Annapolis faces stormwater shortfall; consultants recommend 15% fee hikes and propose ERU-based nonresidential charges

Consultants and public works staff told the Annapolis Finance Standing Committee on April 29 that the city’s stormwater enterprise fund is running below the council’s minimum target and would exhaust reserves within a few years without significant fee increases or structural changes to billing.

David (Dave) Heider of Stantec presented the stormwater analysis, which showed operating expenditures for stormwater at roughly $2.6 million in FY26 and a forecast that, with no fee increases, the fund would be negative by about fiscal 2027. He said a primary driver in FY26 operating growth was a $515,000 tree program included in the operating budget.

Recommendation and scenarios

Stantec recommended a 15% stormwater fee increase in FY26 and another 15% in FY27, followed by lower annual increases. Under that plan, the fund would recover to the minimum balance by about FY28 and then remain close to target. The consultants modeled alternative scenarios: if the FY26 increases are deferred, the city would need much larger increases later (about 25% in FY27 and 18% in FY28 in one scenario).

The consultants also modeled an enhanced tree program (described as a “3,300” or “30/3300” expansion in the presentation) to plant roughly 6,500 trees over time; that scenario substantially increased operating costs and would require higher stormwater fees to remain solvent.

Fee structure and credits

Heider and staff explained the current structure charges single-family and multifamily properties a per-unit fee while nonresidential parcels are billed in tiers based on impervious area. Stantec recommended transitioning nonresidential parcels to an ERU (equivalent residential unit) measurement so fees more closely match impervious area. Heider gave an example: a parcel currently in a tier that equates to five ERUs could instead be billed for 10 ERUs under an ERU approach, increasing proportionality but also potentially producing large increases for some properties.

To ease the transition, staff and consultants proposed an ERU-based fee change effective Jan. 1, 2026, preceded by a credit-application period from July 1 through Dec. 31, 2025. The proposed credit program would reduce bills for parcels installing best-management practices (BMPs) such as pervious pavement or rain gardens; city staff said credits would be volume-based and capped at a 50% maximum per state guidance.

Council questions and next steps

Council members asked for unit-cost comparisons (cost per impervious acre treated) with neighboring jurisdictions and pressed for analysis of expense-side savings and alternative contracting to lower program costs. Alderman Renard asked whether procurement or private investment models could reduce the city’s per-unit costs; public works staff said they and county partners evaluate proposals using cost metrics and are open to alternative implementation strategies.

Staff said they will further refine the credit program, provide details on the tree program’s capacity and plantable area, and bring an amendment for the alternative fee structure for nonresidential parcels during FY26 implementation.

Ending

The Finance Standing Committee heard that immediate FY26 action (15% increase) would substantially improve the fund’s trajectory, while deferring increases would require larger future hikes. Staff will return with implementation details on credits, the ERU conversion, and additional expense-side analyses.