Moving from projects to programs will require new methods of funding and, most importantly, a shift toward financing. Because few cities have made the move, and those that have are largely in the early stages of the process, there are a lot of questions about how it can be done. Again, the importance of coming to the table with a solid program that is worthy of large-scale investment is crucial. Municipalities need to rethink how dollars move through these new programs and be open to creative and combined solutions, and they need to carefully evaluate options specific to their respective needs and realities. Green infrastructure should be viewed as a means of accessing extensive new capital, and the multiple, shared benefits can be leveraged to attract new investors in the public good. The public health community is likely uninterested in financing a massive concrete pipe, but they have a clear and vested interested in the development of community assets that improve chronic, health-related outcomes, from obesity to asthma.
• Establish a stormwater utility. Our empirical analysis clearly shows that the existence of a stormwater utility has a significant, positive impact on city-level investment in green infrastructure. In addition to being a sustainable revenue stream, it enables the issuing of debt and can be used for operations and maintenance. It also properly frames stormwater management as a community issue and GSI as real infrastructure that delivers needed services and value, because there is a straightforward connection between the value of the service and the price.
• Explore community-based public-private partnerships (P3s). These arrangements can take a variety of forms and combine both funding and financing to deliver large-scale programming. Program priorities are identified by the community, and performance-based fees for service transfer risk to the private sector. In theory (because practice is minimal at this point), they incentivize the market-driven efficiencies and innovation of private business, and they prevent the “padding” that is commonly employed to cover private risk in the current public procurement process. If the program doesn’t meet community objectives, the private partner does not get paid. The number of P3s has risen significantly in recent years as a method to address infrastructure funding gaps. $15 billion in P3s are expected to be established in 2018, more than double the previous year.
• Issue environmental impact bonds. Another pay-for-success model, these bonds also transfer risk and incentivize efficiency and performance. They can also be used for operations and maintenance. Fundamentally, these are not a wholly new mechanism – the nuts and bolts of issuing debt are the same, but new incentives are driving the market as impact investors seek environmental and social returns in addition to financial ones. The impact investing sector is projected to grow from $77 billion to $700 billion by 2020, and many see it as one of the most viable opportunities to close the massive infrastructure funding gap.
• Issue municipal bonds under GASB 62. This recent rule clarification from the Government Accounting Standards Bureau is poised to be a game-changing mechanism for engaging private property at scale and as an integrated component of municipal service-delivery systems. Using the Regulatory Assets Approach, distributed infrastructure and incentives (this includes everything from rain gardens to water-efficient appliances) can be booked as capital assets and financed by municipal bonds. Read Earth Economics’ full report on this here.
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