Joseph Krist
Publisher
STORMWATER FEES
When rain falls, it either lands on a pervious or an impervious surface. Pervious surfaces—like lawns, gardens, and sand— can absorb and retain water (albeit at varying rates) during precipitation events and then gradually release it back into the water cycle. Conversely, impervious surfaces are hard surfaces that prevent water from soaking into the ground, such as roofs, pavement, metal, and wood. Since impervious surfaces cannot soak up water, they generate stormwater runoff. Stormwater runoff is water from precipitation that flows on impervious surfaces until it reaches a pervious surface or drains into a sewer system or waterway.
Currently, most jurisdictions in New York do not bill property owners separately for stormwater management. Instead, jurisdictions use revenues generated from metered water and sewer bills based on the amount of clean water consumed, property taxes, or both. Neither water consumption nor property values reflect a property’s contribution to stormwater runoff, creating a disconnect between the revenue being generated and stormwater management costs.
For instance, when metered water revenue is used to pay for stormwater management projects, properties like parking lots that have large impervious surfaces— which contribute to stormwater runoff—but use little or no metered water, pay almost nothing towards the cost of stormwater management. Similarly, when property taxes are used, parking lots may pay very little for stormwater management because they are less developed and therefore may have lower property taxes assessed.
At the request of New York State Assembly Member, Emily Gallagher, the Independent Budget Office (IBO) examined the fiscal impact of a potential stormwater fee in New York City by applying the stormwater fee rates of four peer cities—Baltimore, Philadelphia, Seattle, Washington, D.C.—to properties in New York City. The two most important elements of a rate structure are what the fee is assessed against (impervious land area versus total land area) and whether the fee is set as a flat, tiered, or variable rate.
Revenue potential greatly varies depending on how the stormwater fee is set. IBO’s revenue estimates range from $266 million (using Baltimore’s rates) to $892 million (using Washington, D.C.’s rates) per year. For most census tracts, the median fee per household would equal less than one percent of median household income under all peer city rate structures. Among residential properties, those located in boroughs outside of Manhattan would likely face a greater financial burden due to larger average property sizes, lower population density, and lower median incomes.
The City of Ithaca is the only municipality in New York State with a general stormwater fee, which it adopted in 2014. Since then, no other New York municipality or county has followed suit, despite interest and advocacy from various jurisdictions, including New York City. One concern a municipality may have in implementing a general stormwater fee is the ambiguity surrounding legal authority of localities to implement stormwater fees (Ithaca’s fee has not been challenged in court).
The 2023-2024 legislative session in Albany includes a proposal (A4019/S4169) to address this ambiguity by explicitly authorizing “local water and sewerage authorities to charge fees for surface runoff.”
CONGESTION PRICING DEBATE GETS REAL
The announcement of proposed pricing for the congestion pricing initiative in NYC has stimulated a robust debate. The proposal: Passenger vehicles and passenger-type vehicles with commercial license plates should be charged a $15 toll for entering the CBD, no more than once per day. Trucks should be charged a $24 or $36 toll for entering the CBD, depending on their size, as defined below. Buses providing transit or commuter services should be exempted from the toll. Other buses should be charged a $24 or $36 toll for entering the CBD, depending on their type.
Motorcycles should be charged half the passenger vehicle toll, no more than once per day. Tolls should be charged to vehicles only as they enter the CBD – not if they remain in or leave the zone. Congestion toll rates should apply during the most congested times of the day – from 5am to 9pm on weekdays, and from 9am to 9pm on weekends. Toll rates should be 75% lower in the nighttime.
A credit against the daytime CBD toll rate should be provided to vehicles entering through the four tolled entries that lead directly into the CBD: the Queens-Midtown, Hugh L. Carey, Holland, and Lincoln Tunnels. The credit should be $5 for passenger vehicles, $2.50 for motorcycles, $12 for small trucks and intercity/charter buses, and $20 for large trucks and tour buses. No crossing credits should be in effect in the nighttime period when toll rates are 75% lower.
One issue we will note was the less than sensitive comments from the planning panel’s chair regarding access to medical facilities within the congestion zone. No, insurance companies do not cover the cost of driving and parking when you go to a doctor. Parking is not always at a favorable price even at hospital facilities. In many cases, the drivers and/or passengers are disabled which means that mass transit – under the current conditions – is not an accessible alternative. Full subway access is not expected for another 25 years.
New Jersey remains a primary source of opposition and proposed discounts for NJ drivers using the Lincoln and Holland Tunnels have done nothing to quell it. Some are positing that the fee will make office space in Jersey City, Hoboken, and Weehawken that much more attractive. Nevertheless, litigation is pending which challenges the fees. There is also a call for objective monitoring of changes in pollution in areas like the Bronx which are likely to attract more truck traffic.
The comment period is underway and the hope is that the scheme can take effect by May 1. In the interim, it will be a rough ride as many constituencies are seeking exemptions and many will have compelling cases to make. One last issue: data released by the Traffic Mobility Review Board shows that 85% of 1.5 million people commuting into Manhattan south of 60th Street already take the subway, the PATH, the three commuter railroads or a bus.
DROUGHT AND PORTS
When labor unrest led to fears of shutdowns at West Coast ports – Los Angeles being the major example – some shippers took to using the Panama Canal and unloading their cargos at East Coast ports. For a time, the cost of travelling further to the East Coast provided a reasonable alternative so long as the Panama Canal remained open and cost effective.
The finalization of contracts with the major unions representing Port employees resumed the attractiveness of West Coast ports. The Port of Los Angeles and Long Beach have seen steady increases in traffic since the labor settlement. That trend is only going to increase as the Panama Canal has become a much less efficient and cost effective alternative.
A drought has impacted water levels along the route of the Panama Canal. This has resulted in limitations on the size of ships permitted to pass through as well as on the number of daily transits. This has caused the operator of the Canal to resort to a reservation system for ships wishing to transit through the canal. It has also been steadily reducing the number of daily passages.
The Panama Canal Authority, which normally handles about 36 ships a day, announced on Oct. 30 that it will gradually reduce the number of vessels to 18 a day by Feb. 1 to conserve water heading into the dry season. There was a total of 55 vessels with booked slots waiting as of midday on November 27. The real problem is with ships without reservations. The operator began offering an additional slot in the Panamax Locks for auction two days prior to transit. This slot is being limited to supers (boats above a certain size) and regular vessels that have been waiting for at least 10 days before the auction and do not have a booking slot. It was estimated that the initial bid will be $55,000 in addition to the normal tariff.
It is therefore, no wonder that the Port of LA/Long Beach is seeing steady increases in cargo volumes. October was the driest moth recorded in the history of the Canal. Until water levels revive in the lake segments of the Canal, the limitations will persist.
AV REGULATION
Law enforcement in San Francisco has taken a view that “no citation for a moving violation can be issued if the [autonomous vehicle] is being operated in a driverless mode.” California law requires that a moving violation ticket must be issued to a “driver”. Speed camera laws specify that a violation is cited against the vehicle and is not assigned to a driver for purposes of license points. Texas changed its transportation laws in 2017. According to the Texas Transportation Code, the owner of a driverless car is “considered the operator” and can be cited for breaking traffic laws “regardless of whether the person is physically present in the vehicle.”
General Motors is slowing the expansion of its Cruise automated driving division and significantly cutting spending at the unit after suspending operations in the wake of its difficulties in San Francisco. “We must rebuild trust with regulators at the local, state and federal levels, as well as with the first responders and the communities in which Cruise will operate.” Cruise has been testing self-driving taxi services in San Francisco; Phoenix; Houston; and Austin, Texas; and it has tested its autonomous vehicles in six other cities, including Nashville and Seattle.
ELECTRIFICATION
The Washington State Building Code Council approved new codes mandating the use of heat pumps in most new construction. Those regulations are scheduled to take effect on March 15, 2024 absent legal challenges. The new regulations follow challenges to previously established regs. What the council enacted Tuesday offers builders incentives in the permitting process for choosing electric heat pumps – which provide both heating and cooling in the same unit – instead of natural gas furnaces.
The biggest changes removed language mandating heat pumps for heating water and rooms in homes. It revised how credits that builders need to comply with the state building code are awarded under a scoring system in hopes of spurring greater use of low-carbon building solutions. Under the new rules, a builder will need five credits for a home of less than 1,500 square feet. That’s double what they need today. For a home between 1,500 and 5,000 square feet, they will need eight credits, up from five.
Connecticut Governor Ned Lamont has withdrawn his proposal to end the sale of internal combustion cars in the state by 2035. He cited a lack of legislative support. The hope is that the issue will be reconsidered in the 2024 legislative session.
The City of Detroit has created the first stretch of road in the United States with the capability to charge electric vehicles as they drive on the road. The project is a public private partnership between The Michigan Department of Transportation works with an Israeli electronics firm which developed the technology. The use of the copper and rubber charging infrastructure is buried under conventional asphalt paving. The state is covering one-third of the cost while the private partner covers the rest.
NYC PENSION CHALLENGE
Four NYC employees, backed by Americans for Fair Treatment, a right-to-work group that provides assistance to public sector workers who want to leave a union filed a suit in the New York state courts challenging the divestment from fossil fuel investments in the three pension funds covering City employees. The suit is based on the theory that asset managers breached their fiduciary duties by including climate-related risks when assessing the financial liability of energy companies.
The plaintiffs believe that their pensions are threatened by the use of ESG criteria in the investment process. The City points out that the employees are beneficiaries of a fixed benefit pension plan. The City’s obligation to pay is not based on investment performance. The pension funds — the New York City Employees’ Retirement System, the Teachers’ Retirement System of the City of New York and the New York City Board of Education Retirement System pointed out that after the 2021 decision to stop investing in fossil fuels, the energy stocks lost more than 35 percent of their value, while the broader stock market increased in value by more than 50 percent.
The suits are part of a coordinated effort. Texas’ attorney general lost his case in September which challenged a US Department of Labor rule that ESG considerations were appropriate factors to be considered in the investment process.
Judge Matthew Kacsmaryk of the U.S. District Court for the Northern District of Texas (the conservative go-to judge on a number of issues) however, rejected Texas’ challenge in September, writing that the Biden rollback was not “arbitrary and capricious” under the Administrative Procedure Act, nor did it run afoul of the federal law that sets standards for retirement plans. It did not however, rule on any issues related to fiduciary duty.
Kacsmaryk wrote that the Labor Department since at least 2015 had “posited that ESG factors ‘may have a direct relationship to the economic value of the plan’s investment.’” The case is being litigated by the son of Antonin Scalia who ran the Labor Department in the Trump administration. The politics of the case are obvious.
HOSPITALS
Moody’s announced that it had raised its rating on Catholic Health System’s (Buffalo, NY) rating to Caa1 from Caa2. The upgrade to Caa1 reflects a reduction in the risk of payment default because of recurring operating improvement and the likelihood of covenant compliance at fiscal year-end 2023 as well as approved state and federal grants that will stem further liquidity declines.
Like so many hospitals, the reductions in volumes during the pandemic along with the costs of labor and supplies had significantly strained the System’s balance sheets and liquidity. There were real concerns about default. Now, volumes are recovering which has benefitted the System’s cash position. While outpatient surgeries have rebounded, inpatient volumes still lag pre-pandemic levels. Liquidity will remain weak and reliant on one-time grants for near-term stability.
The outlook on the rating was raised from negative to stable as monthly declines in the operating loss excluding non-recurring grants continue, compliance with the fiscal yearend 2023 covenant, and maintenance of 30-40 days cash on hand. Whatever funding is received from state and federal sources will be supportive of liquidity.
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