Staff propose market‑based stormwater credit program to help infill projects meet state permit requirements

City staff presented a proposal to establish a market‑based off‑site stormwater treatment credit transfer program intended to ease redevelopment where on‑site stormwater treatment is infeasible.

Tyler and Aaron (staff members) explained that under the city's state‑mandated stormwater permit, new development or redevelopment that disturbs an acre or more must provide stormwater treatment emphasizing green infrastructure and volume reduction. When on‑site treatment is infeasible, the ordinance already allows off‑site treatment but the current practice is cumbersome: developers must find land or a willing partner and complete new construction within 24 months.

Staff proposed a structured market in which approved generator projects (public or private) would be listed publicly; each generator must complete construction and pass inspection before credits become transferable. Transfer multipliers would account for environmental benefit and proximity: staff proposed 1.2:1 for the closest same receiving water body projects, 1.3:1 for the next tier, 1.4:1 for a third tier, and 1.5:1 for transfers citywide, with a portion set aside for environmental benefit.

Aaron summarized the program goals: create predictable, cost‑effective off‑site options to allow infill and redevelopment that otherwise could be infeasible, while giving the city a transparent way to track and inspect mitigation projects. He told council that the city could act as a generator; staff pointed to a proposed 37th Street retrofit that they estimate could produce about 90 acre‑feet of treatment capacity that could be listed as credits once built.

Council members pressed staff on safeguards and costs. Questions included: how frequently prices would be set (staff said pricing would be market driven but would include upfront construction cost and an annual O&M payment or an upfront O&M escrow), what minimum project size would be allowed for a generator (staff recommended a one‑tenth acre‑foot minimum to limit lots of small private entries), how the city would avoid a situation where water quality in a particular neighborhood degrades because developers buy credits elsewhere, and who would enforce ongoing maintenance.

Staff answered that city water‑resources staff would approve generator projects and inspect and track credits in a public registry; generators and users would enter contracts that include operation and maintenance responsibilities, and staff proposed annual inspections and notice/backup remedies for noncompliance. The city also indicated it would return regular reports to council and include implementing ordinance language if the council supports proceeding.

Staff walked through a simple hypothetical: if a downtown redevelopment needed 10 acre‑feet and a 37th Street generator offered credits at a 1.3 multiplier, the downtown project would purchase 13 acre‑feet of capacity from the generator and the registry would reduce available credits accordingly. Using an example construction cost of $900,000 for 90 acre‑feet (staff caveated that cost is project‑specific), staff illustrated an approximate $10,000 per acre‑foot capital cost as an example to inform feasibility conversations.

Council feedback ranged from support for a pilot to caution about program complexity and equity: several councilors asked for a clear report‑back schedule, thresholds for when the city should serve as generator versus relying on private participation, and a framework to ensure water quality is not concentrated away from disadvantaged neighborhoods.

Next steps: staff said they will draft policy and ordinance language, prepare sample agreements and a public registry/web dashboard, and return with recommended transfer ratios, phase‑in steps and council reporting checkpoints for any pilot or ordinance change.