Ann Arbor builds climate resilience with long-term funding and planning
The natural beauty of the Huron River inspired longtime Ann Arbor developer Peter Allen to build his real estate empire along Main Street on Ann Arbor’s north side.
But that love of the river has ended up costing Allen — in flood insurance premiums.
In 2000, Allen bought five properties on North Main, all located within the Federal Emergency Administration’s Special Flood Hazard Area. Because of their location, the company's mortgage lender requires Allen to purchase insurance through the National Flood Insurance Program (NFIP) — to the tune of about $16,000 a year.
And those premiums are rising. Allen estimates his premiums have increased 12% in the last two years. Plus, that’s just the out-of-pocket cost. According to Allen’s son Doug Allen, property values have taken a hit, too. He estimates the properties are worth several hundred thousand less because they’re in FEMA’s floodplain hazard area.
But a $9.4-million City of Ann Arbor project to reduce flooding at the junction of Allen Creek and the Huron River will likely soon remove all but one of Allen’s North Main properties from FEMA’s map, saving Allen thousands of dollars every year that he can reinvest in the properties. Plus, he’ll likely enjoy a significant boost to the property's value.
That will enable the firm to spend more money investing in the buildings and making it more affordable for the tenants to be in the properties. It could also create opportunities to place housing where it’s currently prohibited in the special flood hazard area.
Beginning in 2007, Jerry Hancock, Ann Arbor’s stormwater and floodplain programs coordinator, began piecing together grant funding from state and federal agencies to create a porous berm through the railroad grade at the outlet of Allen Creek into the Huron River.
As a result, 30 structures will have a lowered flood risk, and nine will come out of the FEMA flood hazard zone completely. That includes Allen’s properties, nearby Casey's Tavern and the Amtrak station. The city is now in the process of revising the flood map to make it official.
It’s been a labor of love for Hancock, a longtime Ann Arborite and 33-year city veteran staffer, who lives just up the block from the project.
“Since I live close by, I come down here all the time,” Hancock said. “I’m really proud of it.”
The project is part of a comprehensive city effort to manage stormwater and stay ahead of flooding as the climate warms and rainfall increases. Ann Arbor is well-positioned to meet this challenge; it has a dedicated revenue stream and a city department focused on stormwater management.
However, few other municipalities in the state have established the kind of financial and municipal infrastructure that will enable them to manage stormwater and avoid flooding in a warmer, wetter world.
Stormwater management needs funding
Ann Arbor expects to spend $7.9 million on stormwater management in 2023 — roughly $64 per capita — not including capital expenditures. For comparison, the city of Grand Rapids expects to spend $4.8 million, or roughly $24 per capita, in the same year. In 2018, the City of San Francisco spent about $54 per capita on stormwater management.
Ann Arbor can afford this high level of service partly because of its stormwater utility, which creates a dedicated fund within municipal government solely to manage stormwater.
The city first adopted the utility in 1980, charging a flat fee for stormwater service. Then, in 2007, it changed the utility’s structure to base its fee on impervious surface area — which, city officials say, made it more equitable. It also made it more likely to withstand a legal challenge under Michigan’s Bolt v. Lansing doctrine, which established requirements to distinguish a fee from a tax. Fees must be regulatory in nature, proportional to the service provided, and voluntary.
Currently, 10 Michigan cities have adopted stormwater utilities, while Wisconsin has over 200 and Minnesota and Ohio each have over 100. Citizens Research Council researcher Eric Paul Dennis said that Bolt continues to have a chilling effect. Recent attempts by Royal Oak and Jackson to establish stormwater utilities were met with successful lawsuits forcing their rescission. However, others have withstood lawsuits. Dennis said state guidance is needed.
“While stormwater fees are not illegal in Michigan, there is a lack of clarity that has created a chilling effect on their adoption,” Dennis said. “Clarifying legislation would be very helpful here to give municipalities more certainty.”
The owner of a residential property in Ann Arbor with less than 2,000 square feet of impervious surface pays about $132 annually. The city’s stormwater utility will generate $13.8 million in service charges in 2023 — funding Hancock’s position and an entire city department dedicated to properly managing excess rainfall.
Local governments often fund stormwater management haphazardly by borrowing from other budget areas. That often leaves stormwater management as an afterthought, leading to poor management, property damage, and public health and safety harm.
“With no dedicated funding, it often comes out of general tax revenue, in which case … stormwater funding competes for everything else that a city needs to do,” Dennis said. “And since your stormwater system is buried underground, [it’s] not usually at the front of anyone's mind.”
Dennis advocates a regional approach to funding stormwater through a utility. Cities could form intergovernmental authorities, or a regional authority such as the Great Lakes Water Authority could implement them.
“Because of the watersheds and sewersheds that overlay our municipal political boundaries, there are often situations where addressing flooding issues in one municipality may be more efficiently pursued by investing in infrastructure upgrades in another municipality,” Dennis said. “It would make a lot of sense for municipalities to join together to create multi-jurisdictional authorities to make the best use of available funding to manage stormwater in a region.”
Comprehensive, well-funded stormwater management
As Ann Arbor’s water resources manager, Jennifer Lawson works on planning and management for all aspects of the water systems — including stormwater management, drinking water distribution and sanitary sewer collection. She said the city works closely with residents to determine the level of service they want the city’s systems to provide.
The city has a well-developed stormwater management program. In 2021, it adopted a Floodplain Management Overlay Zoning District with higher standards than the National Flood Insurance Program (NFIP) minimum standards. Its capital improvements planning process includes reducing flooding risk as an evaluation and prioritization criteria for stormwater capital projects, including evaluating all planned road projects for stormwater infiltration opportunities. And city code requires stormwater management on all development projects, including single-family properties.
One big push forward, according to Lawson, was incorporating climate change and resilience into its level of service standards for the stormwater utility.
“In 2017, we were starting to hear things and see data that informed us climate changes are happening. We are seeing changing storms, we are seeing higher intensity, more frequent duration,” she said. “We recognized that any stormwater projects needed to account for climate change for those new, more intense storms.”
"We recognized that any stormwater projects needed to account for climate change for those new, more intense storms."
So Lawson went out to the community to understand residents' expectations for how the stormwater system should function in extreme rain events.
“How can the city bounce back from impacts from large rain events? If we have flooded streets, if we have flooded parks? What can we do to lessen the impact on the community as a whole?” Lawson said.
As a result, the city restructured the utility fee, increasing rates to account for a higher level of service and the effort and cost needed to address more intense storms. It was also a move that might be more palatable in a city where the median household income is considerably higher than the state as a whole.
According to Hancock, Ann Arbor’s success is predicated on the support of its citizens.
“We get a lot of support from a highly educated community,” he said. “They expect the city staff to be forward-thinking on environmental issues.”