Developers and governments in Wake and Durham counties have paid the state more than $13 million in mandated fees to compensate for water pollution spawned by schools, subdivisions and shopping centers.
But nearly all of the money, which the state spends on projects to reduce pollution from nitrogen, has gone toward improvements far downstream and outside the watersheds of the Triangle's two biggest sources of drinking water: Falls and Jordan lakes.
Both lakes are classified as impaired, largely because of pollution driven by development. Estimates for cleaning up both range as high as $3.5 billion. That cost will be borne by local taxpayers.
The $13 million couldn't have paid for enough offset projects to stop all of the pollution in the big reservoirs. But the money's use elsewhere frustrates those trying to shield the lakes from lawn fertilizers, animal waste, oils and other contaminants that stormwater carries.
The pollution causes algae blooms that can give parts of Falls Lake a sheen of neon green.
"If there's impact to a drinking water reservoir, it just makes sense that the mitigation needs to happen within that watershed," said John Cox, water quality manager for the City of Durham.
Durham is upstream from Falls Lake and therefore responsible for much of the stormwater runoff that pours into the man-made reservoir. But at the end of 2008, when Durham businesses, nonprofits and government agencies had pumped more than $1.4 million in fees into the state's nitrogen-reduction program, Cox looked to see where the state had placed the offset projects.
He found none in the vicinity of Falls Lake.
The lack of help for twovital but ailing lakes can be traced to the legislative clout of the development community. In 2006, developers succeeded in keeping pollution fees so low that the state Ecosystem Enhancement Program couldn't afford to place nitrogen-control projects near Falls Lake, where land is more expensive than in much of the rest of the Neuse River basin. The lake provides drinking water for more than 400,000 Wake County residents.
Developers also helped delay efforts to reduce pollution in Jordan Lake, which provides water for Cary, Apex, Morrisville and parts of Chatham County.
In 2009, under pressure from Cox and others, lawmakers finally required that fees assessed to developers building in the watersheds go toward nitrogen-reduction projects there. But by then, the millions in fees collected from Wake and Durham developers during one of the biggest building booms in state history had already been targeted for pollution projects elsewhere.
During the subsequent real estate slowdown, developers have paid only $181,000 in fees to the nitrogen-reduction program for projects in the Falls Lake watershed. (Because of the long rule-making process, the regulations governing Jordan Lake aren't yet in effect.)
Wake County developers are by far the state's biggest contributors to the pollution program, one of four initiatives administered through the state Ecosystem Enhancement Program that are designed to offset environmental damage from development.
In fact, more than two-thirds of every dollar spent in the Neuse River basin, which extends to the coast, comes from Wake County. But of the 24 nitrogen-reduction projects built in the basin so far, only two are in Wake County. The rest stretch from Johnston County to coastal Craven County, although one is planned in Durham County and another is under construction in Cary.
One project, a 24-acre buffer planted near farmland in 2003, is in Jones County, nearly 100 miles from Raleigh. It filters runoff along Beaver Creek, a tributary of the Trent River that eventually flows into the Neuse estuary.
Contractors planted river birch, southern red oaks, American beautyberry, wax myrtles and other trees and shrubs to take up the fertilizer-based nitrogen already in the ground and to absorb nitrogen from stormwater runoff.
Concern for the Neuse
The nitrogen-reduction program has its roots in the mid-1990s. Growth in the Triangle and a booming hog industry in Eastern North Carolina overloaded the Neuse and its tributaries with nitrogen, leading to fish kills and endangering the estuary, the seafood-rich area at the mouth of the river.
Because the goal was to reduce nitrogen in the estuary, projects could be placed all along the river basin. In 1998, state officials, without much pricing information, began charging developers a fee of $11 per pound of expected nitrogen pollution to pay for the projects. Unlike stream and wetland restoration projects, these nitrogen-reduction sites have a proven track record.
Within a few years, it became clear that the feesweren't high enough to pay for even the cheapest method of nitrogen reduction: buffers along creeks and farm ditches in the basin's rural areas. Furthermore, state environmental officials were concerned that the rural buffers were too far away from the pollution in urban watersheds.
They sought fee increases that would enable them to place buffers where land prices were higher. They also wanted to use more expensive nitrogen-reduction projects that need less land, such as sand filters and ponds that retain stormwater. In urbanareas, land isn't only more expensive, it also may not be available.
The Environmental Management Commission, a rule-making body, received complaints about an increase to $57 a pound but adopted the standard in January 2006.
A fight over fees
The fee would have become effective March 1, 2006, but the N.C. Home Builders Association complained to lawmakers. State Sens. Richard Stevens, a Cary Republican, and Vernon Malone, a Raleigh Democrat, filed a bill to drop the fee to $35 per pound. A month later, in the Senate Finance Committee, a new bill emerged that dropped the rate back to $11 and proposed a study to determine what the rates should be.
Stevens, a former Wake County manager, said he and Malone, who died in 2009, were convinced the commission was going too far.
"I think they were going to set it way arbitrarily high," Stevens said, though he admitted he had not looked at the research behind the $57 fee. He said he did not introduce the amended bill that kept the fee at $11, though he later supported it and explained it to House and Senate committees.
Finance committee minutes show that Lisa Martin, lobbyist for the home builders, took questions from lawmakers about the amended bill and that a lobbyist for the N.C. Sierra Club spoke against it. The bill cleared the Senate and House by large margins and became law. The House rejected an effort by Rep. Jennifer Weiss, a Cary Democrat, to reinstate the $35 fee.
The home builders are a powerful force within the legislature, and the association's political action committee spends hundreds of thousands of dollars each election cycle on legislative campaigns.
Stevens and Malone received campaign money from the PAC, which was generous to them in the 2006 election, giving each $3,000, campaign records show. Neither had received more than $2,000 in any other election.
Projects on the cheap
Martin said in an interview that the fivefold increase in the nitrogen fee had shocked home builders.
"Our members came out of the woodwork because that made projects completely unfeasible," she said.
Here's how the increased fee would have affected one home builder's project: Heritage Pines, a 298-home community in Cary, paid a fee of $27,733 in 2006. That's $93 per home. At the $57-per-pound fee, the cost would have been $143,656, or $482 per home.
Martin said state officials wanted high fees to pay for their "dream set" of storm water controls. The ensuing study, by Research Triangle International, a nonprofit firm, came up with what she called a more reasonable cost.
Lawmakers then passed a fee of $28.35 per pound of expected nitrogen pollution. But the law also required the state program to use a "least-cost method" in setting future fees.
RTI's study said the $28.35 rate would pay for only the cheapest kinds of projects. The program had enough money to pay for buffers in areas where land was cheap, but little more for anything else.
"It became constrained to the least-cost alternative and drove us back to doing buffer restoration," said Suzanne Klimek, a former operations director for the state program who now works for it as a consultant. Today, the cheapest alternative has gotten less costly, driving the fee down to about $20 per pound.
The program began no pollution-reduction projects during the 12 months it took to settle on the fee during 2006-07, while developers went in droves to pay the fee before a higher one was set. The recession hit shortly after, causing a steep drop in paid fees and making much less money available for future projects to help Falls and Jordan lakes.
Environmentalists, researchers and others have criticized the state Ecosystem Enhancement Program for locating many pollution-reducing projects on public or donated property.
That saves on land costs, but those sites may not be in areas that need the most help or that present the best opportunity to catch pollution. Even worse, they can be at higher risk for failure because they aren't suited for restoration.
Kevin Miller, the former research and grants coordinator for the program, said senior officials at times didn't follow staff recommendations on the best places for stream and wetland restorations because those sites were more costly.
Program officials say they do not aim for the cheapest land. They say they began introducing stronger requirements four years ago to steer more stream and wetland restoration projects to targeted areas in watersheds. Additionally, lawmakers in 2007 directed the state to place the nitrogen-reduction projects closer to the pollution.
But the areas they designated still allowed Wake-funded projects as far away as Wayne County, more than 40 miles from Raleigh.
If the $57 fee had held, the Neuse basin could have had an additional $34 million for projects, based on development during that period. The $35 fee could have produced an additional $17 million. That's assuming the fee would not have stopped any developers from going forward.
For those in Durham and Raleigh's stormwater cleanup programs, the fee battle represents a missed opportunity to help reduce the public cost of cleaning up Falls Lake. Those directly concerned about the health of the Neuse River, however, might not appreciate shifting the projects to the upper end of the river basin.
"If the purpose ... is to protect the estuary, then the closer you do the work to the estuary, the more improvement you are going to see there," said Todd Miller, executive director of the N.C. Coastal Federation.
Cox, Durham's water quality manager, said that a $57-per-pound fee still would not cover the entire cost of a nitrogen-reduction project in Durham, but that it would provide enough money to allow the city to kick in the rest. He credits the program for using other funds to do stream restorations and other pollution controls to help Falls Lake.
But if the higher fee had been approved five years ago, it would have been "a better solution for North Carolina," Cox said, "and we probably wouldn't even be having that discussion."
Danny Bowden, Raleigh's stormwater utility manager, said he, too, wished the money could have done more for Falls Lake, not just for the Neuse downriver.
"If you are looking at the estuary, I think it's great that [the state] is doing these projects where they are getting more bang for the buck," he said. "But on the other hand, it's not doing much for us as far as reducing our water quality problems."
Tomorrow: Doing it all wrong?
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