New report: U.S. cities can save billions, clean waterways, & green neighborhoods, by leveraging private investment in green infrastructure

Today NRDC released a new report on how local and state governments can stimulate potentially billions of dollars of private investment, to offset the costs of repairing our nation’s broken stormwater infrastructure.  It’s worth a read for policymakers, investors, and anyone who receives a wastewater or stormwater bill from a local utility.  In other words, anyone concerned with how municipalities and wastewater utilities will pay for much-needed water infrastructure investments. 

Stormwater and sewage overflows are leading sources of water pollution that we must address to meet the Clean Water Act’s goals -- first enacted forty years ago -- of fishable, swimmable, drinkable waters nationwide.  And the overdue bill for our disinvestment in municipal water infrastructure over the last two decades totals in the hundreds of billions of dollars.  

As NRDC detailed last November in Rooftops to Rivers II, cities across the country are using green infrastructure -- like green roofs, street trees, and porous pavement that soak up urban runoff -- to tackle these problems.  These smarter water solutions work to clean up local waterways while creating healthier cities.  Rooftops includes case studies of more than a dozen cities and spotlights Philadelphia, in particular, for leading the way, with a groundbreaking 25-year plan to deploy the most comprehensive network of green infrastructure found in any U.S. city.

Now, on the financing front, Philadelphia has a huge opportunity to lead the nation in applying innovative ways to fund these green infrastructure solutions.  Many other cities, facing similar challenges, could be primed to do the same.

Our new report, titled “Financing Stormwater Retrofits in Philadelphia and Beyond,” uses the City of Brotherly Love as a test case to explore how innovative financing mechanisms, currently being used for energy efficiency retrofits, can be adapted to the stormwater management context.  The key is that Philadelphia, like many communities around the country, has a stormwater utility fee structure that calculates charges based on a parcel’s impervious area and provides “credit” -- literally, up to a nearly 100% reduction in the fee -- for property owners who retrofit to reduce runoff into city sewers, using green infrastructure and related techniques. 

Over the next 25 years, Philadelphia expects to spend at least $1.67 billion on public stormwater retrofit projects, toward meeting its legal obligation to capture the first inch of runoff from 10,000 acres of impervious surfaces.  To meet that 25-year target, the city is also counting on thousands of acres of private, market-driven redevelopment projects, which must meet a new stormwater performance standard for new construction.  But what’s been missing from the city’s approach, so far, has been an effective way to promote widespread investment in retrofits of existing developed sites -- properties where there is no plan for redevelopment in the foreseeable future, which comprise most of the built environment.

The incentives created by the city’s stormwater fee and credit system provide a vital hook for stimulating these much-needed retrofits.  But without access to private financing, most property owners will be unable to afford the upfront investment needed to take advantage of the stormwater retrofit credit.  And that financing is not easy to come by in the traditional commercial lending market. 

Our new report explains how innovative financing mechanisms already being used to underwrite the capital costs of retrofitting buildings to be more energy efficient -- when combined with a stormwater fee and credit system -- can draw hundreds of millions in private investment to a city like Philadelphia.  My NRDC colleague (and the report's lead author), Alisa Valderrama, has more on that in her latest blog post here. 

As we explain in the report, many hundreds of U.S. cities have stormwater fees and credits based on the same general principles as Philadelphia’s.  Likewise, over 800 cities have similar regulatory obligation to reduce stormwater pollution and/or sewage overflows caused by excessive runoff.  (That’s to say nothing of all of the cities facing flooding problems, which, like stormwater pollution, are expected increase in much of the country due to climate change.)  For example:

• Washington, DC:  Washington, DC has implemented not one but two impervious area-based stormwater fees: one goes to the regional sewer authority, DC Water, to defray the costs of reducing sewage overflows , while the other goes to the city’s Department of the Environment, to funds runoff pollution prevention in the area served by city-owned separate storm sewers. The city is currently developing a fee rebate program that will apply to both fees, or customers who install approved stormwater retention practices.
• New York City:  NYC has pending a draft agreement with the state that would set initial citywide targets for stormwater retrofits over the next 20 years.  Like Philadelphia, the city plans to meet its targets with over $1 billion of public investment in green infrastructure plus new performance standards for redevelopment projects, but currently lacks a strategy to stimulate widespread retrofits of existing development.  The city has explored a restructuring of its water and sewer fees, to provide a credit to owners who install stormwater retrofits.  So far, the city has adopted a very limited pilot fee and credit program, applicable only to stand-alone parking lots.  An expanded program remains under consideration.
• Cleveland:  The North East Ohio Regional Sewer District has a specific federal mandate to implement green infrastructure to help meet Clean Water Act requirements to reduce sewage overflows.  In 2010, the District approved a plan to assess a stormwater fee based on the amount of a property’s impervious surfaces.  Property owners will be eligible for a fee reduction—up to 100 percent for both residential and commercial owners.
• Others:  An appendix in today’s report summarizes fee and credit systems in two other major cities (Kansas City and Portland).  These and others are also featured in Rooftops to Rivers II, .

NRDC is working now with Philadelphia to pilot some of the financing approaches explored in the paper.  Water Commissioner Howard Neukrug recently told me that the Philadelphia Water Department’s goal is to “enable property owners to obtain stormwater credits on their bills while also contributing to the city’s green acre inventory. By working with customers who can manage stormwater from many acres of hard surfaces – and ideally public runoff from streets – we can transform pockets of our combined sewer areas into green acres in a cost effective way. This is the best example of a public/private partnership.”

In Philadelphia alone, we estimate a potential for $376 million in private investment, if innovative finance approaches are applied to harness the power of the market.  Multiplied by hundreds of cities nationwide, and that means a LOT of business opportunity. 

And, most importantly, every private dollar invested in green infrastructure is a dollar that cities like Philadelphia will not have to spend, on the public ledger, to meet clean water goals. 

That’s what anyone would call a win-win-win.  Good for business, good for the environment, good for taxpayers. 

And we all get not only clean water but healthier, greener communities to show for it.

What mayor wouldn’t love that?