Regional Economic and Development Impact of the Draft Watershed Maintenance Ordinance

Metropolitan Water Reclamation District of Greater Chicago (MWRDGC)

In November 2011, SB Friedman was retained by MWRDGC to study the impact of more stringent stormwater requirements on suburban Cook County development.  The purpose of the study was to determine whether development patterns would shift, as a result of the increased costs and in certain circumstances, less developable land caused by more stringent requirements.

MWRDGC is the regional agency that manages the treatment of wastewater and regulates stormwater management in suburban Cook County. In 2007, MWRDGC began the process of developing more standardized stormwater regulations under the Draft Watershed Maintenance Ordinance (WMO) to mitigate flooding. The ordinance, once implemented, would require developments to retain more stormwater capacity than what is required under MWRDGC’s current regulations. Understanding the new regulations would have some effect on development, MWRDGC initiated an engineering study conducted by Christopher Burke B. Engineering, Ltd. (CBBEL) to quantify the incremental cost and, where applicable, loss of land to comply with the stricter requirements. Five projects representing different land uses across suburban Cook County were analyzed as case studies. Both the case study projects and the resulting engineering impacts were used as a basis for our economic analysis.

SB Friedman evaluated how the incremental increase in stormwater cost would impact the development economics of each of the five case studies and, based on the outcome, examined the potential implications of the draft WMO on suburban Cook County development. The analysis included a literature review to identify the range of impacts on development activity, a survey polling the development community, and an assessment of implications on infill versus greenfield development. Supported by the literature review and survey results, we identified four variables in which the increases in stormwater cost could be absorbed or passed through at the project level: the unit purchase price (to the end user), land price, construction costs, and developer profit. Conceptual pro formas were structured for each of the case studies to examine the maximum cost impact on each of the four development variables. Based on each project’s development profile and financing structure, we identified the most likely outcome in which costs could be absorbed. The results of the case study analysis were used as a base to identify potential implications for suburban Cook County development. Potential implications highlighted in the draft report range from increases in purchase price in robust markets to slower development pace and increased need for development incentives in more price-sensitive markets.

Results: A draft report was submitted to MWRDGC and the WMO Advisory Committee in June 2012. The report is currently under review by committee members and will be available for public review and comment in early Fall 2012.