected officials.”

Clarke has had some meetings with PWD regarding their latest round of increases, and “we’re really not clear how they’ve arrived at these numbers,” continued Carter.

PWD is in the midst of a four-year process to change how rate-payers cover the costs of its vast, aging combined system of storm and sewage lines. Meter usage – how much water customers buy – has always been the source of its revenues. But many costs the utility faces don’t stem from the water you draw; they stem from the water that falls on your property and runs off.

This cost is built into your land, and the amount of impervious surface on it. Rain that falls onto your lawn soaks into the soil; rain that falls onto your driveway runs into the gutter. Your water rates never used to pay for that runoff; now they will.

After years of mapping, PWD has determined every land parcel’s “IA/GA” (Impervious Area/Gross Area). As of 2012, stormwater costs have been 50% reallocated from water-buyers to land-owners. By 2014, land-owners will be paying 100% of stormwater costs.

This dramatic change has, among other things, nearly doubled the number of PGW’s customers. New on its billing rolls are 23,447 parcels of land which had no water service. Previously, their owners had paid nothing to maintain the storm drains. Now they will be paying.

This change was initially driven by customer complaints, explained PGW spokeswoman Joanne Dahme. “Large users pointed out they were paying off their meters for parts of the system they weren’t responsible for,” she said. “The new billing method is fairer.”

The change is supposed to be revenue-neutral. The average homeowner won’t notice much difference. But many large commercial properties are seeing vast swings in their costs. Big winners, in general, are “vertical” properties with lots of plumbing stacked on top of a small footprint, and properties with large lawns. “Eds and meds” – care facilities and universities – come out ahead in this switch.

Losers are often “horizontal” properties – those with small water consumption but large areas of paved surface. Auto dealers, shopping centers, factories and warehouses are being hurt. Those operating on tight margins could be driven out of business. Their property values will plummet; in some cases, it’s not clear any new buyer would look at their properties at all. This could lead to a vicious cycle of abandonment and blight, killing the very revenue stream needed to pay for public infrastructure and creating new brownfields of unusable land.

It doesn’t seem fair to Stuart Parmet. The owner of American Box & Recycling Co., a manufacturer in North Philadelphia, Parmet founded United Business Owners of Philadelphia two years ago when the stormwater changeover started. He now claims 130 small-to-midsized businesses as his members, representing 25,000 employees. His property, a 10-acre factory which is mostly impervious, is a good example of those which are being hard hit by the switchover in stormwater billing.

“Joanne Dahme told me this has nothing to do with green footprint and infrastructure,” Parmet said. “This was strictly an increase on small businesses. They’re taking the costs from the highrises, alleviating their water bills 70%-80% and putting it on us. They did this to offset their compromise with big-building owners.”

Dahme disputed Parmet’s charge of bias. “UBOP had a representative on a Citizens Advisory Commission which met 10 times last year,” she said. “We adopted every suggestion they made and they supported the CAC’s final report on Dec. 15, 2011.”

Dahme acknowledged there were different points of view on the committee. “We heard from UBOP, but we also had to hear from BOMA (Building Owners & Managers Association of Philadelphia),” she said. BOMA’s members handle 100 million square feet of commercial footage.

It is true that Center City real-estate comes out ahead under the new rules. The Marriott Hotel at 12th & Market will see its monthly stormwater charge drop from $2,275 in 2010 to $1,045 in 2014. The Municipal Services Building at Broad & JFK will go from $7,275 to $2,940.

Meanwhile, “My water bills have gone from $200 a month to $4,000 a month,” Parmet grimaced. “This could be the straw that broke the camel’s back.”

At UBOP’s suggestion, PWD agreed to limit annual stormwater-charge increases to 10% for owners who plead hardship. This may delay the arrival of 100% stormwater billing by a few years but it will not prevent it.

That stormwater rates needed to be changed looks true. But Philadelphia’s sewer system isn’t its only aging infrastructure in need of special care. By and large, the industries and neighborhoods that benefit from the new billing system – Center City eds and meds – were doing pretty well even under the old system. They could afford to subsidize stormwater control.

Vast stretches of the city’s outer neighborhoods, however, are littered with older impervious properties, many dating from a century-old industrial era. Nobody expects these lots to be filled with a forest of highrises. Where they have been successfully recycled, it has often been with shopping centers, which need the same impervious surface the old factories did.

PWD is offering a package of loans, grants and incentives to help customers with a large impervious footprint reduce their stormwater runoff, and thereby their bills. These are just now being implemented, however, and it is not yet clear how well they will work.

(Next week: A look into business winners and losers. Will the Water Dept.’s bold new stormwater rates help or hurt Philadelphia?)

STORM DRAINS are a major and costly part of Water Dept.’s business. New method of charging for its costs will redo the real-estate map of this city, with major winners – and losers.

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