Randy Abernethy, president of Industrial Weldors & Machinists Inc., in West Duluth, was shocked when he opened his February utility bill only to find that what had been a $46.56 monthly stormwater fee has ballooned to $1,170.45 — more than a 25-fold cost increase.

“It’s going to hurt, but we’ve got to absorb it,” he said of the charge.

Abernethy doesn’t consider passing on the cost to customers to be an option.

“With competition, you just can’t keep jacking your rates every time a new bill comes along," he said.

Eric Shaffer, Duluth’s chief engineer of utilities, explained that over the past few years, city staff have been going out in the field to inventory the quantity of impervious surface (that not allowing water to pass through) located on various commercial and industrial land parcels.

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“Some have gone up, and some have gone down. Some were grossly wrong,” he said.

The site occupied by Industrial Weldors & Machinists fits into that latter camp, Shaffer explained.

“On the good side, they’ve been getting a discount for years, and we’re not going after any repayment of that,” he said.

But many of those businesses receiving news of surprisingly larger charges have taken little consolation in past savings.

Gary Moline, president of Moline Machinery LLC, hired an attorney and battled the city for six months after receiving notice last July about what the city intended to charge his business for stormwater, based on its re-evaluation of the company’s site in West Duluth.

Calculating fee

The city determines commercial and industrial stormwater fees on the basis of how much impervious surface a business has. This is then converted into “equivalent residential unit,” or ERU, measures, each equating to 1,708 square feet, using the city’s formula.

Moline takes issue with the relatively small size of Duluth’s ERU measurement, contrasting it with those of neighboring Superior and Hermantown, which each defines the area of impervious surface that constitutes an ERU in their jurisdictions as 2,933 and 9,100 square feet, respectively.

Shaffer explained away the wide variance.

“Older cities, such as Duluth, have smaller lots for the houses that were built 100 years ago," he said. “But with that said, I absolutely took to heart what Mr. Moline said, and we have hired a consultant to re-evaluate that number,” Shaffer said, noting that the city chose to retain an independent third-party firm to conduct that analysis rather than do it internally, so as to ensure objectivity. That evaluation is just beginning, and Shaffer predicted it will take a few months to complete.

Moline Machinery LLC has three Best Management Practices stormwater retention areas to collect water from its buildings and parking lots. (Tyler Schank / tschank@duluthnews.com)
Moline Machinery LLC has three Best Management Practices stormwater retention areas to collect water from its buildings and parking lots. (Tyler Schank / tschank@duluthnews.com)

Meanwhile, the city also is preparing to move forward with an increase in the stormwater fees it charges all property owners — residential, commercial and industrial alike. The rate is slated to increase by 11.25% annually for each of the next six years, resulting in a cumulative hike of 89% by the end of that time span.

Shaffer explained the city needs to generate more money to update a neglected stormwater sewer system that has fallen into serious disrepair.

The new fee was to have gone into effect at the start of this year, but the Duluth Public Utilities Commission pushed the implementation date back six months, in light of the hardships customers have endured due to the COVID-19 pandemic.

Nevertheless, the increased charge was included in customers’ January utility bills due to a clerical error. The city is asking people to pay those January bills regardless, and proposes to go back to the lower stormwater fee until August now, to make up for the error.

Shaffer explained that rebilling about 31,000 customers would have been a costly and time-consuming endeavor, and many people already had submitted payment by the time the error was discovered.

The pending rate increases coupled with ERU recalculations have sharpened the financial sting many businesses now face.

Tough on business

Gary Lane, president and chief operating officer of Walsh Building Products, said his stormwater fee recently jumped, as well.

“We’re now looking at a charge of $6,000 a year versus what used to be a line item that wasn’t even noticeable. And that’s going to nearly double in the next several years,” he said.

“There are not a lot of manufacturers in this town for a reason,” Lane said. “You could go over to Superior and do business a lot cheaper than you can in Duluth. If I could pick this building up and move it, I’d move it tomorrow.”

Moline also questioned the city’s decision to treat gravel lots as impervious surface and said it penalizes large industrial businesses that need room to handle shipments.

A gravel lot owned by Moline Machinery LLC acts as overflow parking and a space for trucks to unload. (Tyler Schank / tschank@duluthnews.com)
A gravel lot owned by Moline Machinery LLC acts as overflow parking and a space for trucks to unload. (Tyler Schank / tschank@duluthnews.com)

Abernethy also wonders why the city treats gravel the same as pavement.

“Our backyard is gravel, and the water mostly just soaks in,” he said.

Abernethy said city officials told him he could potentially reduce the stormwater fee he pays by planting grass on more of his property. But that’s problematic, given the nature of his business.

“We have several semis a day in here, and fork trucks running constantly. You have to have a solid surface for large equipment like that. One of the parts we send out of here is 140,000 pounds,” he said.

Shaffer explained that compacted gravel is routinely treated as impervious surface, akin to asphalt, in determining stormwater runoff fees. “That’s not something Duluth developed on its own; everyone does it,” he said.

Moline recently expanded its production plant in Duluth, and as part of that project invested more than $100,000 in stormwater management systems that enable it to capture and store runoff on site.

In return for adopting these “best management practices,” Moline can qualify for up to a 50% credit on its stormwater fee.

“But then I find out waterfront properties can get up to 90%. Why is that?” Moline asked.

“Well, they say the water there doesn’t go into the stormwater utilities. It goes into the lake. That’s just B.S. in many cases,” he said, noting that many waterfront developments still drain away from the lake.

Moline said many owners of commercial waterfront properties have been getting what amounts to a free pass, while his business and others continue to bear the financial burden of maintaining the city’s stormwater system.

Shaffer confirmed that many waterfront properties have benefited from a discounted stormwater fee under agreements dating back to the 1990s.

Going forward, however, he said waterfront properties can only qualify for credits covering up to 90% of their stormwater fees if they meet certain criteria. He explained the credits will apply only to the portions of waterfront property that drain toward the lake, and in order to claim those credits, property owners must also take steps to slow runoff, so sediments can settle out, before being swept into the lake.

But Moline remains skeptical.

“This is just unfair. Why would we not get the same credit available to us that these waterfront properties are getting when we invest in BMPs (best management practices), so not one drop of water goes into the utility?” he asked.

However, Shaffer maintains that waterfront properties that drain toward the lake don’t require the same types of city infrastructure.

Shaffer said the higher fees aren’t intended to take money out of the pockets of local businesses as much as they are designed to encourage them to invest in features that will reduce runoff and result in financial credits.

“It’s all about keeping Lake Superior clean,” he said.