Palm Coast’s Stormwater Ordinance is a Ticking Time Bomb

The current ordinance is not legally defensible. If the city doesn’t fix it soon, they may face a court challenge. If the ordinance is found to be invalid, the city may have to refund $ millions.

Palm Coast, FL – January 4, 2011 – The City of Palm Coast has accomplished much in its short 10-year life. Along the way, short cuts were taken; some with adverse, if unintentional, consequences. One example is the City building department’s original permitting fee schedule. The haphazard implementation resulted in over $6M in excess collections [Story]. Another example is the City’s Stormwater Management Ordinance. It’s a ticking time bomb exposing the City to potentially exploding costs.
The 2004 Ordinance
Palm Coast’s existing stormwater ordinance could not withstand a legal challenge. Even the city recognizes the problem. The city’s stormwater system is comprised of a series of swales, ditches, canals and control devices (to regulate flow and control levels). It was designed and implemented to handle Palm Coast’s original 45,000 platted residential lots. It’s performance during last year’s storm which dumped a record 28 inches on the county within a few days attests to its overall effectiveness. But it is ageing. With age comes increased maintenance expense. The utility’s budget exceeds $7M. Over $5M comes from user fees permitted by the ordinance.
The city passed the Ordinance in 2004 creating a Stormwater Management Utility and imposed user fees on city landowners. Unlike taxes, utility fees are supposed to be tied to the level of use of the utility’s system. According to Florida law, those who don’t use the utility shouldn’t be charged a fee. It they are, the "fee" begins to look like a special assessment or an unconstitutional tax.
The Challenge
More than 2 ½ years ago, a group of property owners challenged the legality of the 2004 ordinance. They sent a letter and a legal analysis of the ordinance to the City. In a subsequent meeting with officials, the city asked for time to amend the ordinance. Meanwhile, the existing (flawed) ordinance remains in force. The most glaring flaws of its flaws are:
  • Undeveloped unplatted land is not charged a fee, but undeveloped platted land is charged. How could land become a user of the stormwater system simply because some plat maps had been filed?  
  • The "service area" was not properly delineated. The ordinance is based on the assumption (legislative finding) that all landowners within the city benefit from the stormwater system. That assertion might have been acceptable if the city had chosen to implement a special assessment district, but they did not chose to do so. They are stuck with their selection of a "user fee" to fund the system. To be charged, the land must "use" the system.
City’s Response
In response to the letter, the city agreed to devise a new ordinance. To the extent that a new ordinance would eliminate charges to landowners who do not use the system, future revenue is reduced. Rebates would also be due any landowner who had been improperly charged in the past. The city faces a revenue problem.
Meanwhile, communities like Grand Haven, that have their own self-contained stormwater management system, realized that they too should be exempted. Grand Haven residents pay their own Community Development District (CDD) to maintain their self contained system, but residents also have paid monthly fees to the City since 2004. Cumulatively they have been "overcharged" about $800,000. 
Yet, it was two years before the city floated a revised ordinance. And the aging system is becoming more expensive to operate. The city seems incapable of crafting a proper "utility" ordinance based on user fees. Their attempts to date would surely prompt a legal challenge, the outcome of which could be financially devastating to the city.
Alternative Financing Options
  • Special Assessment: This option is based on the assumption that everyone within a Special Assessment District receives a benefit from the district, such as in increase in value. As an example, property owners along Colbert Lane pay an annual special assessment to cover that road’s construction. There are clearly inequities in this type of system. For instance Colbert Lane is used by many drivers who do not reside within the Special Assessment District. Regardless, the courts have been very liberal in their interpretation of Special Assessment Districts.
  • Ad valorem taxes: Here is a simple solution to the legal pitfalls of the Utility fee alternative. The city can charge ad velorem (property) taxes to fund the stormwater system’s revenue requirements. A $2 per month increase would result in $1.3 million increase in revenue. But such an increase would be politically unpopular. It would affect nearly all voters. Plus it would be labeled as a tax rather than using the more easily digested euphemism; "fee."
The City’s Conundrum
To avoid either of the above alternatives, the city seems hell-bent on jiggering with the utility fee concept. To make a fee based system work and be legally defensible at the same time, an amended ordinance must exempt those who do not use the system. Case law is pretty much on the side of owners of undeveloped land, even to the extent of suggesting that undeveloped land may actually benefit a stormwater system rather than "use" it.
An amended fee-based ordinance would also be required to clearly define who is a "user" of the system (not a beneficiary). Here are a couple of examples of how inequitable their efforts are towards this end so far.
One Palm Coast resident who owns 20 contiguous acres bordering the Karona Canal pays $576 per year in stormwater fees, 140% higher than the property’s Palm Coast ad valorem tax. Yet a portion of the property is wetland which actually receives from rather than contributes to the stormwater system. In contrast, one City Council member will pay about $750 in City property taxes. His stormwater fee is $96; less than 13% of his city property tax.
Grand Haven residents continue to be charged about $200,000 annually although the city recognized over two years ago that Grand Haven’s existing system was constructed and is maintained exclusively by the Grand Haven Community Development District, which is funded by the residents. The system is wholly outside the city’s stormwater system. They are not users of the utility.
The historic Masonic Cemetery on Old Kings Road is being billed a stormwater fee of $1,650 per year. The city is also attempting to collect $4,610 in past due billings – billings that were not invoiced pending an ordinance amendment. This 6.1-acre parcel is assessed for only $76,250. If it paid property tax, the city portion would be only $267; or 16.2% of the stormwater fee. This property has been described as sitting on a sandy ridge that slopes east into Graham Swamp with no effect on the city’s stormwater system.
More examples of vacant land with no roadside swales on Old Kings Road that arguably benefit rather than use the stormwater system:

  • 16 acres:
    Annual stormwater fee – $4,290
    City property tax – $1,239
  • 15 acres:
    Annual stormwater fee – $4,092
    City property tax – $1,182
  • 12.6 acres:
    Annual stormwater fee – $1,848
    City property tax – $66

What Now?
The ordinance is on the agenda for a City Council workshop on January 11, apparently without any meetings between city staff, which will draw up the revised ordinance, and stakeholders; those who will likely pay the fees.
The issues are complex. Crafting an equitable ordinance will not be easy, but the city’s exposure under the existing ordinance is large and growing daily. Under State law, Palm Coast may be liable for improperly collected fees going back up to four years. Failure to devise a fair fee structure soon may result in a legal challenge, potentially invalidating the entire ordinance. If that happened, ALL money collected under the ordinance since 2004 would have to be returned, including money collected from legitimate users of the system. How much money? Enough to build two or three city halls at $10 million each.

8 replies
  1. John Boy
    John Boy says:

    Storm Water

    Maybe if our overpaid under performing City Manager had paid more attentio to things like this rather than spending all of his time "building" a monument (City hall) to himself, this problem would have been solved long ago. I call for his firing as he again demonstrates his total inability to perform even at the most marginal level. Based on the salary he is being paid, all problems should be fixed and taxes should be reduce.

  2. George Meegan
    George Meegan says:

    Never met a tax I didn’t like

    That’s how politicians operate. They want money coming in from anywhere they can get it. This storm water fee is just like the impact fees they colected for new roads they did not need. The funds used for the new Walmart Superstore were taken from the impact fees and used for the "Walmart" site because all the politicians and business budies had bought land near it to profit from when "Walmart" moved in. We did excessive drainage work that gave "Walmart" a high and dry site. They can tap into our drainage provided by tax payers, and impact fees overcharged for years, that sat in an account ready to be taken by the state and returned to tax payers due to it’s illegal status.
    So the storm water fees are not the only problem, but one that should be resolved in courts with a lawyer not from this area who is not part of the "good old boys network" here in Flagler county. We need an audit by the new state govenors office to straighten out the books. Time for new leaders and an elected strong Mayor with a set of "clubs". Landon is just doing what he’s told, can’t you see his strings?

  3. Ron
    Ron says:

    What’s Up

    Why do we see the City time after time dig out the ditches in front of our homes then put sod down ? Also when they dig them out they only dig even with the culvert pipe, then they put sod on top which makes it higher than the pipe again. I just can’t figure it out. Leave it and the weeds/grass will grow right back. And I am sure they will say it will erode but those small areas are fine left alone after cleaning. Or so it has been in every other City in FL I have lived in. This must be another way to uselessly spend money!

  4. George Edward Chuddy
    George Edward Chuddy says:

    Dont forget about us too and

    We were exempt from the years 1972 until 2005. Then we get billed for what was for decades a Developer Improvement/Homesite Purchase Agreement Feature/Improvement for us.
    We are paying now since 2005 and have asked Utility to please Grandfather us, but, that hasn’t happened.
    Additionally, we recall that ‘The Palm Coast Community of ‘The Woodlands’ was also exampt. Are they still exempt?
    After all, even in our first Public Offering Statement it clearly states that this Gargantuan Acreage is subject to FLOODING…so the Developer to sell this land to us made ‘Provisions’…
    This can’t be much clearer..
    Oh well, please don’t forget about us and now ‘The Palm Coast Community of ‘The Woodlands’ also! Thank you!

  5. George Edward Chuddy
    George Edward Chuddy says:

    The Palm Coast Community of the Woodlands

    Are there any readers here from ‘The Palm Coast Community of ‘The Woodlands’?’ If so, is the reason we were exempt from this FEE the same reasons you were once exempt for decades?
    Thank you very much.

  6. George Edward Chuddy
    George Edward Chuddy says:

    Reply to Ron

    Hello Ron!
    …I think this may be due to the Federal ‘Consent Agreement’ C-2854 which requires, required I.T.T. / its successors to have ‘Community Wide Landscaping’ for Palm Coast, Inc. 93,000 acres, of which 15,000 acres set aside for ‘Green Enclaves’.

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