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Preliminary Financial Issues / Analysis Chehalis River Basin Flood District Formation November 18, 2010 Chehalis River Basin Flood District Formation 1

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Preliminary Financial Issues /

AnalysisChehalis River Basin Flood District

FormationNovember 18, 2010

Chehalis River Basin Flood District Formation 1

Multi-County “Flood District”

Lewis County FCZD

Grays Harbor County FCZD

Thurston County FCZD or

SWM

Chehalis TribeInterlocal

Agreement*

Defines:• Governance• Project

selection• Cost shares• Coordination

* Forms entity such as interlocal agency or joint authority

Chehalis River Basin Flood District Formation 2

Multi-County Flood District could continue based on the terms of the interlocal agreement

or Multi-County Flood District could be

replaced by an independently governed multi-county flood control zone district◦ Legislation currently being drafted to allow for this

option

Options for the Future

Chehalis River Basin Flood District Formation 3

Cost Recovery Options

Rates v. Taxes v. Assessments

What is the best combination of funding sources to use to recover Chehalis River Basin flood program costs in terms of equity, revenue sufficiency, reliability, ease of administration, and other factors?

Chehalis River Basin Flood District Formation 4

Characteristics of Options

5Chehalis River Basin Flood District Formation

Legal Constraints Practical Considerations Capital Operations

Taxes

- Ceiling of $0.50 / $1,000 AV without a public vote- May exceed with public vote- Must be applied uniformly

- Cannot be imposed on tax- exempt property- Can be "squeezed" by senior taxing entities

- Can be used for capital project(s), including: · Major flood control · Local / minor flood control · Stormwater facilities- Can support revenue bond or voted GO debt

- Can be used for operations, including: · Maintenance · Engineering · Repairs · Public education

Charges

- Those charged: · Must be contributing to runoff increase · Must be served or benefited by facilities

- Must be indirect nexus between services provided and amount charged- Basis of charging undefined (often impervious surface)

- Can be used for capital project(s) meeting nexus test, including: · Major flood control · Local / minor flood control · Stormwater facilities- Can support revenue bond debt

- Can be used for operations, including: · Maintenance · Engineering · Repairs · Public education

Assessments

- Capital only (not operations)- Can be applied only on specially benefited properties- Assessment limited to AV increase

- Adminstratively cumbersome- Diffi cult to demonstrate special benefit

- Can be used for capital project(s) that provide special benefit- Can support revenue bond debt

- Can not be used for operations

Each of the three counties reports that while $.50 / $1,000 AV is currently available against the $5.90 cap◦ 2010 taxable assessed value will likely decrease◦ Other tax levy rates will likely increase

Result: Possible compression not predictable at this time if $.50 / $1,000 AV will remain available

6

Tax Information

Chehalis River Basin Flood District Formation

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2004 2005 2006 2007 2008 2009Grays Harbor County 4,032,924,875$ 4,303,068,539$ 4,541,366,189$ 5,484,425,084$ 6,316,005,187$ 6,501,053,179$ Thurston County 17,300,000,000$ 19,900,000,000$ 23,500,000,000$ 28,810,000,000$ 30,117,000,000$ 29,249,000,000$ Lewis County 4,225,374,049$ 4,307,489,281$ 5,061,405,200$ 5,967,909,962$ 6,535,716,725$ 6,560,558,034$

$-

$5

$10

$15

$20

$25

$30

$35

2004 2005 2006 2007 2008 2009

Billi

ons

Total Taxable Assessed Value of Real Property by County

Grays Harbor County Thurston County Lewis County

Description Equitable Revenue Sufficiency Reliability Ease of

Admin

Taxes

Charges

Assessments

Cost Recovery Evaluation

Chehalis River Basin Flood District Formation 8

Cost Recovery Questions

Does it make sense to recover some contribution of runoff related costs in a rate and other flood control benefit related costs in a tax and/or assessment?◦ RCW 86.15.160(4) authorizes charging rates “to

those who are receiving or will receive benefits from storm water control facilities and who are contributing to an increase in surface water runoff.”

If a rate is used, how would it be reconciled with existing local drainage utility rates?

Chehalis River Basin Flood District Formation 9

Public Information: Education materials – flood proofing guidance

Regulation: Improve floodplain regulations, develop conservation easement programs

Planning and data collection: Improve hydraulic modeling, study woody debris and stream gravels

Reduce damage to existing structures: Develop home evaluation and buyout programs

Emergency response and preparedness: Develop early warning systems

Natural resources protection projects: Protect and restore riparian areas

List: Non-Structural Mitigation Measures

Chehalis River Basin Flood District Formation

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Floodplain protection ◦ Culvert improvements, tributary drainage

improvements Bank protection

◦ Bank stabilization and protection Conveyance capacity

◦ Open channel migration zone

List: Structural Measures

Chehalis River Basin Flood District Formation

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Cost Recovery Questions

Uniform v. Area-Specific Funding Does it make sense to recover costs

uniformly within the District by applying the same rate and/or tax throughout?

If a uniform approach is preferred, should revenue generated in one area of the Basin be in any way limited as far as where in the Basin it can be spent? If so, how should it be limited?

Chehalis River Basin Flood District Formation 12

District Boundaries

Chehalis River Basin Flood District Formation

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Cost Recovery Questions Does it make sense to charge different rates,

taxes, or assessments in different parts of the Basin depending on their specific needs? If so,◦ How many different areas and associated rates,

taxes, or assessments are appropriate?◦ Which types of costs should be allocated among

areas, e.g., operations and maintenance, capital?◦ How should those costs be allocated among areas?◦ What are the offsetting costs of implementation

and ongoing administration?

Chehalis River Basin Flood District Formation 14

Related Fiscal Policy Issue How can the FCZD(s) protect its property

tax revenues, if used, given the fact that the $.50 per $1,000 tax rate authorization can be consumed by other, more senior, entities.

Chehalis River Basin Flood District Formation 15

Sample Fiscal Policies What is an appropriate working capital

balance to maintain as a cushion against fluctuating expenditures, taking into account the size of the program and other factors?

How should capital repair and replacement be funded over time?

What is an appropriate level of capital contingency funding to maintain for emergency needs?

Chehalis River Basin Flood District Formation 16

Sample Fiscal Policies What is an appropriate capital funding

strategy? When should debt be issued & by whom? When is a public vote necessary to issue debt?

If bonds are utilized, what is a prudent target coverage ratio to maximize fiscal health & allow for future debt issuance as needed?◦ Revenue bond issues are typically accompanied by

a coverage requirement of 1.25 or more◦ General obligation bonds usually do not require

coverage, however, such a target may be set by policy.

Chehalis River Basin Flood District Formation 17