Creating Private Markets for Green Stormwater Infrastructure
Urban cityscapes are an unequal mix of preserved green space and concrete. For every park, there are blocks of sidewalks, streets and skyscrapers. As rain washes over all that paved land, polluted stormwater runoff causes urban flooding and dumps nearly 10 trillion gallons of dirty water into our nation's coasts and waterways annually. To turn back the tides of polluted stormwater, many cities are launching ambitious plans to develop green infrastructure -- effectively unpaving city land and using practices that help rain absorb and be better used near where it falls.
These measures can be beneficial for cities aiming to meet Clean Water Act mandates. Greener solutions also come with a far more manageable price tag than the billions more that can be spent on grey infrastructure. However, cities developing green infrastructure programs face challenges financing those programs entirely through traditional means such as municipal bonds or federal and state funds. With the federal "Clean Water Needs Survey" identifying over $100 billion in needed infrastructure investment over the next twenty years to address stormwater and sewage overflows, the time for creating private markets for green infrastructure has arrived.
Perceiving the opportunity to create markets well-suited to green infrastructure -- NRDC, the Nature Conservancy and EKO Asset Management Partners joined forces to create "NatLab," the Natural Infrastructure Finance Laboratory. NatLab conducted its first pilot in Philadelphia, a city that over the next 25 years plans to transform at least 9,654 impervious acres into "greened acres" that capture runoff onsite. This sustainable solution is the city's primary approach to reducing sewer overflows – the centerpiece of a plan that is expected to cost approximately $2.4 billion. In "Creating Clean Water Cash Flows" and "Greening Vacant Lots," NatLab identifies ways cities can spur private green infrastructure investment on a range of urban lands.
Creating Clean Water Cash Flows
NatLab's Creating Clean Water Cash Flows report details strategies that Philadelphia and a wide range of cities can use to draw private capital into their greening efforts, by driving down upfront costs, improving payback periods for retrofits. The report offers detailed analysis of the roles that project aggregation, offsite mitigation and credit trading programs, stormwater fee discounts and subsidies, and private-public partnerships can play in stimulating much-needed private investment in green infrastructure.
NatLab also found that, for third-party investors to finance long-term projects, questions around regulatory and revenue certainty must be resolved. With some assurance of future stormwater fees and projected cost savings that could accrue to property owners, the market for green infrastructure finance could follow "project developer" models similar to those found in the energy efficiency finance sector, where upfront project costs are re-paid through future cost savings. Creation of a loan loss reserve fund -- to help insulate investors from revenue-related risk -- can also help draw investors into a new and unproven sector. Lastly, a full chapter of Clean Water Cash Flows explores public-private partnership structures as a promising strategy to help cities generate large amounts of greened acres, on a wide range of both public and private land types, at the lowest cost.
Greening Vacant Lands
Many Midwestern and Northeastern cities are grappling to manage stormwater flows at the same time that they face issues related to vacant and abandoned land. Such vacant land is a liability, depressing local property values and dotting cities with blighted eyesores. Yet NatLab found that such properties can offer a low-cost supply of potential greened acres to manage runoff. In the report Greening Vacant Lots, NatLab presents case studies showing how 10 U.S. cities are planning, administering, financing and implementing programs to convert vacant lots to green spaces that combine recreational use and stormwater management.
The ten case studies show cities have most effectively greened vacant lots by:
- Developing a new department or organization specializing in green vacant lots
- Relying upon multiple-use, community-centered designs
- Leading with a single, strong organization
- Ensuring effective mechanisms for transferring and acquiring properties
- Securing effective financing
last revised 2/26/2013
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