Using a reverse auction to promote household level stormwater control

Phase II of the US Environmental Protection Agency's (USEPA) National Pollution Discharge Elimination System (NPDES) stormwater regulations requires communities smaller than 100 000 residents to meet new criteria for stormwater runoff reduction. In many cases these smaller communities have no established stormwater utility, and are investigating alternatives for complying with these new, sometimes expensive requirements. We note that it might be cost effective for some communities to encourage homeowners to control stormwater runoff at the parcel level instead of, or in conjunction with more traditional large, infrastructural best management practices (BMP). We go onto argue that in the absence of a strict regulatory cap, an auction is a cost-effective tool for implementing controls on stormwater runoff quantity at the parcel level. In this paper, we test the effectiveness of a procurement auction as the coordinating mechanism for encouraging installation of parcel-scale rain gardens and rain barrels within a small suburban watershed in the Midwest. The auction, which was conducted in spring 2007 and 2008, resulted in installation of 81 gardens and 165 barrels on 107 of the 350 eligible properties. Average cost per liter of runoff detention in both years was $0.36 for gardens and $0.59 for barrels. Interestingly, approximately 55% of the bids were for $0, suggesting that an educational campaign may result in substantial runoff mitigation if utilities paid for the installation of stormwater management practices. However, we found that an auction promoted more participation than education alone and at a cheaper per-unit control cost than a flat stormwater control payment plan. Overall, this study demonstrates that relatively minimal financial incentives can result in homeowners’ willingness-to-accept stormwater management practices on their property, thus opening an important avenue for retrofitting watersheds that are largely in private ownership.