by Daniel Elroi
Asset Management Program Manager
Standby Charges in California were established in 1949 with the Uniform Standby Charge Procedures Act(1), which “…authorizes any local agency that provides water or sewer services to impose a standby charge in connection with the provision of that service. A standby charge is essentially an assessment that is charged to unimproved properties to ensure that adequate water or sewer service will be available for that parcel when needed. Standby charges normally appear on property tax bills, although they may be billed directly by the local agency(2).”
“Normally standby charges are assessed on undeveloped properties that currently are not using the services. These standby charges provide equity between existing ratepayers and future customers by spreading the cost to maintain water and sewer systems to owners of unimproved property who may eventually develop. However, standby charges may also be imposed on developed properties as well to finance water and sewer service expansions, recycling projects and conservation programs(3).”
“The charge may be imposed on an area, frontage, or parcel basis, or a combination of these. The formula will be established by an engineer and be specified in original documents on file at the agency(4).”
Proposition 13 was passed by the California voters in 1978, which reduced “…property tax rates on homes, businesses and farms by about 57%(5).” “Proposition 13 also specified that any local tax imposed to pay for specific governmental programs – a “special tax” – must be approved by two-thirds of the voters. Since that time, many local governments have relied increasingly upon other revenue tools to finance local services, most notably: assessments, property-related fees, and a variety of small general-purpose taxes (such as hotel, business license, and utility user taxes)(6).”
In 1996, Proposition 218 was passed by California voters. “In general, the intent of Proposition 218 is to ensure that all taxes and most charges on property owners are subject to voter approval. In addition, Proposition 218 seeks to curb some perceived abuses in the use of assessments and property-related fees, specifically the use of these revenue-raising tools to pay for general governmental services rather than property-related services.(7)” If enough voters within a certain area vote against a standby charge being levied, they can exempt themselves from that charge being added to their tax bill. However, a water district may then require the residents in that area to pay standby charges, including retroactively, if new facilities are required to be built to support them.
A good example of a utility district capitalizing on the ability to collect the Standby Charge is Eastern Municipal Water District in Perris, California. This agency, which services about one million people in an area of over 500 square miles, approved assessment of a Standby Charge for its potable water facilities in 1966 with the Water “Standby” Availability program and for its sanitary sewer facilities in 1968 with the Sewage and Waste Service (Sewer) “Standby” program(8).
The annual assessment and collection of these charges requires transparent, defensible, and repeatable processes that combine information from different sources and apply both spatial and data rules to them. As the California Uniform Standby Charge Procedures Act did not specify how these assessments should be made, some agencies have opted to use simple flat-fee assessment methods that trade potential revenues for a more defensible stance, i.e., they err on the side of caution rather than risk protracted litigation by their constituents.
Other agencies, like EMWD, have chosen to apply more sophisticated methods that they feel they can defend, which produce higher revenues to fund infrastructure development. EMWD, which has been using GIS since the 1990s, generates different “zones of benefit” that generally assess diminishing fees the farther away parcels are from EMWD’s water or sewer main lines. These zones are augmented by additional overlays that include improvement districts, special exemptions, and a differentiation between irrigable and non-irrigable land. These are then overlaid with assessor parcels to identify which zone or zones they fall within, and the whole process results in individualized assessment for each affected property.
This elaborate process had been in place for two decades, and while it resulted in valuable funding for infrastructure, it was labor intensive, prone to adjustments particularly because of the data from the assessor’s office, and caused organizational stresses related to the need to feed the assessments back to the county assessor in time for its legislated deadlines for issuing its own annual property tax assessments. EMWD contracted NSGIS (NorthSouth GIS LLC, a Tepa Company) and its subcontractor Avineon Inc. to overhaul the process with modern geospatial and data transformation technologies from Esri Inc and Safe Software Inc(9) .
The system has increased this agency’s ability to ensure data quality while at the same time reducing staff time requirements by 30% or more. Higher quality leads to fewer disputes by constituents, and the dashboard and query tools configured for the system accelerate research and issue resolution.
As a result of the successful overhaul and creation of the new system, EMWD shared at the 2022 Esri International User Conference that it was able to collect $5,900,000 in the 2021-2022 Fiscal Year.
While the Standby Charge can be assessed by densely urban agencies, this funding mechanism has particular significance for agencies in areas experiencing rapid growth because the availability of infrastructure makes development possible but also because development places particular pressures on infrastructure. The methods that agencies choose to assess these fees influence the amount that can be reasonably and fairly collected, with data management and GIS-based automations being central to these methods.
(1) Source: California Legislature – Chapter 12.4. Uniform Standby Charge Procedures Act
(2) Source: California Tax Data – What is a Standby Charge?
(3) Source: California Tax Data – What is a Standby Charge?
(4) Source: California Tax Data – What is a Standby Charge?
(5) Source: California Tax Data – What is Proposition 13?
(6) Source: Legislative Analyst’s Office – Understanding Proposition 218
(7) Source: Legislative Analyst’s Office – Understanding Proposition 218
(8) Source: EMWD – “Standby” Tax Assessment/Fee
(9) Source: Esri – 2022 International User Conference
