Recent Stormwater Regulations and Development Concerns in the Mid-Atlantic

Date: October 9, 2019
Aging infrastructure, a desire to reduce pollutant loads, rising sea levels, and the impact of more intense weather events have created an urgent need for state and local governments to upgrade their water infrastructure, including stormwater systems. The public focus on water infrastructure tends to gravitate towards clean water and wastewater issues given the immediate public health impacts when those systems are not properly functioning. While those issues are important to address, stormwater infrastructure plays an often unseen and increasingly critical role in our communities.

Frequently neglected, stormwater infrastructure tends to be a patchwork of systems implemented at the municipal and subdivision level designed to collect, filter, and convey stormwater runoff from storm and flooding events away from areas where it may collect and cause flooding to an outfall point. The regulatory scheme governing the implementation of stormwater systems focuses on preventing water quality impacts to the water body at the outfall point. The federal Clean Water Act imposes stormwater outfall permitting and water quality requirements on local governments through the Municipal Separate Stormwater System (“MS4”) permitting system, which also imposes stormwater-related development reviews and costs. However, the impacts of more extreme weather events and sea level rise place an increasing stormwater load on these systems causing severe and prolonged flooding. This emerging pattern has pushed legislatures in the Mid-Atlantic and Northeast regions to consider new investments, taxes, and regulatory programs to control and upgrade their stormwater infrastructure. The burden of these new programs will fall on real estate owners and developers who will be stuck between the dilemma of increased costs and regulatory burdens versus improved infrastructure that facilitates development.

The State of Maryland and the District of Columbia have enacted so-called “rain tax” laws to offset the impact of development on stormwater management. In Maryland, the purpose of the law is to establish the local means and funding to provide for the remediation and maintenance of the state's stormwater management facilities, streams and creeks in its most heavily developed areas. The state law authorizes local jurisdictions to charge property owners fees based on a flat rate, by a graduated amount based on impervious surface or by other reasonable methods.  Jurisdictions are required to give credit against the fee charged to property owners to account for measures that reduce the quantity or improve the quality of stormwater discharged from a property, along with those subject to substantial economic hardship. The D.C. Department of Energy & Environment also charges a separate stormwater fee, in addition to requiring developers to adhere to certain stormwater management practices and standards. These standards may be particularly difficult to meet when the District’s development constraints leave little room for pervious surfaces to reduce stormwater runoff.

New Jersey is the most recent state in the region to address this problem through new legislation and provides a useful case study. The impact of increased flooding in New Jersey communities has been documented extensively in the news, by government agencies, non-profit groups, and the business community. A statewide task force and the New Jersey Infrastructure Bank both reported recently on the dire need to invest in the state’s water infrastructure. As reported by the Press of Atlantic City in its “Rising Waters” series, a Rutgers University professor posited that the impact from melting ice caps will result in a disproportionate impact to South Jersey communities via rising sea levels in the Delaware and Chesapeake estuaries. Nonprofit groups such as Jersey Water Works advocate for a holistic approach to water infrastructure including green infrastructure that reduces the volume of stormwater runoff by returning groundwater or retaining it for beneficial use. Of concern to developers, a major credit rating agency announced that its government bond ratings would consider whether a government issuer is prepared for climate related threats to its infrastructure. Critically, their analysis considered whether local governments were planning and investing in stormwater infrastructure to prevent the economic impacts caused by climate-related flooding, citing Superstorm Sandy and Hurricane Katrina as examples of the long-term economic impacts caused by these events. In response to the these concerns, earlier this year the state’s legislature passed the “Clean Stormwater and Flood Reduction Act” that authorized local governments to create new stormwater utilities with the power to assess fees, create oversight bodies, and make investments in stormwater infrastructure, and impose development requirements.  The impact of this legislation will take time to play out as the local governments decide whether to use their new-found authority. But, it is safe to assume that it will add complications to already challenging regulatory environment for real estate developers and owners.