Green Infrastructure Financing
Stormwater runoff is increasingly recognized as a primary source of urban water pollution. The preponderance of impervious surfaces and the lack of green infrastructure in cities lead to insufficient water infiltration in the soil, and the resulting stormwater runoff often flows, untreated, into local waterways.
In cities such as New York and Philadelphia with combined sewer systems, rainfall and the runoff from urban infrastructure leads to sewer overflows that pour billions of gallons of untreated sewage into urban waterways every year. In New York City alone, combined sewer overflows result in approximately 30 billion gallons of sewage flowing into the local rivers.
Starting in July 2010, Philadelphia began to phase in a new "parcel-based" stormwater fee system for all non-residential properties within city limits in order to provide an incentive for property owners to reduce impervious area on their parcels. Whereas Philadelphia's previous stormwater fees were based on water consumption per parcel, Philadelphia's new system will link stormwater fees to the square footage of impervious surface on each property, as determined by GIS mapping programs. For the first time, Philadelphia's commercial owners' fees will be based directly on the amount of stormwater they generate.
Philadelphia's new sewer fee structure (which will be phased in over the next four years) includes a "credit" incentive, whereby owners who replace impervious area with green infrastructure are eligible for a nearly 100% credit against their monthly fees. However, local commercial owners most heavily impacted by the conversion to parcel-based billing lack the access to capital that they need to install green infrastructure on their properties.
The success of Philadelphia's green infrastructure efforts will depend in large part on commercial property owners' ability to overcome initial cost barriers. Because of its new parcel-based fee system, Philadelphia is now in a unique position to explore application of innovative financing mechanisms that have emerged from the building retrofit space, such as Property Assessed Clean Energy (PACE) and third-party PPA-type models. In these third-party financing models, a third party investor makes funds available to owners to make changes to their property to reduce stormwater runoff. In exchange, the property owner enters into a contractual relationship with the third party (a public or private entity or a public-private partnership) to share the stormwater fee cost savings for a term of years until the third party capital provider has attained repayment or the sought financial returns.
CMI is collaborating with the NRDC water team and the Philadelphia Water Department to survey the current financing mechanisms available to Philadelphia property owners and to work with the city to create a first-of-its-kind menu of options for financing stormwater reduction retrofits that leverages private capital under the new fee system.
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