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NACWA would like to update its membership on a number of important developments this week regarding the issue of whether federal government facilities are required to pay impervious area charges (IACs) and other fees related to stormwater and/or wastewater service.   On Sept. 28, NACWA held a high-level meeting with the U.S. Department of Justice (DOJ) to advocate the Association’s position that federal facilities should be required to pay all charges related to stormwater and wastewater service, including charges based on impervious surface area.  On Sept. 29, in a development unrelated to NACWA’s DOJ meeting the previous day, the U.S. Government Accountability Office (GAO) issued two legal opinions addressing an IAC assessed against federal government facilities in the District of Columbia (District).  In a letter sent to NACWA member agency the District of Columbia Water and Sewer Authority (DC Water), GAO stated that federal facilities in the city would pay an IAC levied by DC Water to recover capital costs associated with the utility’s Long Term Control Plan (LTCP).  This decision represents an important victory for DC Water and for NACWA.  However, in a second letter sent to the District of Columbia Department of the Environment (DDOE), GAO stated that federal facilities in the city would not pay a similar IAC levied by DDOE to cover the regulatory costs of complying with the city’s municipal separate storm sewer system (MS4) permit.  NACWA is disappointed in this decision by GAO and believes it was wrongly decided.

The Advocacy Alert provides a review of NACWA’s Sept. 28 DOJ meeting as well as a brief summary and analysis of the Sept. 29 GAO letters regarding the DC Water and DDOE impervious area charge.   This Alert also provides NACWA’s reaction to the GAO letters and outlines NACWA’s next steps to continue the Association’s advocacy efforts on this very important issue.  Anyone with questions or concerns regarding the information provided in this Alert is encouraged to contact Nathan Gardner-Andrews, NACWA’s General Counsel, at 202/833-3692 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

September 28 NACWA/DOJ Meeting

On September 28 NACWA held a high-level meeting at the U.S. Department of Justice (DOJ) with Associate Attorney General Tom Perrelli to discuss the ongoing problem of federal government facilities refusing to pay certain local stormwater and wastewater fees – particularly fees that are based on impervious surface cover.  The meeting provided an important opportunity to follow up on previous correspondence NACWA sent to DOJ on this issue, including a Sept. 10 letter presenting the Association’s legal and policy arguments that impervious area charges and stormwater charges levied by municipal wastewater and stormwater agencies should be classified as fees for service and not as taxes — a finding that would result in federal facilities being required to pay these charges.  Additional information on the Sept. 10 letter  and NACWA’s advocacy position on this issue is available in Advocacy Alert 10-25.

Associate Attorney General Perrelli, who is third in command at DOJ, appeared receptive to NACWA’s concerns during the meeting and indicated that he believed the issue was in need of resolution.  He also expressed significant interest in the use of impervious surface charges as a way to more fairly and equitably assess the costs associated with stormwater runoff and indicated an understanding of the importance of these types of programs to utilities in setting stormwater and wastewater rates.  Perrelli displayed a clear understanding of the national importance of this issue to clean water utilities and demonstrated an awareness of the significant problems utilities would face if federal government facilities and other tax-exempt organizations refused payment of certain fees by alleging them to be impermissible taxes.  He also inquired about existing legislative efforts to clarify this matter under the Clean Water Act and signaled that the legislation represented a step in the right direction to resolving the fee v. tax issue.  Although Perrelli indicated that DOJ has not yet reached any conclusion on how to the resolve the fee v. tax dispute, he noted that they continue to study the matter very closely and expressed gratitude to NACWA for its engagement on the issue and for sharing the utility perspective.

Although it is unclear at this point what DOJ’s next steps will be, it does seem apparent that certain high-ranking officials at DOJ are sympathetic to the Association’s position and are exploring a favorable resolution of this issue through legal and/or legislative means.  The Association’s advocacy efforts have been critical in bringing this issue such high-level attention, and we will continue to communicate with DOJ to seek definitive legal guidance.

GAO Decisions Regarding DC Water and DDOE Impervious Area Charges

On September 29, GAO forwarded letters to DC Water and DDOE addressing an IAC levied against ratepayers in the District for wastewater and stormwater service.   One IAC is billed by DC Water to cover the construction and capital costs incurred by the utility related to its LTCP and federally mandated consent decree.  A second IAC, which is calculated in exactly the same manner as the first one, is billed by DDOE to cover the costs of compliance with the city’s federal MS4 permit.  GAO analyzed both IACs and determined that while the DC Water charge was an appropriate regulatory fee payable by federal facilities under the Clean Water Act, the DDOE charge represented an impermissible tax against federal facilities and thus is not payable by the federal government.   A brief description of GAO’s opinions regarding the two IACs is set forth below.

GAO Letter to DC Water
In its letter to DC Water, GAO determined that because the DC Water IAC is a component of the utility rate charged to all customers for water and sewer service, it can be considered part of a “reasonable service charge” under Clean Water Act Sec. 313 and is thus payable by a federal facility.  In making this determination, GAO relied heavily on the fact that DC Water’s IAC “is designed specifically to cover costs associated with the [LTCP], which is composed of construction projects such as the building of underground storage tunnels and the rehabilitation of aging pump stations.”  Because of this nexus between the IAC and the capital costs of the LTCP, GAO viewed the IAC as “part of the rate for obtaining water and sewer services.”  GAO then went on to note that “it makes no difference if the charge for these capital improvements is set out separately from DC Water’s other costs of operation or is included in an overall rate.  As a customer availing itself of DC Water’s water and sewer services, GAO may pay a reasonable share of the costs of operating and maintaining the system.”

Importantly, GAO also noted that DC Water’s use of impervious surface as a way to calculate the charge for stormwater runoff represented “a reasonable approximation of GAO’s fair share of the capital costs and a fair approximation of the sewer services provided to GAO.”  This language clearly indicates that, at least within the context of DC Water’s IAC, GAO had no concerns with the use of impervious surface area as a way to calculate a utility charge against a federal government facility.  GAO also explained that even thought the DC Water IAC is charged to all property owners in the city, even those without water and sewer service, this does not automatically turn the IAC into a tax.  The GAO legal opinion noted that “while an assessment against all property owners is one of the indicia of a tax, that, by itself, does not transform the charge into a tax.”  Taking all these factors together, the GAO analysis concluded by saying that the DC Water IAC represented a charge for utility services rendered and was thus payable by the federal government.

GAO Letter to DDOE

In its letter to DDOE, GAO took a very different approach and opined that because GAO does not receive any direct benefit from the DDOE stormwater IAC and because the charge is designed to cover the costs of general community benefits related to the city’s MS4 permit and not to defray any specific regulatory costs, the IAC qualifies as impermissible tax and is thus not payable by federal facilities.   GAO focused on a number of factors in making this decision, including the fact that the DDOE stormwater IAC is assessed against all properties owners in the city and that failure to pay the charge will result in a lien being placed upon the property.  More importantly, the GAO analysis found that “District property owners are not receiving any particularized benefit in exchange for the DDOE stormwater fee.   Rather, the DDOE stormwater fee is used to defray the costs of the District’s activities that benefit the public generally, such as enhanced street cleaning, tree planting, installing green roofs on District buildings, and educating the public on the collection and disposal of waste.”  GAO did acknowledge that all of the activities paid for through the DDOE stormwater IAC are directly related to meeting the mandates of the city’s federally imposed MS4 permit, but did not find this fact to be dispositive.  The analysis went on to state that because the fee “is not assessed to defray the costs of regulating GAO, nor does it represent a fair approximation of a particularized service provide to GAO,” the DDOE stormwater IAC thus represents an impermissible tax that federal facilities are not permitted to pay under the constitutional principle of sovereign immunity.

NACWA Reaction and Next Steps

NACWA is very pleased with the GAO response to DC Water’s IAC and believes the finding that federal government facilities should pay the DC Water IAC is correct.  In particular, NACWA believes GAO accurately determined that the IAC is part of the overall rate structure for utility service from DC Water.  Additionally, NACWA is supportive of GAO’s finding that the use of impervious surface to calculate the IAC represents a reasonable approximation of the use of the system by federal facilities and is thus a valid service charge.

However, NACWA is extremely disappointed with GAO’s decision regarding the DDOE stormwater IAC and believes the legal analysis underlying the decision is extremely flawed.   NACWA further believes that GAO’s position regarding a lack of “particularized benefit” from the stormwater IAC and its opinion that activities supported by the IAC represent general community benefits and not specific regulatory requirements are particularly misplaced.   Additionally, it is NACWA’s position that GAO has misinterpreted much of the case law addressing how to determine if a charge is a fee or a tax and has misapplied that case law to the facts of the DDOE stormwater IAC.  There are also a number of inconsistencies between GAO’s legal reasoning in the opinion on the DDOE IAC and the opinion on the DC Water IAC, raising serious questions about the accuracy of the legal arguments underpinning GAO’s decision regarding the DDOE stormwater fee.

NACWA believes that stormwater fees based on impervious surface qualify as reasonable service charges under the Clean Water Act and is committed to aggressive advocacy on behalf of its members on this issue.  NACWA plans to respond strongly to GAO’s position regarding stormwater fees through a number of advocacy actions.  First, NACWA will continue direct engagement with the Department of Justice to seek a legal directive from DOJ overruling GAO’s position.  NACWA’s meeting this week at DOJ was an important first step in this process.  Second, NACWA will increase its efforts to obtain a legislative solution to this issue in Congress.  Recent legislation introduce at NACWA’ s urging in both the Senate and the House of Representatives would amend the Clean Water Act to clarify that stormwater fees and other fees based on impervious surface area qualify as reasonable service charges and must be paid by the federal government.  NACWA will be ramping up efforts in the wake of GAO’s opinion to secure passage of this legislation.  And third, NACWA will explore all options for a legal challenge to GAO’s position on stormwater fees in court, including participation in any challenge lodged by a utility that has been denied payment by federal government facilities.

NACWA will continue to track this issue closely and report on any developments.  Anyone with additional questions about recent developments or NACWA’s stormwater advocacy efforts can contact Nathan Gardner-Andrews, NACWA General Counsel, at 202/833-3692 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .