ENVIRONMENTAL FINANCIAL ADVISORY BOARD
Members
Karen Massey, Chair
Helen Akparanta
Brent Anderson
Aurei Arndt
Lori Beary
Janice Beecher
William Cobb
Edwin Crooks
Hopฎ Cupit
Lisa Daniel
Marie Be la Parra
Yvettฉ Downs
Donna Ducharme
Rick Giardina
Heather Himmelberger
Jeffrey Hughes
David Kane
Suzanne Bin
Courtney Knight
Pamela Lemoine-
Thomas Uu
James McGoff
G. Tracy Mehan, ID
February 14, 2017
Mr. Michael H. Shapiro
Acting Assistant Administrator
Office of Water
United States Environmental Protection Agency
1200 Pennsylvania Avenue, NW
Washington, DC 20460
Dear Mr. Shapiro:
>
The Environmental Financial Advisory Board (EFAB) is pleased to present you with the enclosed
report, Green Infrastructure Operations and Maintenance Finance, on ways to address the operations
and maintenance (O&M) costs associated with implementing green infrastructure approaches.
The EFAB recognizes that the Environmental Protection Agency (EPA) is committed to finding cost-
effective and sustainable approaches to dealing with the challenges posed by community stormwater
and sewer overflow issues. Furthermore, the Board understands that while there are significant exist-
ing and potential funding sources for green infrastructure O&M costs, many communities may not be
aware of the resources and options available to them. The EFAB, at its own discretion, formed a
workgroup and developed the report recommending ways for financing the O&M costs of green infra-
structure.
This detailed report identifies a wide range of 14 existing and potential strategies that governments
can use to address the O&M costs associated with implementing green infrastructure solutions. The
report also includes many examples of communities that have used the strategies to address the costs
associated with environmental and other projects.
The EFAB members hope that EPA finds the results of this work and the specific strategies presented
valuable, and thank you for the opportunity to assist the Agency in meeting this important challenge.
Chris Meister c: ""1"
Wayne Seaton
Blanca Surgeon
Joanne Throwe Karen Ma;
JeffteyWaltor Envirฐ
Jennifer Wasinger Enclosure
Richard Weiss
Karen Massey, Chair
Environmental Financial Advisory Board
Michael Shapiro
Designated
Federal Official
Innovative and Cost Effective Environmental Protection
-------
Environmental Financial Advisory Board
I
EFAB
Members
Karen Ma&sey, Chair
Helen Akparanta
Brent Anderson
Aurel Aradt
Lort Beary
Janice Beecher
William Cobb
Edwin Crooks
Hope Cnpii
Lisa Daniel
Marie De La Parra
Yvette Downs
Donna Ducharme
Rick Giarditia
Heather Himmeiberger
Jeffrey Hushes
David Sane
S uzanne Kim
Courtney Knight
Pamela Lemctne
Thomas Liu
G. Tracy Meliaa, III
Chrtj Mek-ter
Wayne Seatca
Blanc a Surgeon
Joanne Throwฉ
Jeffrey Walker
Jenifer Wasinger
Richard Weiss
EPA Designated
Federal Official
Mite Shapiro
Green Infrastructure
Operations and Maintenance Finance
February 2017
This report has not been reviewed for approval, by the U.S. Environmental
Protection. Agency: and hence, the views and opinions expressed :n the
report do not necessarily represent those of the Agency or any other
agencies in the Federal Government
Printed on Recycled Paper
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Table of Contents
Executive Summary 3
Green Infrastructure Operations and Maintenance Funding/Financing Mechanisms Matrix 6
I. What Is Green Infrastructure (Gl)? 15
A. Definition of Green Infrastructure 15
B. What is Green Infrastructure Used For? 16
C. Types of Green Infrastructure 17
D. Benefits of Green Infrastructure 18
II. The Need for Green Infrastructure Operations and Maintenance Financing 18
A. Overview of Maintenance Requirements 18
B. Overview of the Financing Problem 19
C. Who is Responsible? 21
1. Public vs. Private Property: Deciding Who is Responsible for the O&M Costs 21
2. Implementation Approaches 23
III. Green Infrastructure O&M Funding/Financing Mechanisms 24
A. Overview 24
B. Mechanisms 25
1. Stormwater Utilities/Fees 25
2. Watershed Improvement Districts 28
3. Fee Credits or Discounts for Maintaining Gl O&M on Private Property 31
4. Ordinances on Private Property 33
5. Conservation Land Trusts 35
6. Property Assessed Green Infrastructure (PAGI) Programs 37
7. Water Funds 39
8. Ecosystem Service Payments 41
9. Endowments 44
10. Philanthropic and Federal Grants Philanthropic Grants 48
11. Private Equity Capital: Public-Private Partnerships (P3s) and Community-Based Public-
Private Partnerships (CBP3s) 52
12. Social Ventures 57
13. Credit Enhancements 59
14. Environmental Insurance Settlements/Judgments 61
IV. Supports to O&M Financing 64
A. Operations and Maintenance (O&M) Training 64
l
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B. Cost Reduction Strategies 66
C. Enabling Legislation 67
D. Partnerships 67
E. Regulatory Frameworks (e.g. trading mechanisms) 68
Appendix 70
Figure 1: Base Case 45
Figure 2: Lowering the Contribution 46
Figure 3: Actual Interest Rate Exceeds Projected Interest Rate 47
Figure 4: Public-Private Delivery Model Spectrum 53
2
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Executive Summary
State, regional, and local governments across the United States have increasingly turned to
green infrastructure (Gl) as a means of controlling stormwater runoff, remediating sewer
overflows, and preserving coastal environments. While Gl is environmentally sensitive and
cost- effective, many governmental entities struggle with the challenge of funding or financing
ongoing operations and maintenance (O&M) costs. In this report, the Environmental
Protection Agency's Environmental Finance Advisory Board (EFAB) defines Gl, outlines the
benefits of Gl, introduces Gl O&M costs, and, most importantly, identifies and evaluates
diverse ways to fund/finance Gl O&M costs.
Defining Green Infrastructure: Gl controls stormwater runoff from impervious surfaces by
collection, filtration, and purification in integrated networks designed to mimic natural
processes. Gl systems include bioretention (the retention and filtration of runoff in
constructed ponding areas), wetlands, rain gardens, green roofs and walls, permeable
pavement, rain barrels, downspout disconnection, vegetated swales, and tree planting.
Benefits of Green Infrastructure: Gl is used to reduce the costs of stormwater control and,
increasingly, remediate combined sewer overflows while generating multiple environmental
and social benefits. Besides reducing costs and water pollution, Gl, deployed at scale, can
create natural habitat, mitigate urban heat island effects, enhance human health and
productivity, reduce energy consumption, recharge groundwater, and generally contribute to
local beautification and improvement of the quality of life. The installation and maintenance
of Gl also offers job opportunities to lower-income workers who have frequently found it
difficult to secure traditional employment.
Operating and Maintaining Green Infrastructure: Program operating costs for Gl include
planning, budgeting, and ongoing administration, including the use of oversight personnel.
Once installed, Gl is maintenance-intensive. Porous pavements must be cleaned at least twice
a year and most require annual vacuuming or power washing. Infiltration catch basins and
inlets must be inspected, cleaned, and revegetated at least twice annually. Rain gardens must
be mulched, trimmed, pruned, weeded, treated for pest damage, and inspected for erosion,
sediment buildup, and vegetation health. Green roofs require fertilization, irrigation, and
weeding. They also require inspection and remediation for leaks, blocked drains, sediment
buildup, and debris. Landscaping and planting beds must be fertilized, weeded, and
maintained to prevent disease and migration into porous pavement areas to avoid clogging
or silting. Trees must be inspected, pruned, and treated for disease or pest infestation.
The Financing Challenge: A key issue confronting state, regional, and local governments in the
use of Gl is the financing of ongoing O&M. Gl O&M has a number of characteristics that makes
the funding of these expenditures particularly challenging. In particular, they:
often lack dedicated revenue sources;
increasingly require the involvement of both public and private entities; and
3
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commonly have diverse and widely distributed costs and benefits across a watershed,
crossing municipal and private boundaries.
One of the biggest challenges in funding Gl O&M expenses is the establishment of a dedicated
and growing revenue source, such as general fund property taxes, utility district property tax
assessments, stormwater utility or other user fees, or endowment income to cover these costs
over time. In a recent EPA report that evaluated 22 Gl projects, more than 40 percent did not
have a dedicated source of revenue to cover O&M expenses.1
In addition, municipalities looking to implement GI projects are constrained under the tax code
regarding the types of funds other than revenues that they can use for O&M expenses. Many
Gl funding sources - like tax-exempt general obligation and revenue bonds and Clean Water
State Revolving Fund loans - provide funding for capital expenditures but cannot be used for
ongoing O&M expenses. Similarly, most federal funding is restricted to capital costs.
Financing Gl O&M: EFAB identifies in this report 14 potential strategies that local, regional,
and state governments can use to finance Gl O&M. Frequently, financing strategies are
combined to assure an adequate revenue stream.
Each funding/financing mechanism has both pros and cons and will be useful to varying
degrees, depending on the circumstances. If state, regional, or local governments are to select
the most appropriate strategies, they must ask and answer a number of questions to
determine their circumstances and goals. Examples of such questions include:
How do they define Gl?
What are their goals in establishing a Gl O&M program?
Does political support and an enabling environment exist for the program?
How many Gl projects need to be monitored and maintained?
What capacity exists to implement these activities?
Are the Gl projects on public and/or private land?
What partnerships need to be formed to ensure success?
The 14 potential strategies EFAB identifies as well as their use considerations, advantages,
and disadvantages are summarized in the funding matrix beginning on page 6. Case studies
on the use of each strategy are also provided in the text. Strategies reviewed and identified
by EFAB include:
Publicly funded strategies: These include stormwater fees/utilities and the use of
associated credits and discounts; and watershed improvement districts. These
strategies rely exclusively on publicly mandated revenue streams.
1 EPA Office of Water. (2013) The Importance of Operations and Maintenance for the Long-Term Success of Green
Infrastructure: A Review of Green Infrastructure O&M Practices in ARRA Clean Water State Revolving Fund
Projects. March.PA-832-R-12-007. Accessed 7/23/15 at https://www.epa.gov/sites/production/files/2015-
04/documents/green_infrastructure-om_report.pdf
4
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Privately funded strategies, which rely exclusively on private revenue sources:
Strategies in this group include the use of ordinances to require property owners to
finance Gl O&M on their land and buildings to control stormwater runoff, and the
establishment of conservation land trusts to provide Gl O&M.
Strategies that can rely on public, private, or hybrid revenue streams: Eco-system
service payments, for example, can be publicly mandated or established through
voluntary private transactions or compliance-driven private systems. In addition to eco-
system service payments, strategies that can be financed by either public, private, or
combined revenue streams include water funds, endowments, and grant funding from
public, philanthropic, or combined sources. EFAB also suggests that state, regional,
and local governments consider adapting PACE (property assessed clean energy)
financing, which can use private loans, government bonds, and philanthropic
donations for the Gl arena. A new class of property-assessed green infrastructure
(PAGI) programs could be combined with PACE initiatives or administered
independently.
Partnership strategies: Partnering with private organizations can also be used to
finance Gl O&M. Under public-private partnerships (P3s) and community-based public-
private partnerships (CBP3s), state, regional, and local governments can contract with
private entities to provide Gl O&M activities. Similarly, state, regional, and local
governments can contract with social ventures to provide Gl services.
Capacity-building strategies: EFAB further recommends that state, local, and regional
governments evaluate the use of credit enhancements to reduce the financing costs
of Gl O&M programs. In addition, environmental insurance settlements and judgments
obtained under pollution control lawsuits can be used to capitalize Gl O&M programs.
5
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Green Infrastructure (Gl) Operations and Maintenance (O&M) Funding^Financing
Mechanisms Matrix
Funding Source
When to
Use/Considerations
Key Advantages
Key Disadvantages
Examples & Resources
Public Funded
1. Stormwater Utilities/Fees
- Options range
from simple fee on
municipal bill to
full utility structure
- Rapidly
expanding in use
across the U.S.
- Strong champion exists
among elected officials or
senior municipal
management
-Adocumented need
raises public awareness
(e.g., flooding event, water
body impairment,
commission report, (etc.)
impairment, commission
report (etc.)
- Stable, dedicated
source of revenue
- Fee credits can create
a strong incentive for
the installation and
maintenance of Gl on
private property
- Fees on impervious
areas provide a form of
equity
-Widely adopted with
many examples
- Politically unpopular -
"rain tax"
- High levels of political will
and resources required to
successfully navigate the
legal, technical, social, and
financial issues to establish
- The resources needed for
Gl O&M often competes
with flood control and other
capital investment needs
within utilities' budgets
NAFSMA Guidance for Municipal
Stormwater Fundina 2006
Black & Veatch 2014 Stormwater
Utility Survey
2. Watershed ImDrovement Districts
- Special purpose
district; a political
subdivision
- Can impose
taxes, user fees,
or both
- Can be
established for
- State enabling laws may
be required. Local laws
are often required to set
up districts and establish
special assessments
- New stand-alone
operating districts need to
hire management and
- Special purpose
districts provide a
stable, dedicated
source of revenue for
O&M activities
- Fees are collected
from property owners or
utility customers who
- Smaller and/or poorer
special purpose districts
may not have sufficient tax
or revenue base needed to
support Gl O&M programs
- Political opposition and
lack of public awareness
may lead to the perception
Urban Drainaae and Flood Control
District, Denver Metro Area
Urban Drainaae and Flood Control
District, About Us
Eastmark Communitv Facilities
District (Mesa, AZ area)
6
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Funding Source
When to
Use/Considerations
Key Advantages
Key Disadvantages
Examples & Resources
one municipality
or a group of
municipalities
staff and develop
procedures to procure any
outside venders
- District will need to
establish procedures to
set initial and ongoing
assessment levels and
billing and collections
systems
- If district boundaries
cross municipal
jurisdictions, governance,
member input,
assessment, billing, and
collections procedures
may be more complex
directly benefit from the
Gl projects.
- Fees can be based on
property taxes or usage
- Property owners who
install Gl and reduce
their stormwater runoff
can receive an offset
against the district
assessments
- Revenues held by the
district can be applied
to Gl expenditures
without any other
competing uses of the
funds
that proposed district
assessments are a tax
rather than a user fee, thus
diminishingsupport
3. Fee Credits or Discounts against Stormwater Fees
- Credits/
discounts to
stormwater fees
offered to property
owners for Gl
installation and
maintenance
- Compliance
enforced through
inspection and/or
reporting
- Must have a stormwater
fee in place to offer
credits against
- Credit/discount policies
may be subject to the
ratemaking process -
Directly linking fee/credit
system with stormwater
services provided
- Gl maintained on
private properties,
increasing reach of the
public sector program
- O&M funding is
provided by private
property owners
- Voluntary tool may
avoid property/ privacy
rights issues (versus
requirements)
- Can address
implementing Gl on
developed property
- Issues with maintenance
quality/consistency by
private property owners
- Public resources needed
for inspection, outreach,
education, and training
Portland, OR Clean River Rewards
Program
NorthamDton. MA Stormwater Utility
Credit/Incentive Policy
httDs://www.eDa.2ov/2reen-
i nf rastructu re/green-i nf rastructu re-
municioal-handbook
American Rivers Staying Green:
Strategies to Improve 0& M of Gl in
the Chesapeake Bay Watershed at
httDs://www.americanrivers.org/cons
ervation-resource/oDerations-
ma intena nce-green-i nf rastructu re/
7
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Funding Source
When to
Use/Considerations
Key Advantages
Key Disadvantages
Examples & Resources
Private Funded
4. Ordinances on Private ProDertv
- Green versions of
detention/
retention
maintenance
standards have
been used by
municipalities for
decades
- Compliance
enforced via
inspection and/or
reporting
- Compliance/
enforcement may
be more effective
with larger property
owners/managers, such
as commercial property
owners, homeowners'
associations, etc.
- Gl is maintained on
private properties,
increasing the reach of
public program
- O&M funding provided
by private property
owners
- O&M fundingcan be
supported by
government payments
to private property
owners (see
Ecosystems Service
Payments)
- Does not address
existing development
- Issues with maintenance
quality/consistency by
private property owners
- Public resources needed
for inspection, outreach,
education, and training
Los Anaeles Low Impact
Development Ordinance
EPA Green Infrastructure Operations
& Maintenance web page at
httos: //www. eoa. gov/gree n-
i nf rastructu re/green-i nf rastructu re-
ODerations-and-maintenance
Includes a model stormwater
ordinance and sample Gl O&M
agreements for private property.
5. Conservation Land Trusts
- Common
nonprofit land
restoration and
preservation
model across the
U.S.
- Brings charitable
tax credits to the
table as a funding
source
- Land owner-
ship/control
- An existing land trust is
available to partner with
or a champion is willingto
create a new one
- Easements or land
donations of land are
desirable
- Monitoring and
maintenance capacity is
needed
- A source of monitoring
and maintenance funds
- Can bring the capacity
to accept donations of
land and easements
providing charitable tax
credits
- Can provide the
capacity to monitor and
maintain Gl
- Well established and
exists for relatively easy
adaptation to Gl
- Requires coordination or
partnership with local
government
- Source of monitoring and
maintenance funding must
be determined upfront
- Effort needed to adapt this
existing tool to Gl
Land Trust Alliance: Benefits for
Landowners web page
httD://www.landtrustalliance.ora/wha
t-vou-can-do/conserve-vour-
land/benefits-landowners
8
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Funding Source
When to
Use/Considerations
Key Advantages
Key Disadvantages
Examples & Resources
ranges from
easements to
purchases
can be obtained through
private donors or public
funds
Public or Private Funded
6. ProDertv Assessed Green Infrastructure CPAG 11 IA oroDosed aDDroach. similar to ProDertv Assessed Clean Energv (PACE) Drograms.l
-Adapted Property
Assessed Clean
Energy program
model to green
infrastructure
- Several possible
models, including
establishing as a
- State enabling legislation
may be required
- Local legislation typically
required to set districts,
assessments, and billing
and collections
procedures
- When district boundaries
- Districts can be stable,
dedicated revenue
source for the centrally
contracted
management of Gl on
private property
- Fees assessed on
property owners or
-Voluntary mechanism: If
property owner interest is
limited, it could result in
lower economies of scale
from contracted Gl O&M
programs
- Will most likely require
state legislation to enable
Whv Residential PACE is Growina
NREL Enerav Analysis: Property
Assessed Clean Enerav (PACE)
Financina of Renewables &
Efficiency
PACENation: List of U.S. PACE
public agency with
professional
government
administration or
establishing as a
nonprofit with
nonprofit manager
cross multiple municipal
jurisdictions, governance,
member input,
assessment, billing, and
collections procedures
may be more complex
- PAGI projects and O&M
requirements likely to vary
considerably depending
on the type of
participating
property, increasing
operating complexity
utility customers who
directly benefit from the
projects
- Payment of fees is
more secure as fees are
collected with the local
property tax or utility bill
- Revenues held by the
district are applied to Gl
without other competing
uses
- Economies of scale for
Gl O&M can lower cost
to property owners
in the program
the establishment of PAGI
districts
- Project O&M activities may
vary considerably across
projects, increasing
implementation complexity
Proa rams
City of Berkeley, CA: Berkeley First
Proa ram
9
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When to
Funding Source use/Considerations Key Advantages Key Disadvantages Examples & Resources
7. Water Funds
- Mechanism to
aggregate and
distribute funds
- Requires pooling
and transferring
funds between
public and private
entities
- Best if used when
covering a watershed or
region to maximize
operational benefits
- Need to have a viable
business plan to make
fund self- supporting over
time
- Useful way to
aggregate funds
- This creates
efficiencies, provides
cost-effectiveness, and
allows leveraging of
resources from a variety
of sources
- Overcomes barriers
that stop the flow of
resources between
public and private
entities: supports
public-private
collaboration
- Relatively new concept in
U.S. used for water quality
restoration and
conservation
- Financial benefits difficult
to document
- Political viability of fund
may be challenged if fund
operates across
jurisdictions
Brandywine-Christina Healthy
Watershed Fund
httD://www.wra. udel.edu/brandvwine
-christina-healthv-water-fund/
The Nature Conservancy Rio Grande
Water Fund
htto ://www. n at u re. o ra/o u ri n itiat i ves/r
ea i o ns/n o rt h a m e rica/u n ited states/n
ewmexico/new-mexico-rio-arande-
water-fund.xml
8. Eco-svstem Service Payments
- Payments for
eco-system
services can
capitalize an
endowment
- Payments can be
made by federal,
state, or local
government; by
voluntary private
transactions; or by
private but
compliance-driven
transactions
- Appropriate and reliable
revenue stream available
to fund all or part of Gl
O&M program
- Quantifiable,
performance-based
measures available/can
be created, if required
- Program sponsor has the
technical expertise to
design and manage the
program
- Government payment
programs can
sometimes be identified
to fund Gl O&M by
private property owners
- Voluntary payment
programs (fees) can
create revenue streams
for Gl O&M
- Compliance-based
payment programs can
create revenue streams
linked to fulfillment of
- May be difficult to identify
and capture reliable
payment streams
- Need for reliable forecasts
of Gl O&M costs
- Significant technical
expertise may be required,
especially if quantifiable
performance metrics are
required
Takina Stock: Payments for Forest
Ecosystem Services in the United
States
Status of Mitiaation Bankina
What is a Mitiaation Bank?
The Mitiaation Rule Retrospective:
A Review of the 2008 Reauiations
Governina Compensatory Mitiaation
for Losses of Aauatic Resources
10
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Funding Source
When to
Use/Considerations
Key Advantages
Key Disadvantages
Examples & Resources
environmental
objectives, including Gl
Credit Guide for Wetland Mitiaation
Banks
9. Endowments fused in coniunction with Ecosvstem Service Payments of other dedicated revenue stream)
- Ecosystem
service pay-ments,
private donations,
or other funds are
placed in an
interest-bearing
account
- Interest is used
to fund Gl
maintenance
-The corpus of the
account is
protected to
continue
generating interest
over time
- Appropriate, reliable
revenue base/revenue
stream needed to
capitalize the endowment.
- Sound forecasting of
future contributions, Gl
0&M expenditures, and
interest rates required
-Appropriate investment
program needed to lock in
the desired yield over the
life of the endowment
- Funds for Gl 0&M
payments are set aside
in advance
- Interest income pays
for/helps to pay for
future maintenance
costs
- Forecasting of Contribution
revenues, Gl 0&M costs,
and interest rates may not
be accurate enough to
deliver required Gl 0&M
payments
- Endowment funds are
purpose-restricted; build-up
Wetland Mitiaation Bankina
Guidebook for Oreaon. First Version
10. PhilanthroDic and Federal Grants
- One-time
injections of
capital to support
a project
- Could be used in
conjunction with
an endowment
strategy
- Ability and time to
complete the grant
application in a
professional manner
-Ability to secure required
matching funds and
additional sources of
funding or loan financing,
if needed
- Supplements local
revenues and does not
require repayment
- Can leverage
additional grant funding
or loan financing
- May encourage
beneficial partnerships
with other organizations
on Gl issues
- Time needed to prepare
application can be more
than 30 days
- No guarantee of winning
award; uncertainty for the
applicant/recipient
- May require matching
funds or contingent loan
financingto win an award
Cataloa of Federal Domestic
Assistance
Grants.aov
Foundation Center Databases
Fundina Information Network
11
-------
Funding Source
When to
Use/Considerations
Key Advantages
Key Disadvantages
Examples & Resources
- May need to locate
additional sources of
funding or financing
Guidestar Online Directory of
Charities & Nonprofits
National Directory of Nonprofit
Organizations
Partnerships
11. Private Eauitv CaDitaI/Public-Private PartnershiDS fP3s1 and Communitv-Based Public-Private PartnershiDS (CBP3s1
- Government
enters into a long-
term contract with
a private entity
that brings capital
and expertise in
exchange for a
negotiated return
- State enabling legislation
passed
- Value for money (VfM) or
similar analysis shows
that P3/CBP3 produces
savings versus traditional
contracting
- Government has
contracted for needed
negotiation and
implementation expertise
- Integrates project
capital financing with
long-term O&M funding:
providing a one-stop
solution for Gl
development and
operation
- Encourages the
creation of integrated,
least-cost solutions
- May accelerate project
delivery by better
integrating planning
design, construction,
and operating decisions
- May attract additional
private financing and
allow greater flexibility
in the use of financing
structures
- Must raise revenues to pay
for P3/ CBP3 contracts
- May lack expertise to
evaluate costs and benefits,
negotiate contracts, and
monitor and manage
successful implementation
-Transaction and ongoing
monitoring costs may be
high
-Anticipated results and
savings may not be
delivered
State P3 Enablina Leaislation
Military Housina Privatization CBP3
CBP3 for Gl: Prince Georae's
County, MD
12
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When to
Funding Source use/Considerations Key Advantages Key Disadvantages Examples & Resources
12. Social Ventures
- Businesses that
generate both a
social and an
economic return to
enable Gl program
to accomplish
multiple
community goals
- Other important
community goals need to
be addressed (and can
through Gl program)
- Better installation and
maintenance options are
not readily available
- Brownfield sites are part
of the potential Gl
program portfolio
- Enables a community
to accomplish goals in
brownfield remedia-
tions, job training and
job creation for the
hard-to-employ as well
as environmental goals
- Provides access to
additional fundingsuch
as brownfield or job
training grants or
earned income via
commodity sales
- Each Social Venture
requires a social
entrepreneur with
significant capacity to
establish and maintain the
business over time
- Many new ventures fail in
the first few years
- Social Ventures often
experience tensions
between their social and
their business/financial
goals that require juggling
and compromise
httDs://www.americanrivers.ora/a
ssets/pdfs/reports-and-
publications/stavina-areen-and-
arowina-iobs.pdf
www.millenniumreserve.ora/Prioritie
s/hiah-bridae
video. cnbc.com/gallery/?video=300
0270133
Capacity Building
13. Credit Enhancements fused in coniunction with other financing
- Improve the
economics of Gl
projects by
lowering financing
costs
- Can be a useful
way to support Gl
maintenance and
businesses/
social enterprises,
reducing Gl
maintenance
costs
- Expertise to identify a
guaranty program or
guarantor and to
negotiate a satisfactory
guaranty agreement with
a guarantor and a lender
-Availability of a
guarantor entity or
guaranty program
- Help to attract private
financing
- Reduce the risk and
expense of financing
- A guarantor or guaranty
program may not be
available
- Search and transaction
costs may be high
- Borrower may lack the
expertise to identify a
guarantor and/or to
negotiate a guaranty
agreement
New Markets Tax Credit Fact Sheet
Utilizina SRF Fundina for Green
Infrastructure Proiects
Green Connecticut Loan Guaranty
Fund
Credit Enhancement for Green
Proiects
13
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~ When to
un ing ource use/Considerations
Key Advantages
14. Environmental Insurance Settlements/Judgments
- One-time
injection of funds
due to historic
pollution
- Could be used in
conjunction with
endowment
strategy above
-Specialized legal counsel
is available to pursue
environmental
remediation/historic
insurance case, preferably
on a contingent fee basis
- Provides financial
resources that might
not otherwise be
considered for
environmental
remediation, including
green infrastructure
O&M
- Contingent fee cases
may result in a relatively
modest financial outlay,
although plaintiff may
be responsible for non-
attorney expenses, such
as filing fees and
deposition costs
14
Key Disadvantages Examples & Resources
- Applicable only to Gl
programs that stem from
pollution/brownfield cases
- Legal case can disrupt
daily business due to
volume and detail of records
and information requests
- Costly, unless a contingent
fee arrangement is available
- Litigation is lengthy,
typically extending for years
A Guide to Insurance Coverage for
Environmental Liability Claims
Michael D. Goodstein and Stacey
H. Myers, Hunsucker Goodstein
PC, "Funding Remediation of
Environmentally Impaired
Properties," in Environment and
Climate Change Law, International
Comparative Legal Guides, 2013,
pp. 15-20
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I. What Is Green Infrastructure (Gl)?
A. Definition of Green Infrastructure
Green infrastructure (Gl), sometimes referred to in the context of Low-Impact Development
(LID), describes an "integrated network of centralized and decentralized environmentally
responsible wet-weather management systems" to control stormwater runoff from impervious
surfaces in urban and suburban areas - roads, roofs, sidewalks and parking lots.2 These
systems are designed to mimic natural processes and help return urban areas to something
like pre-development hydrologic conditions in which water is infiltrated, reused, and
evaporates while velocity and temperature are reduced.
Although stormwater runoff is a species of nonpoint source pollution, a category of sources
not within the reach of the Clean Water Act, in 1987 Congress decreed it to be point source
pollution under Section 402(p), bringing it into the law's permitting program.3 The law defines
a "point source" as "any discernible, confined and discrete conveyance...from which
pollutants are or may be discharged."4 Think of the common image of a discharge pipe in the
water. However, it specifically excludes "agricultural stormwater discharges and return flows
from irrigated agriculture." Thus, point source discharges are regulated by federal law, but
nonpoint source pollution - polluted runoff, say, from row crop agriculture - is not.
This action expanded EPA's responsibilities "by almost an order of magnitude."5 Indeed,
urban stormwater is "the primary source of water quality impairment for 13% of all rivers, 18%
of all lakes, and 32% of all estuaries" based on 2002 reporting.6 Yet, urban areas cover just
3 percent of all landmass of the United States. With continues population growth,
development, and sprawl, there will be more imperviousness and resulting stormwater runoff
that need to be managed, absent decisive action.
Gl improves water quality by reducing pollutant runoff, mitigating combined sewer and
sanitary sewer overflows, and preserving stream ecology. Examples of Gl include bioretention,
wetlands, rain gardens, green roofs and walls, permeable pavement, rain barrels, vegetated
swales, and urban tree planting.
Gl is complementary to traditional "gray" infrastructure, not always a substitute for it.
According to Ken Kopocis, former EPA deputy assistant administrator for water, "No, green
infrastructure is not the answer. Green infrastructure is a component of the answer." In other
2 "Green infrastructure yields sustainable stormwater solutions," by James C. Schlaman, Jeff Henson, Les K. Lampe
and Dave Koch (Black & Veatch), Word Water: Stormwater Management, Summer 2014, p. 10
3 33 U.S.C. Section 1342(p)
4 33 U.S.C. Section 1362 (14)
5 National Research Council, Urban Stormwater Management in the United States, National Academies Press
(Washington, D.C. 2009), p. 1
6 National Research Council, Urban Stormwater Management in the United States, National Academies Press
(Washington, D.C. 2009), p. 25
15
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words, selecting the optimal mix of green and gray solutions is an asset management decision
in the circumstances of a given utility's service objectives.7
Given the decentralized or distributed nature of Gl practices, and their use of vegetation, trees
and other nonstructural techniques, they present many challenges in terms of ongoing
operation and maintenance (O&M) and financing over time. They are also more labor-
intensive than traditional engineered approaches, a definite benefit for many communities
but, again, not without challenges.
B. What is Green Infrastructure Used For?
Gl is used to reduce costs of stormwater control and, increasingly, remediating combined
sewer overflows (CSOs) while generating multiple environmental and social benefits. In the
parlance of sustainability theory, it addresses the triple bottom line in the area of wet weather,
water-quality challenges. Besides reducing costs and water pollution, Gl, deployed at scale,
can create habitat, mitigate urban heat island effects, enhance human health and
productivity, reduce energy consumption, recharge groundwater, and generally contribute to
city beautification and improvement of the quality of life.
Two examples from Pennsylvania illustrate the dual attraction of Gl in terms of cost savings
and multiple benefits. The City of Lancaster is developing an integrated Gl plan both to reduce
CSO, stormwater and nutrient runoff. An EPA case study suggests that the city's plan will
provide approximately $2.8 million in energy, air quality, and climate-related benefits
annually.8 The plan will also reduce capital costs by $120 million and pumping and treating
costs by $661,000 per year. Moreover, these benefits exceed the costs of Gl in the study area,
which ranged from $51.6 million to $94.5 million, depending on the mode of implementation.
Philadelphia's Green Cities, Clean Waters program is designed to both avoid massive gray
infrastructure costs of traditional CSO remediation, e.g., massive tanks and tunnels, while
improving water resources and revitalizing the city's quality of life. Over 25 years the
Philadelphia Water Department will invest approximately $2.4 billion in the largest green
infrastructure initiative in the nation.9 This intensive effort is modest, in terms of costs,
compared to the $6 billion Philadelphia would have spent going the traditional route.
7 "Mixing Grey & Green," by G. Tracy Mehan III, Water & Wastes Digest, January 2015, p. 16 available at
www.wwdmag.com
8 U.S. Environmental Protection Agency, 'The Economic Benefits of Green Infrastructure. A Case Study of
Lancaster, PA," February 2014, EPA 800-R-14-007 accessed at
http://water.epa.gov/infrastructure/greeninfrastructure/upload/CNT-Lancaster-Report-508.pdf April 18,
2015
9 "Philadelphia's One-Water Approach Starts with Source Water Protection," by Elizabeth Couillard, Molly D.
Hesson, Kelly Anderson, Chris Crockett, and Mary Ellen McCarty, Journal AWWA 107:4, April 2015, pp. 67-68.
16
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On the benefits side, a 2009 triple bottom line study of the water department's Gl program
examined several categories of benefits, including:
Recreation
Increased community aesthetics, reflected in higher property values
Heat stress reduction
Water quality and aquatic ecosystem improvements
Wetland creation and enhancement
Poverty reduction from local green jobs
Energy savings and carbon footprint reduction
Air quality improvement
Construction and maintenance related disruption10
While economists will argue about the precise quantification of the benefits, it is clear that
the traditional "tunnel option" did not yield much benefit in most categories.
C. Types of Green Infrastructure
Examples of Gl include bioretention, wetlands, rain gardens, green roofs and walls, permeable
pavement, rain barrels, downspout disconnection, vegetated swales, and urban tree
planting.11
Onondaga County, New York, is pursuing an aggressive Gl program as part of its CSO reduction
plan. As of 2014 it had implemented 150 Gl projects and is projected to spend $80 million,
which will account for almost one-third of its CSO reductions. This amounts to a savings to the
county of $20 million compared to using traditional stormwater and CSO techniques.12
Onondaga County and the City of Syracuse utilize almost every variety of Gl practice, from
downspout disconnection to green streets with permeable pavement, bio-swales, and
infiltration trenches. They also utilize rainwater harvesting at the War Memorial arena where
captured rainwater is treated and used to make ice for the professional hockey team. A one-
hectare constructed wetland is the first of its kind in the Northeast to treat CSO discharges.
A spectacular example of a green roof can be at found Ford Motor Company's River Rouge
Center in Dearborn, Michigan.13 450,000 square feet of assembly plant roofing are covered
with sedum and other succulent plants and can hold an inch of rainfall. According to a former
Ford official who oversaw the project, Ford invested $15 million in the Gl project versus $50
10 ATriple Bottom Line Assessment of Traditional and Green Infrastructure Options for Controlling CSO Events in
Philadelphia's Watersheds. Final Report, Stratus Consulting, Inc., August 24, 2009.
11 See Schlaman et al., p. 10.
12 "Save the Rain program models green-grey approach to reducing CSOs," by Kristina Twigg, World Water:
Stormwater Management, Spring 2014, pp. 15-16.
13 "Ford Motor Company's River Rouge Plant," http://www.greenroofs.com/projects/pview.php?id=12
17
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million in capital costs for a traditional engineered approach before even counting ongoing
O&M.14
Urban forestry and sophisticated tree planting are an important part of Gl programs across
the country. However, environmental and financial returns depend on sound design and
installation to ensure long-term survival in the harsh urban environment.15 Toronto, Ontario,
sets minimum soil volumes for street trees of 30 cubic meters per tree and aims to increase
its overall tree canopy from 17 percent to 40 percent.
As important as individual Gl practices or techniques are, scale and ongoing O&M are crucial
to achieving environmental goals. Thus, a centralized management and financing system
must be in place to sustain what is, of necessity, a decentralized and distributed system.
D. Benefits of Green Infrastructure
As noted in the foregoing sections, Gl offers a cost-effective means of addressing urban wet
weather issues, including stormwater runoff and combined sewer overflows, while generating
many co-benefits in terms of social and environmental benefits. With proper management
and financing, relating to design, installation, and O&M, it can effectively meetsustainability's
triple bottom line for communities across the country.
II. The Need for Green Infrastructure Operations and
Maintenance Financing
A. Overview of Maintenance Requirements
All stormwater management systems, whether gray or green, require maintenance.
Appropriate O&M ensure that green infrastructure will function properly and provide water
quality and environmental benefits, protect public safety, meet legal standards, and protect
communities' financial investment. If properly constructed and maintained, Gl is capable of
significant flow volume reductions during storm events. In addition, Gl projects can also cost
less to construct than gray stormwater practices. Gl can reduce traditional maintenance costs.
The successful financing of green stormwater infrastructure O&M is steadily gaining
importance as the environmental, social, and economic benefits of these projects are
increasingly recognized.
Ensuring that Gl projects are planned and designed with maintenance in mind can maximize
environmental benefits and reduce costs over time. There are a number of important O&M
factors to consider before project implementation. These include type of maintenance,
14 Email from Tim O'Brien to G. Tracy Mehan III, EFAB member, January 31, 2015.
15 "Repairing urban forests to help manage stormwater," Peter MacDonagh, World Water: Stormwater
Management, Summer 2014, pp. 20-21.
18
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frequency of maintenance, cost of replacement (e.g., plants, shrubs, porous pavement), and
sufficient funds to cover O&M, including cost of replacement components.
Successful Gl O&M programs typically include an accountability mechanism such as an O&M
plan or manual, documentation and tracking systems, training and education, partnerships,
assuring compliance, and dedicated funding. Below are brief summaries of maintenance
requirements for the most common Gl practices.
Porous Pavements. General maintenance for porous pavement includes cleaning sediments,
trash, and other debris out of inlets and clean-outs, at least twice a year. Most porous
pavements require annual vacuuming or power washing. Adjacent landscaping and planting
beds need to be maintained to prevent migrating into porous pavement areas and clogging or
silting. Inspections for clogged areas, cracks, and broken areas should occur at least once a
year.
Infiltration Practices. General maintenance includes inspecting and cleaning catch
basins/inlets at least twice per year, maintaining overlying vegetation, and re-vegetating bare
spots as needed. Prohibiting vehicular access on subsurface infiltration areas unless they are
designed to allow vehicles prevents compaction that reduces infiltration.
Rain Gardens. General maintenance includes mulching, trimming, pruning, weeding, and
removing litter. The party responsible for maintenance must inspect for erosion, sediment
buildup, and vegetation health; clean inlets, outlets, overflow risers; manage damage by
pests, if any; and ensure water is draining within 72 hours.
Green Roofs. The first 12 to 15 months after construction is the establishment phase during
which fertilization, irrigation, and weeding are necessary. Some contractors provide a warranty
after construction to care for vegetation and replace any dead or diseased plants. Beyond the
establishment phase, extensive green roofs may only require irrigation during drought
conditions. They require inspection to check for leaks, blocked drains, dead vegetation, or
debris.
B. Overview of the Financing Problem
Gl O&M expenses have a number of characteristics that make the funding of these
expenditures particularly challenging. In particular:
They have unique challenges relative to grey infrastructure with regard to planning and
budgeting.
They often lack dedicated revenue sources.
They increasingly require the involvement of both public and private entities.
They commonly have diverse and widely distributed costs and benefits across a
watershed, crossing municipal and private boundaries.
19
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One of the biggest challenges in funding Gl O&M expenses is the establishment of a dedicated
and growing revenue source, such as general fund property taxes, utility district property tax
assessments, stormwater utility or other user fees, or endowment income to cover these costs
over time. In a recent EPA report that evaluated 22 Gl projects, more than 40 percent did not
have a dedicated source of revenue to cover O&M expenses.16 A number of funding
mechanisms available to municipalities, nonprofits, and private entities for Gl O&M expenses
are presented later in this report.
In addition, municipalities looking to implement GI projects are constrained under the tax code
regarding the types of funds other than revenues that they can use for O&M expenses. Many
Gl funding sources - like tax-exempt general obligation and revenue bonds and Clean Water
State Revolving Fund loans - provide funding for capital expenditures but cannot be used for
ongoing O&M expenses.
O&M expenses are considered working capital expenditures under general federal income tax
principles and cannot properly be capitalized. There are significant limitations under the tax
code on the use of long-term tax-exempt debt for working capital expenditures. Typically, such
working capital financing has to be funded on a taxable basis unless the municipality can
demonstrate that it is in financial distress and that it does not expect to have any available
amounts for five years after issuance of the bonds for bond redemption. Beginning in year six,
it is required to use any excess available amounts to either (1) redeem the working capital
bonds, (2) yield restrict investments allocable to these excess available amounts, or (3) invest
the excess amounts in non-Alternate Minimum Tax tax-exempt bonds. For most municipalities,
however, tax-exempt working capital financing is not available.
Another funding consideration is the ongoing renewal and replacement of Gl projects. A
threshold question is whether or not green plantings are considered capital expenditures. This
will be a function of the Gl project owner's policies and procedures as well as tax
considerations. Policies and procedures vary from project owner to project owner. For
example, New York City does not include tree pruning or the cost of planting new or
replacement trees as an eligible capital project, unless done in connection with a betterment
to an existing park or playground, a comprehensive streetscape improvement program, or if
part of a comprehensive tree planting and replacement program.17
From a tax perspective, general federal income tax principles define a capital expenditure to
include any cost of a type that is properly charged to a capital account. Costs incurred to
acquire, construct, or improve land, buildings, and equipment are generally included as capital
16 The Importance of Operation and Maintenance for the Long-Term Success of Green Infrastructure, A Review of
Green Infrastructure O&M Practices in ARRA Clean Water State Revolving Fund Projects,
http://water.epa.gov/grants_funding/cwsrf/upload/Green-lnfrastructure-OM-Report.pdf, US EPA Office of Water,
March 2013, p. 9.
17 The City of New York Office of the Comptroller, Internal Control and Accountability Directives: Directive 10-
Charges to the Capital Projects Fund, May 31, 2011.
20
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expenditures. The question for tax counsel will be whether the green plantings can be deemed
to be improvements to the land. If they are, a second question is the assumed useful life of
these assets. The term of any tax-exempt debt issued to fund these assets would need to take
into account their useful life. The same would be true of any significant additions or
replacements of Gl plantings.
C. Who is Responsible?
1. Public vs. Private Property: Deciding Who is Responsible for the O&M Costs
While it would seem as if the responsibility for operating and maintaining Gl installations
would be relatively clear - if you install it, you must maintain it - in reality, it is up to the local
government to clearly define who is responsible when Gl is installed. If Gl improvements are
installed on public property to satisfy a local government's Municipal Separate Storm Sewer
System permit (MS4), then it is the responsibility of the local government to operate and
maintain the improvements, including documenting and tracking all O&M activities.
If a private landowner installs improvements voluntarily, it is that landowner's responsibility
to operate and maintain the installation. Yet, in many circumstances the delineation of
responsibility is not so easily defined, and the outcome can be dependent on the requirements
of the state or other jurisdiction in which a Gl project is implemented. For example, when
public funding supports implementation of a project on private property or when installations
installed by a developer are then left to one or a number of private property owners to maintain
over time, the responsibility of maintenance can become quite uncertain.
There are many complexities and nuances at the local level about the responsibility for O&M
for Gl practices. Greater investigation in the following areas would enable a better
understanding of the models that appropriately and successfully allocate responsibility for Gl
O&M:
Clear comprehensive municipal O&M plan and/or municipal stormwater management
ordinance: Stormwater infrastructure, gray or green, is like any other infrastructure
component. It must be planned for, budgeted for, and maintained over time in order
to function as intended. As with the asset management approach applied to any other
form of infrastructure, developing an O&M plan can help ensure that both gray and
green infrastructure practices function properly over time.
Without an O&M plan in place for stormwater practices, projects may become
neglected and inadequate maintenance will lead to the installation failing to function
as intended. A local ordinance can frame out the process for operating and maintaining
these practices and define the responsible party based on where projects are
implemented - private land, public land, and hybrid models. In The Importance of
21
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Operation and Maintenance for the Long-Term Success of Green Infrastructure, an EPA
Office of Water report, the necessary elements of an O&M plan are defined as:
o Identification of the party(ies) responsible for maintenance
o Maintenance schedules
o Inspection requirements
o Frequency of inspections
o Easements of covenants for maintenance
o Identification of a funding source18
Education and outreach to party(ies) responsible: Even when the party responsible for
Gl O&M is clearly identified in a plan, ordinance, or maintenance agreement,
oftentimes the responsible party remains unaware of its obligation to operate and
maintain a practice. In Staying Green: Strategies to Improve Operations and
Maintenance of Green Infrastructure in the Chesapeake Bay Watershed, authored by
American Rivers, lack of awareness and poor public perception of green infrastructure
were identified as a barrier to effective maintenance.19 Since, in the case of MS4
permitted communities, the municipality is typically the permit holder and thus
responsible for keeping track of all green and gray stormwater management practices
being implemented, American Rivers recommends voluntary homeowner incentive
programs, workshops, tours, and other events to educate and engage the public.20
Perhaps the most difficult cases arise when a Gl project is installed by a developer in
a new or growing community, and the maintenance is passed on to either one or a
group of property owners (through a homeowner's association (HOA), property
management entity, etc.). A lack of proper communication or education, often
amplified by property transfer, can result in the neglect and failure of O&M activities.
Because this can occur frequently, it often becomes the responsibility of the
municipality or local government to inspect and enforce Gl O&M requirements to
ensure that those responsible for maintenance understand their role.
Training for party(ies) responsible: Gl practices/installations function differently than
gray infrastructure, and there can be a steep learning curve to understanding the O&M
procedures of these installations. In addition, the O&M procedures often differ by type
of installation as well as site specificity. While a number of guidance documents are
18 The Importance of Operation and Maintenance for the Long-Term Success of Green Infrastructure, A Review of
Green Infrastructure O&M Practices in ARRA Clean Water State Revolving Fund Projects,
https://www.epa.gov/sites/production/files/2015-04/documents/green_infrastructure-om_report.pdf, US EPA
Office of Water, March 2013, p. 9.
19 Staying Green: Strategies to Improve Operations and Maintenance of Green Infrastructure in the Chesapeake By
Watershed, http://www.americanrivers.org/conservation-resource/operations-maintenance- green-
infrastructure/, American Rivers, p. 2.
20 Ibid., p. 2.
22
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available, they tend to be site-specific, and there is fairly limited data on standard O&M
procedures for Gl best management practices. American Rivers recommends
developing maintenance standards for Gl.21
Public works staff responsible for the maintenance of gray infrastructure will need
additional specific training to properly operate and maintain Gl practices. The EPA
report previously cited states that "training courses or workshops for municipal
employees and contractors responsible for green infrastructure O&M are a necessary
component of a well-developed maintenance program. Training targeted to the
activities employees are expected to perform provides practical instruction on the
proper care and maintenance of green infrastructure projects. Training can also
provide information on the environmental benefits and important water quality impact
that green infrastructure can have when properly maintained."22 American Rivers
suggests tapping into existing capacity within the local government, particularly when
green infrastructure benefits naturally overlap with other community priorities, such as
parks, and public health and safety, to aid in green best management practices O&M,
either through training or being brought on as a responsible party.23
In cases of private landowners and/or other private entities as the responsible party
(ies) for O&M, the municipality or government should provide public education efforts,
outreach campaigns, and training programs to ensure proper O&M on private best
management practices.24
2, Implementation Approaches
a. Public Projects: For projects on public property there are a number of ways to ensure
proper O&M takes place:
o In-house personnel: The agency or municipality that owns the infrastructure re-
tools, re-trains, or hires new appropriate public employees,
o Shared service agreements: These occur when public Gl owned by a primary
public body are constructed on public property owned by second public body.
Often, maintenance can be integrated in an existing property maintenance
regime, usually by the secondary public body, or its contractor. Appropriate
training, inspection, and oversight may be needed,
o Private contracts: These contracts, typically to landscape maintenance firms,
help defray the cost and reduce pressure on existing staff. However, inspection
21 Ibid., p. 2.
22 US EPA Office of Water, pp. 18-19.
23 American Rivers, p. 8.
24 US EPA Office of Water, p. 19.
23
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and oversight, as well as damage and replacement costs need to be considered
in contracting.
b. Private Projects: Depending on how the project was paid for, or how ownership is
defined, maintenance can vary from regular inspection and enforcement to no
maintenance. Ideally, a public or other regulatory body would inspect privately owned
Gl installations.
o On staff personnel: Depending on project size and staff size, there may be
capacity to conduct maintenance in-house, but training is likely necessary,
o Private contracts: These contracts, typically to landscape maintenance firms,
help defray costs and reduce pressures on existing staff. However, inspection
and oversight, and damage and replacement costs need to be considered in
contracting.
c. Tracking Maintenance Costs and Activities: An asset management system helps keep
track of costs, needs, priorities, schedules, and inspections records. Whether it is a
spreadsheet or a software tool, depending on the number of Gl installations to
manage, an asset management tool is a helpful way to ensure that O&M take place
efficiently. Items to track in an asset management system would include:
o In-house personnel hours and rates
o Shared service direct costs
o Private contracts direct costs
Database records for such systems would include, but not be limited to:
o Annual inspections
o Maintenance records
III. Green Infrastructure O&M Funding/Financing
Mechanisms
A. Overview
There are a wide variety of potential ways to address Gl O&M costs. Each funding/financing
mechanism has pros and cons and is most useful in specific circumstances. Individual
communities must ask themselves a number of questions to determine their circumstances
and goals, to select the most appropriate strategies. Examples of such questions include:
Are there many Gl projects that need to be monitored and maintained, or just a few?
Are the Gl projects voluntary or mandatory?
Are they on public or private land?
24
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What other goals (such as job training and the hiring of disadvantaged groups) does
the community have that could or must be addressed in conjunction with the Gl O&M?
Is the political support and will, as well as the enabling environment, amenable to
different strategiesespecially related to taxes, fees, cutting-edge strategies, and
potential partnerships?
What capacity exists within the community or nearby to monitor and maintain the Gl?
What capacity needs to be created?
What partnerships (public, private, and/or nonprofit) might be formed to ensure
success?
What are the community's goals in establishing the Gl O&M program?
Thirteen mechanisms to finance Gl O&M are described in this section and summarized in the
Funding/Financing Matrix on page 6. Some of the mechanisms presented are more tested
than others. Many are based on mechanisms already in use for other environmental areas
with similar characteristics but which have not been adapted yet to Gl O&M financing. The
mechanisms are not mutually exclusive and communities may seek to combine multiple
mechanisms to address goals, needs, and circumstances. Brief information on a number of
innovative Gl O&M programs that are being financed by a combinations of multiple
mechanisms are presented throughout this section.
B. Mechanisms
1. Storm water Utilities/Fees
More than 1,400 U.S. municipalities charge some form of dedicated user fee for providing
stormwater management services to property owners.25 While many of these communities
use the funding stream from stormwater utility fees for flood control and traditional
stormwater management with gray infrastructure, many also use it to support Gl O&M.
In this discussion, "stormwater fee" and "stormwater utility" are used interchangeably, both
referring to when a user fee is assessed by a governmental entity specifically for stormwater
management. Many do not include a separate, semi-independent agency similar to a water or
electric utility but are housed within another local government agency.
Most stormwater utilities assess fees based on some measure of a property's contribution of
stormwater to the public system, such as the amount of impervious surface or the amount
and type of development. Some local governments, however, issue a flat fee or mix
stormwater fees with other environmental services, such as air quality mitigation or
25 Roberts-Lahti, MicKenzie. Stormwater Utilities: A Funding Solution for New Jersey's Stormwater Problems. New
Jersey Future, September 2014. http://www.njfuture.org/wp-content/uploads/2014/09/New-Jersey- Future-
Stormwater-Utilities-Report.pdf
25
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wastewater service. A 2014 survey of stormwater utilities documented average stormwater
fees ranging from $0.24 to $26.58 per month for a single-family residence.26
Example
It is not always necessary for enabling legislation to be present at the state level for a local
stormwater utility to enact a fee. New York State is one of about two-dozen states that do not
have enabling legislation for communities to develop, and directly charge for, stormwater
utilities.
The City of Ithaca, New York, enacted a fee beginning January 1, 2015. Being in a home rule
state, New York communities may not need to wait for the state to enable them to act. Before
the Ithaca stormwater fee was established in 2014, stormwater O&M were funded by property
taxes. Property taxes in Ithaca are based on property value, which does not reflect how much
stormwater is generated by a property. Further, when stormwater is funded out of taxes, tax-
exempt property owners do not contribute toward the cost required to handle stormwater
flowing off of their properties.
In 2013, Ithaca Mayor Svante Myrick established a task force to examine whether a funding
mechanism other than property taxes would be appropriate for the city's stormwater
expenses. In particular, Myrick was interested in a new funding mechanism that improved
incentives for reducing stormwater runoff from each property; shared the cost burden of
stormwater services and infrastructure in proportion to each property's contribution to the
need for it; included tax-exempt property owners; and was dedicated to current and future
maintenance and regulatory obligations.
The stormwater user fee meets all of these goals. The fee also encourages property owners
to reduce the amount of impervious surface area on their properties, which reduces the
amount of stormwater runoff. Finally, because the user fees are placed into a separate
account, the fee provides a dedicated funding source for these costs that is not affected by
the overall economy. This is an important consideration, since through the general fund
budget process, stormwater funding needs are in competition with other service areas, such
as police, fire, parks and libraries. In this competition, stormwater funding needs are often
relegated to a lower priority. The implementation of a user fee results in a recurring, dedicated
funding source for both traditional and Gl ongoing and one-time needs.
Utilization Considerations
The majority of stormwater fees are considered to be a user charge, which generally meet the
following criteria:
Fees assessed for stormwater management are used only for that purpose.
26 Black & Veatch. 2014 Stormwater Utility Survey, http://bv.com/docs/default-source/management- consulting-
brochures/2014-stormwater-utility-survey
26
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Fees charged are reasonably comparable with the cost of providing the service and
proportional to the property's impact on the stormwater system.
Citizens have the option to opt out of the program or reduce their fees in some way.27
While it does not appear that enabling state legislation is always needed to implement
stormwater fees, many stormwater utility programs have been legally challenged, often based
on the criteria listed above and the question of whether a stormwater fee is a true user fee or
a tax. Many, but not all, of those programs challenged have withstood the legal test. However,
a close consideration of legal issues should be an essential part of the due diligence phase
for any community considering stormwater fees. Foran excellent discussion of the legal issues
involved with stormwater fees, see the publication Guidance for Municipal Stormwater
Funding, produced by the National Association of Flood and Stormwater Management
Agencies.28
Additional considerations regarding the fee vs. tax challenge include:
Whether the charge is imposed for a regulatory purpose or simply for revenue
generation.
Whether the charge is paid in exchange for benefits not received by the general public.
Whether the charge is voluntary or required.
Whether the charge is a fair approximation of the costs incurred by the agency or utility
to provide the benefit.29
The Water Environment Federation publication, User-Fee-Funded Stormwater Programs,
contains numerous case studies discussing the challenges surrounding the development and
implementation of stormwater userfees, includinga consideration of the legal, political, public
acceptance, and technical challenges faced by communities.
Advantages
Stormwater utilities provide a stable, dedicated source of revenue for stormwater
management, which may include Gl O&M.
Programs that include fee credits can offer a strong incentive for implementing and
maintaining Gl on private property (see Section 3).
Fees create a funding pool in which Gl O&M is a much higher priority than it is in, by
contrast, a municipal general fund based on property or sales taxes.
To the degree that rates are linked to the cost of providing the service and are based
on the relative impact of each property on the stormwater system, stormwater fees are
an equitable way to allocate costs.
27 Black & Veatch. 2014 Stormwater Utility Survey.
28 National Association of Flood and Stormwater Management Agencies. Guidance for Municipal Stormwater
Funding. 2006. https://www.epa.gov/sites/production/files/2015-10/documents/guidance-manual-version- 2x-
2_0.pdf
29 Water Environment Federation Special Publication. User-Fee-Funded Stormwater Programs. Second Edition.
2013.
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Stormwater utilities that were created to exclusively address issues like flood control
or regulatory compliance may find it is possible to expand or modify programs to
incorporate Gl over time to reflect the changing community priorities and industry
practices.
Disadvantages
For local governments seeking to institute a stormwater utility, significant political
issues may exist relating to:
o The lack of public awareness of the need for funding stormwater management
(and thus a lack of public support).
o The perception that the proposed stormwater user fees are actually a tax.
Instituting a stormwater utility requires navigating a complex set of legal, technical,
social, and financial issues that may be difficult to address in many communities but
often more so in smaller and/or poorer communities. These issues may include, but
are not limited to:
o Public understanding and acceptance, e.g., the view that the user fee is nothing
more than a "rain tax."
o Affordability concerns.
o Availability and accuracy of property-related information, e.g., lot size and
impervious area.
o Billing requirements, including the reconciliation of utility account holders and
property owners.
Even within a dedicated funding source for stormwater management, Gl O&M must
compete with other priorities, such as regulatory compliance, flood control, and capital
investment needs. The majority of stormwater utility managers consider their revenues
to be inadequate to even meet the most urgent needs, or at best, adequate to meet
only the most urgent needs.30
2. Watershed Improvement Districts
To date, watershed improvement districts have not been established specifically for public Gl
improvements. However, municipalities around the country have established special purpose
districts as political subdivisions to provide various water-related services to residential,
commercial, and/or industrial customers. Such districts have been established to provide
public utility services, such as water, sewer, or drainage as well as other services such for
roads, parks, conservation, or hospitals.
30 2014 Stormwater Utility Survey. Black & Veatch. http://bv.com/docs/default-source/management- consulting-
brochures/2014-stormwater-utility-survey
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Watershed improvement districts have been established in states such as Florida (utility
assessment districts), Arizona (community facilities districts), Texas (municipal utility
districts), and California (Mello-Roos Districts). These special purpose districts can impose an
ad valorem or non-ad valorem property tax assessment, a specific user fee, or a combination
of the two on all properties in the district on an ongoing basis to fund O&M expenses, capital
expenditures, and/or district-related debt service.
A watershed improvement district can be set up by a municipality or group of municipalities
to manage any publicly owned Gl projects located within the watershed. The district would be
authorized to finance municipally owned Gl projects and/or fund ongoing O&M expenditures
for these projects. Property owners located within the watershed would be assessed an ad
valorem or non-ad valorem tax levy on their property tax bill or user fee on their utility bill,
which would be remitted to the watershed improvement district to cover O&M expenditures
and any capital or debt service expenditures for Gl projects. The district would be able to enter
into contracts with design and construction companies to design and construct these projects
and maintenance companies (e.g., landscapers) to maintain these projects. It could also hire
professionals to construct and/or maintain these projects without outside contractors.
Examples
The City of Cape Coral, Florida, established several special assessment districts during
periods of rapid growth to fund water, sewer, and irrigation projects for single-family
residential, multifamily residential, and commercial customers in these districts. The city has
used these districts to facilitate the funding of infrastructure in rapidly growing sections
without burdening existing ratepayers in older sections. Non-ad valorem taxes are assessed
on the property tax bills of each property in the district based upon equivalent lot size with a
total maximum assessment rate established per lot for a period of 20 years. Property owners
have the option to make annual payments or prepay the total assessment. In the event of a
payment default, there is a lien on the assessed property that is on parity with any other non-
ad valorem assessments. These revenues are collected to cover the debt service on the
special assessment bonds issued to fund the infrastructure projects plus one percent and the
collection costs of the assessments. For each district, the city enacted a capital improvement
ordinance that established a procedure for the imposition and levying of special assessments
to finance its improvements. No state legislation was required to establish the districts or levy
the special assessments. Bonds issued to fund district capital improvements are secured by
district special assessments as well as a subordinate claim on the revenues of the city's water,
wastewater, and irrigation utility system. These utility system revenues are collected from all
utility customers and are also used for system-wide O&M expenses (including expenses
related to district improvements).31
31 "City of Cape Coral Case Study." NBS. Web. http://www.nbsgov.com/case-study/city-of-cape-coral 32 Urban
Drainage and Flood Control District. Sustainability on a Large Scale. April, 2010.
http://www2.apwa.net/Documents/Advocacy/UDFCD%20Sustainability%20Project.pdf
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The Denver Urban Drainage and Flood Control District (udfcd.org) was established in 1969 by
the Colorado General Assembly to assist local governments in the Denver metropolitan area
with multi-jurisdictional drainage and flood control problems. The district covers an area of
1,608 square miles and includes Denver, parts of six surrounding counties, and all or parts of
33 incorporated cities and towns. The district population is approximately 2.7 million people.
The district is governed by a 23-member board of directors that includes 21 locally elected
officials appointed to the board and two professional engineers selected by the other
members to serve on the board. The district operates with a relatively small staff of 23 full-
time employees and eight part-time college interns and relies upon private consultants and
contractors. This staff manages all project funds, oversees work done by the consulting
engineers, and coordinates local government planning, design, construction and floodplain
management. The district is funded by four different property tax mill levies that are
designated for four programs (master planning; design, construction and maintenance;
floodplain management; and information services and flood warning). The total mill levy
authorized by the state cannot exceed one mill. The largest levy (0.8 mill) is for design,
construction, and maintenance. All design and construction projects implemented by the
board are selected based upon criteria, including (1) the proposed improvements must be
requested by local governments; (2) the proposed improvements must be master- planned;
(3) district funds must be matched by local governments; and (4) local governments must
agree to own completed facilities and must accept primary responsibility for their
maintenance. All design and construction work is contracted to the private sector. Flood
management projects selected provide multiple purposes, including use for parks, open
space, trail corridors, wildlife habitat, and water quality management. Maintenance funds are
used to assist local governments in the Denver area with the maintenance and preservation
of drainage ways. Local governments are not required to match these funds. Maintenance
funds are prioritized first toward district-owned facilities and district-funded projects, then to
projects funded by others, and finally to unimproved urban and rural drainage ways. Money is
allocated to each of the seven counties based upon their contribution of tax revenues to the
maintenance fund.32
Utilization Considerations
Districts have been established in many states for many purposes with or without state
enabling legislation. Local legislation is often required to establish the districts as well as the
type of special assessments and billing and collections procedures. The legislation may also
specify the governance structure for the district (if separate from the city or utility) and
processes for district member input. A new stand-alone operating district will need to hire
management and staff and develop procedures to procure outside vendors (including design,
construction, and maintenance companies). The district will need to establish procedures to
set initial and ongoing assessment levels as well as for billing and collections. For example,
32 Urban Drainage and Flood Control District. Sustainability on a Large Scale. April, 2010.
http://www2.apwa.net/Documents/Advocacy/UDFCD%20Sustainability%20Project.pdf
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the basis for the assessment charge could be an ad valorem property tax, non-ad valorem
property tax, or user fee. It could depend upon the size of the property or assessed valuation,
the type of land use or the amount of impervious area (in the case of a user fee), and it could
provide for an offset for any private property Gl. Depending on the governance structure or
contractual relationships, billing and collections could be done by the district, municipality
(with a line item on the municipal property tax bill), or a utility (with a line item on the utility
bill). If the district boundaries cross multiple municipal jurisdictions, the governance, district
member input, assessment, billing, and collections procedures may be more complex.
Advantages
Special purpose districts provide a stable, dedicated source of revenue for O&M
expenses and capital expenditures.
The fees are assessed on property owners or utility customers in the district who
directly benefit from the Gl projects.
District property owners who install Gl on their properties can receive an offset against
district assessments due to reduced stormwater runoff.
Revenues held by the district are applied to Gl expenditures without any other
competing uses of the funds.
Disadvantages
Smaller and/or poorer special purpose districts may not have the tax or revenue base
needed for Gl O&M and capital spending.
Where there is a lack of public awareness of the need for and benefits of Gl, or the
perception that proposed district assessments are a tax rather than a user fee, there
may be political opposition to special purpose districts.
Resources
http://www2.apwa.net/Documents/Advocacv/UDFCD%20Sustainabilitv%20Proiect.p
df
http://udfcd.org/resources
http://www.eastmark.com/wp-content/uploads/2014/02/EM-CFD-Brochure-Final-
100313.pdf
3. Fee Credits or Discounts for Maintaining Gl 0& \> . i.* < perty
Communities that have implemented stormwater utilities or stormwater management fees
may incentivize the installation of Gl practices on private property through stormwater fee
discounts and credits. Reductions in stormwater fees or credits are provided to property
owners for reducing impervious surfaces, retaining and/or detaining stormwater on-site, or
installing specified Gl practices.
These incentives can apply to the Gl O&M if they provide a means for ensuring or encouraging
proper practices. The following methods are commonly used:
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Requiring access for periodic inspection by the responsible agency.
Limiting fee discounts or credits to a certain time period, making renewal contingent
on providing proof of maintenance (via inspection, photo documentation, etc.).
Examples
Via its Clean River Rewards program, the City of Portland, Oregon, provides stormwater utility
fee discounts of up to 35 percent to residential properties based on the amount of stormwater
that is retained on-site and to commercial/industrial/multi-family properties based on
reductions in pollution, flow rates, and disposal control of stormwater. When an application
for a discount is filed, the property owner must grant the city permission to conduct
inspections of the property with proper notice. If improper maintenance is found to affect the
functionality of on-site stormwater systems, the utility can discontinue discounts until the
property owner remedies the situation.33
The City of Northampton, Massachusetts, provides stormwater fee credits of up to 50 percent
for property owners who install and maintain stormwater best management practices such as
rain gardens. The credit offered for residential rain gardens and permeable pavement expires
after three years, and renewal applications must include proof that the facility is being
maintained and functioning properly. The program does not specify what constitutes proof.
The city also requires that property owners receiving credits allow for on-site inspection at any
time with proper notice.34
Utilization Considerations
To use incentives, a community must have a stormwater fee in place. Depending on state and
local regulations, stormwater fees and credits/incentives may be subject to a ratemaking
process that links the fee and credit program with the public stormwater management
services provided (see section on stormwater utilities/fees on page 15). Since credits reduce
the revenue available to the public entity for stormwater management, consideration should
be given to the portion of fees associated with the management of stormwater runoff from
private versus public property, and the baseline revenue requirements for the managing
entity. For instance, Portland gives credits of up to 35 percent of the stormwater fee because
it has found that 35 percent of stormwater management costs relate to runoff from private
property. Similar to requirements for installing and maintaining Gl on private property, credits
and incentives require significant investments in inspection, enforcement, and education to
be effective.
Advantages
O&M funding is provided by the private sector.
33 ENB - 4.16 Clean River Rewards Stormwater Discount Program. June 2012. Portland Policy Documents],
Portland, Oregon, https://www.portlandoregon.gov/bes/41976
34 City of Northampton. Credit and Incentive Policy for Stormwater and Flood Control Utility. 2015.
http://www.northamptonma.gov/documentcenter/view/4776
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Gl is implemented on private property, which can significantly increase the impact of a
Gl program led by the public sector.
These voluntary mechanisms may avoid possible issues associated with mandatory
requirements, such as privacy and private property rights.
They provide a mechanism for implementing Gl on property that is already developed
(as opposed to requirements, which are typically placed on new development only).
Disadvantages
They reduce the revenue available to the managing public entity for stormwater
management.
Private maintenance may be of inconsistent quality or quantity, with inspection or
requiring proof of maintenance being governments' primary methods of assurance.
Public resources must be made available for inspection, and also likely for outreach,
education, and training for ordinances to be effective.
Resources
Managing Wet Weather with Green Infrastructure Municipal Handbook: Incentive
Mechanisms
This EPA publication provides a review of incentive mechanisms, including several
examples from communities across the country.
https://www.epa.gov/sites/production/files/2015-
10/documents/gi munichandbook incentives O.pdf
Staying Green: Strategies to Improve Operations and Maintenance of Green
Infrastructure in the Chesapeake Bay Watershed
This report by American Rivers provides a discussion of Gl maintenance incentives and
provides examples.
http://www.americanrivers.org/conservation-resource/operations-maintenance-
green-infrastructure/
4. Ordinanc ate Property
To meet the environmental goals of Gl programs, local governments may require the
implementation and maintenance of privately owned and maintained Gl practices on private
property. To the degree that this maintenance is funded by the landowners themselves, these
funds can augment, offset, or replace public expenditures.
Local governments have required the construction and maintenance of stormwater
infrastructure on private property for decades. Examples include retention and detention
basins and infrastructure for stormwater conveyance into the larger municipal system. These
requirements are commonly instituted through ordinances that regulate site development and
that require developers to enter O&M agreements with the local government and/or
incorporate them in conditions, covenants, and restrictions. Enforcement is usually achieved
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through requirements to provide site access for periodic inspection, and/or documentation of
green infrastructure performance/condition by the private entity.
A number of communities are greening these requirements to include green infrastructure
principles and practices, such as requiring full retention of frequent storms on-site, and the
use of surface-level, vegetated stormwater features. The most comprehensive of these
requirements are found in low-impact development ordinances.
Example
The City of Los Angeles instituted a low-impact development ordinance in 2012 that mandates
the use of Gl features to retain, filter, and infiltrate stormwater on-site on the majority of
private projects (as well as city projects). During the plan submittal process, each project
subject to the ordinance must submit a covenant and agreement, signed by the property
owner, that indicates the owner's responsibility and commitment to maintain the Gl features
over the long term. The covenant and agreement is submitted with an O&M plan that includes
types and frequency of maintenance that will be performed, training procedures for staff, and
other details. The owner must agree to keep a maintenance log on- site and provide access
to the city for inspection of the facilities for the life of the project. These documents are bound
to the property and become the responsibility of the new owner if the property is sold.35
Utilization Considerations
Private property owners in essence become partners in maintaining a community's Gl. Most
local leaders would agree that this is desirable; however, serious consideration should be
given to how prepared governments are to inspect and enforce maintenance agreements with
potentially thousands of new partners. Gl maintenance may also present technical challenges
that are not familiar to the vast majority of property owners. Significant and ongoing
investments may need to be made in education and training that are not needed with
government-maintained infrastructure.
Advantages
O&M funding is provided by the private sector.
Gl is implemented on private property, which can significantly increase the impact of a
Gl program led by the public sector.
Some existing development can be captured by ordinances if they include
requirements of significant redevelopment projects.
Disadvantages
Does not address Gl implementation and maintenance on developed property (for the
most part), which constitutes the vast majority of land in most communities.
35 City of Los Angeles Department of Public Works, City of Los Angeles, and Watershed Protection Division.
Development Best Practices Handbook. 4th ed. 2011. http://www.lastormwater.org/wp-
content/files_mf/lidhandbookfinal62212.pdf
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Private maintenance may be of inconsistent quality or quantity, with inspection being
governments' primary method of assurance.
Public resources must be made available for inspection, and are also likely for
outreach, education, and training for ordinances to be effective.
Resources
Stormwater Control Operation & Maintenance
EPA maintains this website, which includes a model stormwater ordinance and several
sample Gl O&M agreement
http://water.epa.gov/DOlwaste/nps/stormwater.cfm
5. Conservation Land Trusts
Land trusts, also called land conservancies or conservation land trusts, have been in
existence since 1891. There are more than 1,500 land trusts operating in every state.
Conservation trusts are established to preserve sensitive natural areas, farm and ranch lands,
water sources, and cultural resources. Land trusts can be large, such as The Nature
Conservancy, or smaller organizations that operate on a state, county, or community level.
Often, conservation trusts preserve lands adjacent to existing protected areas; however, land
with other natural or cultural values is also a candidate for protection. It is up to each trust to
determine, according to its mission, what type of land to protect. A conservation land trust
could readily be used to protect land used for Gl.
As nonprofits, land trusts rely on donations, grants, and public land acquisition programs for
operating expenses and for acquiring land and easements. Donors often provide monetary
support in the form of a grant or an endowment to fund the ongoing O&M of the conservation
land. The structure of an endowment is discussed in the ecosystem services section of this
report on page 30. Some land trusts also receive funds from government programs to acquire,
protect, and manage land. Land trusts use a variety of strategies to provide conservation
protection. These include:
Acquisition: Outright acquisition of the land by the trust at the market price allows the
trust to control the land in perpetuity for conservation purposes.
Donation of Land: Donation of land to a land trust allows the taxpayer to deduct the
value of the land from taxable income. Gifts to a public charity allow the taxpayer to
deduct the fair market value of the land. Gifts to a private foundation allow the taxpayer
to deduct the cost basis of the land.
Purchase of Conservation Easement: In some cases, the land will remain in private
hands, but the trust will buy a conservation easement on it to prevent development.
Donation of Land or Easement. It is not uncommon for conservation-minded
landowners to donate an easement on their land or the land itself. Conservation
easements allow private landowners to permanently retire development rights to all or
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part of their property to protect significant natural resources. Easements maintain the
land under private ownership. This keeps the land on local property tax rolls, thus
providing income to the local government. Future owners are also bound by the terms
of the conservation easement. Each conservation easement is crafted to meet the
needs of the landowner while notjeopardizingthe conservation values of the land. The
land trust is responsible for monitoring the land to ensure that the easement's terms
are followed.
Bargain Sale: A landowner sells a property interest to an organization for less than the
market price. The amount of value between the market price and the actual sale price
is considered a donation to the organization. The donation is deductible at fair market
value for gifts to public charities, and at cost basis for gifts to private foundations.
Charitable tax incentives such as these can be critical incentives for conservation
easements.
In the case of Gl O&M, existing or new conservation land trusts could purchase and/or accept
donations for land or easements to be used for Gl. These trusts would maintain or monitor
the condition of the Gl over time, depending on terms of the easement. Gl mandated by
regulation might require the owner of the easement to maintain it with private funds, whereas
a voluntary Gl easement might require the trust to maintain the land, possibly using the
property tax revenue collected on the easement property. Trusts that own land or easements
outright would be responsible for infrastructure O&M. In this situation, the donor of the land
or easement could include O&M funds with the donation and receive a charitable tax credit.
Utilization Considerations
This existing tool has not, to our knowledge, been used yet with a formal Gl program. However,
it merits consideration as a way to bring both monitoring and maintenance expertise and
charitable tax credits to the Gl O&M toolkit. Since many land trusts struggle to meet the O&M
costs of the lands they own and manage, the source of O&M funds should be established
upfront if used for Gl.
Advantages
Land trusts can be excellent partners for local governments in maintaining Gl. Land trusts can
and do monitor the O&M of conservation easements that remain in private hands and
maintain Gl on lands held by the trust or on voluntary easements. Trusts must comply with
local regulations related to Gl.
Disadvantages
Disadvantages are few, although government entities would be required to coordinate with
the land trusts within their jurisdiction concerning the development (if needed) or enforcement
of relevant municipal regulations.
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6, Property Assessed Green infrastructure (PAG!) Programs
These are a proposed mechanism similar to property assessed clean energy or PACE program.
Like a watershed improvement district, this PAGI funding mechanism would be a district
established for improvements owned by private property owners, and all participation by
owners in the district would be voluntary. While this mechanism has not yet been used for Gl,
it has been used by communities to fund solar energy systems for residential homeowners
and commercial establishments.
A utility or municipality could establish a district, which would assist private property owners
interested in making Gl improvements to their properties with the district's involvement. By
definition, any property owners that self-fund Gl capital as well as O&M expenditures would
not be in the district. The district could be involved in funding participants' Gl improvements
with district debt and/or the district could be involved in managing the O&M of the
improvements. District participants would benefit from economies of scale cost savings, and
the utility or municipality would benefit by ensuring that Gl benefits are achieved upfront and
maintained over time.
There are several possible governance models for such a district. One model would be for the
district to be a public agency established by a utility or municipality. It would have professional
governmental administration to ensure ongoing billing and collections, any operator and debt
service payments, and environmental compliance. However, a non- binding advisory board
could be established by the district with participating private property owner representation.
In this case, there could be a separate district charge on utility bills or property tax bills.
Another model could involve the management of the district by a nonprofit environmental
organization or business improvement district with district advisory board representation by
relevant utility, municipality, participating private property owners, and other stakeholders.
The nonprofit organization or business improvement district would handle billing, collections,
and operator payments. The utility or municipality would have oversight responsibility to help
ensure ongoing environmental compliance. Property owners could be billed by the district for
any capital and/or O&M expenses related to improvements. For certain utilities, any district
assessments could be offset by reduced property owner stormwater impervious area charges.
A utility or municipally established district could issue taxable bonds on behalf of the district
to fund capital improvements for property owners that elect to borrow for improvements in
the district. Property owners could enter into contracts with district-approved construction
contractors to make improvements. The district would enter into maintenance agreements
with the property owners specifying required O&M activities, their frequency, and inspection
and reporting requirements. The district could also contract with maintenance companies to
maintain the improvements and fund the ongoing O&M expenses with an added assessment
(which would be recognized under the property owners' maintenance agreements). Subject to
statutory authority and any prior lien pledges to other creditors, unpaid capital and O&M
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assessments could potentially be enforced by the utility or municipality on behalf of the district
with service shutoff or tax liens on the property, respectively.
To the extent that property owners finance and construct their Gl improvements, they still
could join the district to take advantage of the economies of scale by using the district's
maintenance company. The district assessment in this case on the utility or property tax bill
would only be for contracted ongoing O&M expenses as well as any district administrative
costs. The district would contract with the maintenance company to do the work according to
certain performance standards. There would be annual inspections of the properties by the
district (or municipality or utility) to confirm compliance with the contract.
Examples
The City of Berkeley, California, was the first community in the country to establish a property
assessed clean energy (PACE) program for solar installations. In November 2007, the
Berkeley City Council created a sustainable energy financing district into which property
owners who wanted to install solar systems could annex themselves. The Berkeley program
requires the property owner to hire a city-approved solar installer who determines the best
solar installation for the property. The city pays the contractor for the system and installation,
less any applicable state and federal rebates, and adds an assessment to the property
owner's tax bill to pay for allocable debt service and administrative fees pursuant to a loan
agreement. Energy savings from the solar installations help cover the assessment costs. The
20-year amortizing loan to the property owner attaches to the property, so if the property is
sold, the new owner assumes the loan and any assessment payments due on it. The district
is authorized to issue bonds whose proceeds finance the upfront costs of photovoltaic solar
systems.
Since this program was implemented, 31 states and the District of Columbia have passed
legislation supporting PACE financing. Commercial PACE financing has been the primary focus
of lenders around the country. Residential PACE financing went into a hiatus in 2010 when
the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to stop
underwriting mortgages for homeowners in the program because PACE loans take priority over
home mortgages if a property owner defaults or moves. Residential PACE was recently
restarted in California. To alleviate FHFA concerns, the state set up a loan loss reserve fund
to backstop defaults, set minimum credit requirements for participating homeowners, and is
collecting and evaluating data on PACE loan performance. In addition, the Federal Housing
Administration (FHA) has now provided guidance under which it will approve mortgages on
properties that include PACE assessments. The FHA will approve purchase and refinance
mortgage applications in states that treat PACE obligations as special assessments similar to
property taxes.
Utilization Considerations
Like PACE, it is expected that PAGI may require state enabling legislation to establish these
types of districts, including their governance structures. Local legislation may also be needed
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to establish the type of district assessments as well as the billing and collections procedures
(particularly if they are on municipal or utility bills). Depending on the governance structure or
contractual relationships, billing and collections could be done by the district, by a municipality
(with a line item on the municipal property tax bill) or by a utility (with a line item on the utility
bill). If the district boundaries cross municipal jurisdictions, governance, member input,
assessment, billing, and collections procedures may be considerably more complex.
PAGI projects, as well as O&M requirements, will vary considerably, based on the type of
property involved compared to PACE projects. Solar residential projects tend to be more
homogeneous. PAGI project diversity and O&M needs increase a district's operating
complexity.
Advantages
Special-purpose districts provide a stable, dedicated source of revenue for O&M and
capital expenditures.
Fees are assessed on property owners or utility customers in the district who directly
benefit from the Gl projects.
Revenues held by the district are applied to Gl expenditures without any other
competing uses of the funds.
Economies of scale for Gl O&M can help lower the cost to the property owners
participating in the program.
Disadvantages
As a voluntary mechanism, limited property owner interest could result in lower
economies of scale funding benefits of contracted Gl O&M or capital spending.
It will most likely require state legislation to enable the establishment of PAGI districts.
PAGI project O&M activities may vary considerably from property to property, increasing
the complexity of implementing district-wide activities.
Resources
http://www.greentechmedia.com/articles/read/Whv-Residential-PACE-ls-Growing
http://www.nrel.gov/docs/fvl0osti/47097.pdf
http://www.pacenow.org/resources/all-programs/
http://www.ci.berkelev.ca.us/berkelevfirst/
https://en.wikipedia.org/wiki/PACE financing
7. Water Funds
Water funds are a mechanism for aggregating dedicated funds and then distributing them
according to a water quality/watershed objective. The use of a fund for financing or paying for
a service is not a new concept. However, its application to water quality restoration and
conservation activities is relatively new. Best known for success in Latin American under The
Nature Conservancy's guidance, water funds have been a mechanism for:
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collective and innovative decision-making among water-related sectors;
diversification of private and public funding streams and/or donors;
sustaining a balance of natural and built infrastructure;
allocating resources and watershed benefits more equitably.36
To date, the primary sources of capitalization for water funds are user fees from drinking water
enterprise programs. Additional funds may come from state, local, or federal grants and
philanthropic contributions. Tax-supported funds will become more common when the water
fund concept expands to other water issues such as stormwater management.
Water funds provide a means of overcoming institutional barriers that impede or prevent
pooling and transfer of resources among private and public entities. In a review of 22 Gl
projects, EPA found that 36 percent had shared private-public involvement.37 The private
sector managed 23 percent of the projects, with municipal entities responsible for the
remaining 41 percent. With initiatives focused on increasing private sector engagement,
economic theory suggests that significant efficiency gains could be realized through pooling
and sharing resources to undertake Gl O&M activities across a region. Since they can be
organized to serve a watershed or region, typically under the management of a nonprofit
organization specializing in water restoration and protection, water funds offer one
mechanism to capitalize on this efficiency potential.
Examples
The use of water funds is relatively limited in the United States. The Nature Conservancy
established the Rio Grande Fund serving central and northern New Mexico to focus on forest
management needs, centering the fund's activities on the control of large fires and the
maintenance of waterway health. The fund is capitalized by a combination of federal, state,
and county monies and charitable contributions from foundations and business. The Pinchot
Institute established a voluntary fund in 2011 focused on the Upper Delaware River Basin.
The fund has a private endowment, the U.S. Endowment for Forestry and Communities, Inc.
While not dedicated to water activities, similar models have been developed - most frequently
by enterprise funds and utilities - to manage discrete restoration or conservation initiatives.
Enterprise fund projects are operated as self-sustaining, fee-driven programs, functioning
outside public financing and budgeting systems. Alternatively, as in the case of the Rio Grande
Fund, public and private entities may come together to capitalize funds established by
nonprofit institutions.
The primary purpose of existing water-related funds has been to support watershed
restoration and protection. To date, the assumption has been that such watershed
investments need to occur outside the traditional infrastructure financing system set in place
36 Natural Capital Project. Water Funds in Latin America: Prioritizing Investments in Watershed Services. Accessed
4/19/15 at http://www.naturalcapitalproject.org/pubs/WaterFunds_Brochure.pdf
37 Ibid.
40
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by the local water system due to the need for technical expertise in watershed restoration
project management. The concept of a water fund is, therefore, also well suited to addressing
the challenges involved in meeting the capital, O&M, and other needs associated with Gl.
Utilization Considerations
Efficiency and Cost-effectiveness: A key consideration in establishing a water fund is efficiency
and cost-effectiveness. Water purveyors will set up funds if and when it can be demonstrated
that investments in watershed restoration and protection outweigh investments in treatment
technology. The same is true for other water resource issues such as stormwater
management. Urban communities will consider supporting waterfunds when the investments,
often outside their jurisdiction, can be demonstrated to be the most cost effective and
economically beneficial approach to address local stormwater management needs.
Geographic Scope: The water fund should be sized to serve the appropriate geographic area.
In many cases, a fund would need to operate throughout a watershed or other region to
maximize environmental and operational benefits.
Expertise: Whether intended for watershed restoration and protection or stormwater
management, the entity charged with administering a water fund needs to have personnel
with the appropriate technical, financial, and project expertise. Strong governance, financial
controls, and good asset management practices are needed as well.
Business Plan: If it is to become self-supporting over time, the water fund needs a viable
business model and plan.
Advantages
Flexible organization
Economies of scale
Ability to leverage resources from a variety of financing sources, including federal,
state, and local government and philanthropic sources.
Disadvantages
Financial benefits may be difficult to document.
Political viability can be challenging when operations involve multiple jurisdictions.
Concept is new to the Gl space.
,1 josystem Service Payments
Ecosystem service payments can be used to finance Gl O&M over the long term. These
payments can be used to capitalize an endowment fund in which the corpus is preserved and
the interest applied for future O&M expenses. Ecosystem service payment programs monetize
the benefits derived from ecosystems, including carbon sequestration, water quality
maintenance, and the preservation of wildlife habitats and biodiversity. Ecosystem service
payment programs can be structured in a number of ways:
41
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Public Payment Programs: Under public payment programs, federal, state, or local
governments pay private landowners for conserving or enhancing ecosystems. The
U.S. Department of Agriculture's Conservation Reserve Program, established in 1985,
makes annual rental payments to farmers to remove environmentally sensitive land
from agricultural production and to plant species that will improve environmental
quality. Contracts are 10 to 15 years in length and have been used to improve water
quality, prevent soil erosion, and reduce loss of wildlife habitat. Additional public
payment programs are managed by the Department of Agriculture, the Department of
the Interior, and state governments.38 Where applicable, state and local governments
may want to work with eligible landowners to encourage participation in public
payment programs to finance Gl O&M.
Voluntary Transactions: Voluntary transactions include the sale of carbon offset
credits, the purchase of hunting leases by private individuals, the payment of entrance
fees for wildlife viewing and hunting, and the purchase of conservation easements.
(See section 5 on Conservation Land Trusts for a more detailed examination of the use
of conservation easements.) Voluntary transactions are typically executed between
private parties and/or nongovernmental organizations.39 Local and state governments
could also levy entrance fees for wildlife viewing and hunting on public land; these fees
could be applied to meeting the O&M costs of associated Gl.
Compliance-Driven Transactions: Compliance-driven transactions are markets and
payment mechanisms established in response to government regulation, including
mitigation banking, conservation banking, and carbon offset markets set up under
regional cap-and-trade programs.40 Compliance-driven transaction structures provide
government entities with clear-cut mechanisms to finance Gl O&M costs. An example
can be found in mitigation banking. Mitigation banks are created to offset adverse
impacts to nearby wetlands, streams, and or wildlife habitats, as required by Section
404 of the Clean Water Act. Mitigation bank activities are governed by 2008
regulations issued jointly by the U.S. Army Corps of Engineers and the Environmental
Protection Agency.
Example
U.S. Army Corps of Engineers Mitigation Banking Program: The most prominent U.S. mitigation
banking program is run by the Army Corps of Engineers. Developers of projects that the Corps
of Engineers determines to adversely impact a sensitive ecosystem are required to purchase
credits at a nearby mitigation bank to offset their impact. Established in 1992 with 46
mitigation banks, the Corps' mitigation banking program has grown rapidly. A 2005 Corps
inventory estimated the number of banks at 450, of which 59 (13.1 percent) had sold out of
38 D. Evan Mercer, David Cooley, Katherine Hamilton, Taking Stock: Payments for Forest Ecosystem Services in the
United States, Forest Trends Ecosystem Marketplace, February 2011, pp. 3, 5, 41-45.
39 D. Evan Mercer, David Cooley, Katherine Hamilton, Taking Stock: Payments for Forest Ecosystem Services in the
United States, Forest Trends Ecosystem Marketplace, February 2011, p. 3.
40 Ibid., p. 3.
42
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credits, with 198 banks in the proposal stage.41 By December 2014, the number of approved
mitigation banking sites had grown to 1,428, encompassing 870 square miles of protected
land, and 303 bank proposals were under consideration by the Corps. Mitigation banks,
implemented in most states, are most prevalent in the Corps' South Atlantic and Mississippi
Delta regions.42
Corps mitigation banking programs have four components:43 1.) the bank site or physical
acreage to be restored, established, enhanced, or preserved; 2.) the bank instrument or the
formal agreement between the bank owners and regulators establishing liability, performance
standards, management and monitoring requirements, and the terms of bank credit approval;
3.) the interagency review team (chaired by the Corps) of federal, state, local and/or tribal
authorities that provide regulatory review, approval, and oversight of the bank; and 4.) the
service or geographic area in which permitted impacts can be compensated for at the bank.
Most Corps mitigation banks are commercial mitigation banks, which sell credits to project
developers throughout a service area. These commercial programs represented 80 percent
of protected land area as of December 2014. Eighty-eight percent of commercial mitigation
banks are sponsored and managed by private, for-profit organizations. The remainder are
sponsored and managed by state and/or local governments, by private nonprofit
organizations, or through joint public-private initiatives.44 Twenty percent of land area in the
Corps mitigation banking program is protected under programs run by single-user banks,
which sell credits to a sole company or government agency. Most single-user banks sell credits
to mitigate the impact of road and highway projects.45
The number and pricing of credits issued to a mitigation bank is negotiated between the
bank's sponsor and the interagency review team regulators responsible for bank oversight.
The number and pricing of credits are typically linked to the quantity and quality of ecosystem
resources that can be restored, established, enhanced, or preserved through the mitigation
banking program. Potential credits are identified through a site design program and quantified
on the basis of affected acreage or other reliable measure. Credits are released to project
developers as performance-based mitigation activities are completed.46
Considerations in Utilizing Ecosystem Service Payments:
An appropriate and reliable revenue stream must be identified:
Revenues must be set aside sufficient to fund all or part of the Gl O&M program.
41 U.S. Environmental Protection Agency, Status of Mitigation Banking.
42 Forrest Vanderbilt, Steven Martin, David Olson, The Mitigation Rule Retrospective: A Review of the 2008
Regulations Governing Compensatory Mitigation for Losses of Aquatic Resources, Institute for Water Resources,
U.S. Army Corps of Engineers, U.S. Environmental Protection Agency, October 2015, p. 59.
43 U.S. Environmental Protection Agency, What is a Mitigation Bank?
44 Vanderbilt, Martin, Olson, p. 64
45 Ibid., p. 65.
46 Washington State Department of Ecology, U.S. Army Corps of Engineers, Credit Guide for Wetland Mitigation
Banks, February 2013, pp.2-9.
43
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Compliance-based systems, which link payments to site restoration, establishment,
enhancement or preservation activities, must develop quantifiable, performance-
based measures to guide program operation.
If using a compliance-based system, the program sponsor needs the technical
expertise to design and manage the program in partnership with regulators.
Advantages of Utilizing Ecosystem Service Payments:
Public payment programs may enable private landowners to undertake Gl O&M
activities, by identifying government financing.
Voluntary transaction programs may identify additional streams of fee revenues for Gl
O&M.
Compliance-based payment systems establish revenue streams linked to the
fulfillment of environmental objectives, including O&M.
Disadvantages of Utilizing Ecosystem Service Payments
Local governments may find it difficult to identify and capture reliable payment
streams.
Program effectiveness may require reliable forecasts of O&M costs.
Significant technical expertise may be required to design and manage the program,
especially if quantifiable performance metrics are required.
9. Endowments (used in conjunction \ osystem service payments or other dedicated
revenue stream)
Endowments are used in combination with ecosystem service payments to set up a fund in
an amount sufficient to finance future Gl O&M requirements. To succeed, the payment stream
backing the endowment must be large enough to ensure O&M payments in future years.
In running its mitigation banking program, the Corps often requires that a portion of credit
sales (either by an amount per credit or as a percentage of gross sales) be made to an
endowment to pay for future O&M costs. The establishment of an endowment for long-term
maintenance of a mitigation site is an appropriate function of a mitigation banking program.
The endowment can be managed by the mitigation bank, if provided for in the bank's initial
agreement with the Corps, or can be turned over to an organization charged with permanent
site maintenance after completion of the mitigation program.47
Frequently, endowments are set up in an interest-bearing account with protections against
running down the corpus. The following table demonstrates how endowments generally work.
The base case assumes that 20 percent of gross revenues from credit sales is placed in an
endowment for a 10-year period, earning 5 percent annual interest. The endowment is drawn
down in $30,000 increments over the subsequent 90 years to fund O&M expenses.
47 Wetland Mitigation Banking Guidebook for Oregon, First Version, October 2000, pages 4-2, 4-7.
44
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Figure 1: Base Case
% Gross Revenue
Reserved
20%
Assumed Nominal
Interest Rate
5%
Cash Flow without Endowment
Gross Credit Revenues
Operating Costs
Total Net Cash Flow
!RR
$230,000
33%
$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
($200,00) $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
Cash Flow with Endowment
Gross Credit Revenues
Operating Costs
Contribution to
Endowment
Contribution by
Endowment
Total Net Cash Flow
IRR
Endowment
Beginning Balance
Interest $129,452
Contributions $200,00
Withdrawals ($270,000)
Ending Balance
$500,000
21%
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$20,000
$1,000
$20,000 $20,000
$0
$20,000
$0
$41,000
$41,000
$2,050
$20,000
$0
$63,050
$63,050
$3,153
$20,000
$0
$86,203
$4,310
$20,000
$0
$110,513 $136,038 $162,840 $190,982 $220,531 $251,558 $234,136 $215,843 $196,635 $176,466 $155,290 $133,054 $109,707
$5,526
$20,000
$0
$6,802
$20,000
$0
$8,142
$20,000
$0
$9,549
$20,000
$0
$11,027
$20,000
$0
$12,578
$0
$11,707
$0
$10,792
$0
$9,832
$0
$8,823
$0
$7,764
$0
$6,653
$0
$5,485
$0
$85,192
$4,260
$0
($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
$86,203 $110,513 $136,038 $162,840 $190,982 $220,531 $251,558 $234,136 $215,843 $196,635 $176,466 $155,290 $133,054 $109,707 $85,192 $59,452
The critical variables are (1) the total amount or level of credit sales versus the expected O&M costs; (2) the expected interest
rate of the endowment; and (3) amount of corpus preserved.
Lowering the contribution amount will negatively impact the amount available for future O&M costs. In Figure 2 below, only 10
percent of gross revenues are put in the endowment, versus 20 percent in the base case. As a result, interest earned on the
corpus is not enough to support expected O&M costs (see the negative value in the highlighted cell in the bottom right).
45
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Figure 2: Lowering the Contribution
% Gross Revenue
Reserved
10%
Assumed Nominal
Interest Rate
5%
Cash Flow without Endowment
Gross Credit Revenues
Operating Costs
Total Net Cash Flow
!RR
$230,000
33%
Cash Flow with Endowment
Gross Credit Revenues
Operating Costs
Contribution to
Endowment
Contribution by
Endowment
Total Net Cash Flow
/RR
Endowment
Beginning Balance
Interest
Contributions
Withdrawals
Ending Balance
$600,000
21%
$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
($200,00) $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
$34,327
$100,00
($270,000)
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($10,000)
($10,000)
($10,000)
($10,000)
($10,000)
($10,000)
($10,000)
($10,000)
($10,000)
($10,000)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
$60,000
$60,000
$60,000
$60,000
$60,000
$60,000
$60,000
$60,000
$60,000
$60,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$10,000
$20,500
$31,525
$43,101
$55,256
$68,109
$81,420
$95,491
$110,266
$125,779
$102,068
$77,171
$51,030
$23,581
($5,240)
($35,502)
($62,277)
($100,641)
$0
$500
$1,025
$1,576
$2,155
$2,763
$3,401
$4,071
$4,775
$5,513
$6,289
$5,103
$3,859
$2,551
$1,179
($262)
($1,775)
($3,364)
($5,032)
$10,000
$10,000
$10,000
$10,000
$10,000
$10,000
$10,000
$10,000
$10,000
$10,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
$10,000
$20,500
$31,525
$43,101
$55,256
$68,019
$81,420
$95,491
$110,266
$125,779
$102,068
$77,171
$51,030
$23,581
($5,240)
($35,502)
($67,277)
($100,641)
($135,673)
If interest rates are higher than expected, then too much corpus is reserved and capital, which could go toward other improvement
projects, is not efficiently allocated. In Figure 3 below, see how the corpus is oversized versus expected O&M costs (see the
positive value in the highlighted cell in the bottom right). Alternatively, if interest rates are lower than expected over the life of the
endowment, interest earned would be inadequate to pay for expected O&M costs.
46
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Figure 3: Actual Interest Rate Exceeds Projected Interest Rate
% Gross Revenue
Reserved
20%
Assumed Nominal
Interest Rate
7%
Cash Flow without Endowment
Gross Credit Revenues
Operating Costs
Total Net Cash Flow
!RR
$230,000
33%
Cash Flow with Endowment
Gross Credit Revenues
Operating Costs
Contribution to
Endowment
Contribution by
Endowment
Total Net Cash Flow
/RR
Endowment
Beginning Balance
Interest
Contributions
Withdrawals
Ending Balance
$500,000
21%
$129,452
$200,00
($270,000)
$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
($200,00) $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000) ($30,000)
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$100,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
($20,000)
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$20,000
$41,400
$64,298
$88,799
$115,051
$143,066
$173,080
$205,196
$239,560
$276,329
$265,672
$254,269
$242,068
$229,013
$215,043
$200,097
$184,103
$166,991
$0
$1,400
$2,898
$4,501
$6,216
$8,051
$10,015
$12,116
$14,364
$16,769
$19,343
$18,597
$17,799
$16,945
$16,031
$15,053
$14,007
$12,887
$11,689
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$20,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
($30,000)
$20,000
$41,400
$64,298
$88,799
$115,015
$143,066
$173,080
$205,196
$239,560
$276,329
$265,672
$254,269
$242,068
$229,013
$215,043
$200,097
$184,103
$166,991
$148,680
In sum, it is important that the corpus is appropriately sized. For the corpus to be adequate, the expected O&M costs must be less
than the interest earned during the period under consideration. While there is a sacrifice in the internal rate of return associated
with a stream of public revenues, endowments can allow for the long-term sustainability of Gl projects.
Considerations in Using Endowments
An appropriate and reliable revenue base or revenue stream must be established to capitalize the endowment.
Sound forecasting of future contributions, O&M expenditures, and interest rates is required.
An investment program must be set up to lock in the desired yield over the life of the endowment.
47
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Advantages in Using Endowments
Service payments are related to environmentally beneficial outcomes, such as the
establishment of a Gl infrastructure system.
Funds for Gl O&M payments are set aside in advance.
Interest income helps to pay future maintenance costs. If the corpus is large enough
relative to expenses, long-term O&M might be financed entirely from interest income.
Disadvantages in Using Endowments
The forecasting of service payment revenues, O&M expenses, and/or interest rates
may not prove sufficiently accurate to deliver the needed level of O&M payments.
Endowment funds are purpose-restricted; the build-up of excess capital in the
endowment might result in inefficient capital allocation over time.
10. Philanthropic and Federal Grants Philanthropic Grants
Philanthropic grants can supply additional financial and programmatic support for the
operation and maintenance of Gl. Key resources for identifying appropriate organizations are:
Foundation Center: The Foundation Center maintains databases for identifying
appropriate philanthropic organizations and grants. The Foundation Center's
databases can be used online for a monthly fee ($49.99 as of mid-2015), or without
charge at a Foundation Center regional office in Atlanta, Cleveland, New York, San
Francisco, or Washington, D.C.
Funding Information Network: The Funding Information Network is a network of
libraries, community foundations, and other nonprofit resource centers that can be
found across the country and around the world. Network partners provide a suite of
tools and resources consisting of Foundation Center databases, publications, and a
variety of supplementary materials and services in areas useful to grant seekers.
Guidestar. Guidestar maintains an online directory of charities and nonprofit
organizations, organized by subject matter. Areas covered include organizations
dedicated to environmental and public benefit causes.
National Directory of Nonprofit Organizations: The National Directory of Nonprofit
Organizations, maintained by the Gale Group, is an online searchable database that
identifies nonprofit organizations. The database can be searched by keyword, location,
and other criteria. Several nonprofit and philanthropic ventures in the directory
relevant to Gl are identified below for illustrative purposes.
ACTrees: A national nonprofit organization dedicated to building the capacity of its
members to plant, sustain, and advocate for trees in America's communities. Working
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with grassroots member organizations and network partners in the United States and
Canada, ACTrees engages volunteers to take action to improve the environment where
more than 90 percent of people live and work: in cities, towns, and metropolitan areas.
Together local ACTrees member organizations have planted and cared for more than
15 million trees in cities with the help from more than 5 million volunteers. ACTrees
offers grants, awards, and other funding opportunities as benefits of membership. The
programs of ACTrees can be combined with municipal efforts to develop, replant, and
extend areas dedicated to Gl.
Arbor Day Foundation: The Arbor Day Foundation is a national conservation and
education organization dedicated to encouraging tree planting in communities
throughout the United States. The Foundation's Strategic Tree Planting Initiative is a
project funded by the U.S. Forest Service Urban and Community Forestry program and
administered in partnership with the Forest Service, the National Association of State
Foresters, and state forestry agencies. The initiative is designed to stimulate public
participation and awareness to support strategic tree planting by participating utilities.
The intent is to grow utility company investment and community involvement in
strategic tree planting for carbon sequestration and energy conservation. Eligible
grantees include municipalities, state agencies, and IRS-designated charitable or
education organizations. Grants can be used to spread the word about trees available
through the Energy-Saving Trees program, support the distribution of trees in the
community, and provide participating homeowners with information on proper tree
care. Grantees must be located in the service area of a participating utility.
SAGE (Stormwater Alternatives through Green Enhancement): This is a donation-
funded program to install and maintain Gl in the Chesapeake Bay watershed. Started
in Lynchburg, Virginia, in 1990 by a landscape architect, SAGE took a 10-mile stretch
of a dreary four-lane expressway and turned it into a green oasis using business
donations to pay for installation and maintenance gardens on the right-of-ways with
tasteful sponsorship signs located in the fauna and flora of the beautifully designed
gardens. Maintenance costs are set aside as part of donations to ensure appropriate
upkeep. The program was approved by the Virginia State Highway Administration and
recently copied in Hampton, Virginia, to become part of its stormwater program.
Funding for the Hampton SAGE program comes from local businesses and special
interest groups wishing to invest in the aesthetic improvements of local streets and
roads and improve stormwater quality. The program is being modeled in Baltimore.
Federal Grants
A broad spectrum of federal grants can be used to support local programs to operate,
maintain, and expand or improve Gl. Grantee eligibility varies by program but typically includes
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government entities, native tribes, and nonprofit organizations that develop and administer
programs of community benefit.
Local governments and their partners should also consider other grant sources, including
state and foundation grants, to support Gl. Many states provide grant funding to local
governments with money derived from EPA's Clean Water Act Section 319 program, which
supports a wide variety of activities to control nonpoint source pollution, including technical
assistance, financial assistance, education, training, technology transfer, demonstration
projects, and monitoring to assess the success of specific nonpoint source implementation
projects. Tribal governments and territories are also eligible for Section 319 support.
The Catalog of Domestic Federal Assistance and Grants.gov are the key databases for local
governments that wish to identify and apply for federal grants. Users can search both
databases on the basis of relevant search functions and keywords.
The Catalog of Domestic Federal Assistance organizes results by agency and program,
and covers all forms of federal financial assistance, including grants.
Grants.gov permits users to identify, apply for, and track the progress of grant
applications online.
A summary of key federal grants that can be used to support Gl O&M appears in the following
Federal Grant Program Table. A select number of the many federal grants that might be used
to support Gl infrastructure O&M programs are described in the Appendix. This number can
be expanded with further research.
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Table 1: Federal Grant Programs
J"
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Grant Program
Agency
**A S&ffi/M
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Utilization Considerations
Winning and managing grants requires significant planning and expertise. Local governments
and partner organizations applying for grants will typically require a dedicated employee or
specialized contractor to prepare the grant application or, for larger communities and their
partners, a larger team. Local governments and their partners will be expected to document
need, anticipated program results, and outcomes associated with the grant. Grantees will also
be expected to demonstrate their capabilities to manage the grant during the award term.
Each granting agency or organization has specific guidelines and criteria that must be met
during the application process. One final important point to note is that the failure to meet
such guidelines and criteria is likely to be a factor in application rejection, regardless of the
inherent worth of the proposal.
Advantages
Federal and other grants supplement local revenues and do not require repayment.
Grants can often be used to leverage additional grant funding or financing, including
federal, state, and foundation grants. Private and nonprofit partners may also be able
to obtain loan financing to supplement the capital raised from grants.
The pursuit of grants may encourage local governments to develop beneficial
partnerships with foundations, nonprofit organizations, and the business community
in the creation of effective Gl initiatives.
Disadvantages
A major drawback for many applicants can be the time and dedication needed to
complete a grant application. It can easily take more than 30 days if done properly.
Because the grant process can be extremely competitive, there is never a guarantee
of an applicant winning an award. This leads to considerable uncertainty for the
potential grant recipient.
A single grant may be inadequate amount to fully support the desired program,
requiring the applicant to locate additional sources of funding or financing. In some
cases, applicants must demonstrate their ability to secure matching funds or, on a
contingent basis, loan financing to win an award.
. , m ate Equity Capital: Public Private Partnerships (P3s) and Community Bas < 1 otic
ite Partnerships (CBP3s)
Public-private partnerships, also known as PPPs or P3s and referred to as P3 in this paper,
are business relationships in which a government entity enters into a long-term contract
(typically with private enterprise) to deliver a public facility or service. As shown in Figure 4,
such arrangements can be organized through a variety of transaction structures and arrayed
on a spectrum from complete public ownership and control (at the left) to complete private
ownership and control (at the right).
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Figure 4: Public-Private Delivery Model Spectrum
Public Ownership/Control
Put>lkPrtuปtซ Partnership Prh,.t. Contr-I/O^r-*,
Design-Build-Finance-Maintain (DBFM) and Design-Build-Finance-Operate-Maintain (DBFOM)
P3 models could be especially useful for designing, developing, financing, and maintaining
required Gl and, if needed, operating a Gi program to provide ongoing services to private
property owners on behalf of local government. Under these models, a private contractor or
consortium of contractors would supply the financing and would earn its long- term return
from contract payments from the local government. This approach bundles design,
development, maintenance, and, if desired, other operating activities in a single contract,
thereby integrating project delivery with long-term financing. The theory behind P3s is that
integrated long-term project delivery and financing will enhance value-added service delivery
and create economies that minimize some costs to the public sector.
P3 contracts, including DBFM and DBFOM agreements, are typically vetted using value for
money (VfM) financial models. These are discounted cash flow analyses that compare the
long-term expense associated with a typical design-bid-build contracting model combined with
traditional operating and maintenance agreements (the public sector comparator) with a
hypothetical P3 contract for the same services (the shadow bid). If the shadow bid results in
lower overall expense than the public sector comparator, the municipality may elect to bid out
the project as a P3. Eventual bids can also be required to conform to the parameters of the
VfM model to allow for standardized comparisons between bids. State enabling legislation is
required for local governments to undertake P3 projects. As of December 2014, 33 states,
the District of Columbia, and Puerto Rico had adopted P3 enabling legislation.48
Community-based public-private partnerships (CBP3s), a proposed variant of the traditional
P3 model, have been advocated by EPA Region 3 to support the development, operation, and
maintenance of green infrastructure programs in the Chesapeake Bay region. EPA notes that
CBP3s differ from traditional P3s by better aligning local government and private sector
interests through the execution of relational contracts, designed to:
Offer higher levels of municipal control in P3 decision making and, in some instances,
fund disbursements.
48 U.S. Department of Transportation, Federal Highway Administration, Office of Innovative Program Delivery,
State P3 Enabling Legislation, http://www.fhwa.dot.gov/ipd/p3/state_legislation/
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Provide for shared accountability and adaptive management over time, while holding
the private partner responsible for program execution.
Returning residual cash flows (net cash flows after all expenses and fees) to the local
jurisdiction or to a reserve fund. (By contrast, residual cash flows are returned to the
private sector partner under traditional P3s.).
Focus on project opportunities to provide for local economic growth and improved
quality of life in urban and underserved communities.49
Examples
The CBP3 model has its roots in the privatization of U.S. military housing. Most Americans may
not realize it, but most military housing in this country today is privately financed, constructed,
and maintained using a fraction of public monies to leverage adequate capital and O&M
investments.50 Facing an aging, substandard inventory - at one point more than 50 percent
of military housing was rated substandard.51 With a $20 billion cost of revamping its housing
system for a volunteer army with more dependents than ever before, the Pentagon utilized
new authorities granted to it in the Military Housing Privatization Initiative of 1996. The
Residential Communities Initiative worked on 88,000 homes and took advantage of a 10-to-
1 leverage of public investment.
A key element of the Residential Communities Initiative is the use of long-term, low-risk
incoming revenues, such as military housing stipends, to attract equity investment and obtain
debt financing at favorable interest rates from the private investment community. Moreover,
economies of scale in project delivery allowed for more innovative construction practices. This
drove down overall costs. Costs were 20 percent lower than previous government projects,
and the Residential Communities Initiative cleared up a $7 billion housing maintenance
backlog.52
Due to recent legal mandates for the cleanup of Chesapeake Bay, Prince George's County,
Maryland, needs to retrofit 15,000 impervious acres at a cost of $1.2 billion. The county is
developing a pilot CBP3 program, the Clean Water Partnership, in service of this objective, as
recently promoted by Region 3 of EPA.53 The county seeks to meet regulatory mandates,
49 U.S. Environmental Protection Agency, Region 3, Community-Based Public-Private Partnerships, April 21, 2015.
50 Privatizing Military Family Housing. A History of the U.S. Army's Residential Communities Initiative, 1995- 2010
(Government Printing Office, Washington D.C.), 2012, by Matthew C. Godfrey and Paul Sadin with Dawn Vogel,
Joshua Pollarine, and Nicolai Kryloff, p. 293.
51 "Solving a National Crisis. Assessing the effectiveness of the P3 model for storm water management ", by Greg
Cannito, Water & Wastes Digest, April 2015, p. 16.
52 "Public-Private Partnerships: Lessons From Military Housing," by Mahlon (Sandy) Apgar, IV, Real Estate Issues,
Vol. 36, No. 2, 2011, p. 63. EPA Region 3 has invited RCI partners from the Army, the contractor, and the investor
to make presentations, at least twice, to meetings of stormwater managers given the relevance of the program.
53 Ibid. See also Community Based Public-Private Partnerships (CBP3s) and Alternative Market-Based Tools for
Integrated Green Stormwater Infrastructure. A Guide for Local Governments prepared by U.S. Environmental
Protection Agency Region 3, Water Protection Division, April 2015 which can be accessed at
https://www.epa.gov/sites/production/files/2015- 12/documents/gi_cb_p3_guide_epa_r3_final_042115_508.pdf
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reduce costs, and create local economic benefits. It is dedicating the revenue stream created
by local stormwater management fees to capitalize $100 million in private investment for an
initial pilot program that retrofit 2,000 acres over a three-year period, as well as fund long-
term maintenance over the life of a 30-year agreement to design, finance, build, operate, and
maintain a massive stormwater retrofit program. Improvements to be installed in the county
include bios-wales, rain gardens, green roofs, rain barrels, and permeable pavements. The
program is also intended to drive economic development in the county by using locally based,
small and minority businesses for 30 percent to 40 percent of the project. Some 5,000 entry-
level green jobs are projected to be created. According to Larry Coffman of the county's
Department of the Environment, "Early indications were a P3 program could drive down costs
by as much as 40 percent, thus saving the county over $400 million over the life of the retrofit
program."54
The prime contractor for the Prince George's County program is Corvias Solutions, which will
oversee the design, development, and maintenance of diverse stormwater improvements.
Corvias' fees are performance-based and are linked to the achievement of time, budget,
procurement, and local business development goals. Potential fees are capped and based on
project budgets; half of the fees Corvias is eligible for represent incentive fees for exceeding
performance targets. Greg Cannito, managing director of Corvias Solutions, describes some
aspects of the cost-savings involved with this CBP3 pilot:
"Unlike traditional procurement, where each of the thousands of individual
stormwater projects must go through a time-consuming and fragmented
design, bid and build process, this approach aggregates the stormwater
projects into an integrated program that streamlines the planning, engineering,
design, construction, and maintenance activities to improve both affordability
and speed of implementation."
In addition, Prince George's County's CBP3 allows for implementation of full life cycle asset
management and maintenance to ensure resilient facilities; private partner accountability for
success while retaining the county's oversight and governance; and performance-based fees.
The promise of the community-based public-private partnership model is that a community
can implement a stormwater fee or secure another dedicated funding stream and enter into
a partnership that allows the leveraging of private funds at ratios many multiples of the income
stream. Leveraging additional private financing allows the community to raise sufficient
capital to scale up the initial installation of Gl and LID practices while assuring long-term O&M.
That, at least, is the vision of CBP3.
Utilization Considerations
Local governments typically need state enabling legislation to use P3s and CBP3s,
including the authority to enter into development and service contracts. If local
54 EPA, p. 72.
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government wants to use a CBP3 model that lets it share in ownership, administration,
or policy making, then local government officials must have the authority to serve as
officers or directors of private entities.
Government entities must develop the technical capacity to plan, develop, and
implement appropriate procurement practices; evaluate the feasibility of proposals;
and negotiate and monitor P3 contracts. If such capacity is not available in-house, then
third-party expertise must be engaged.
The decision to use a P3 contract instead of a typical design-build contract is typically
evaluated through a complex financial analysis, such as a value for money (VfM)
model. VfM or similar models must also be used to cross-compare competing bids. If
the analytic capacity to conduct and/or review such models is not available in-house,
then third-party expertise must be engaged.
Advantages
The use of P3s and CBP3s integrates project capital financing with long-term O&M
support, offering a one-stop solution for developing and operating infrastructure
projects.
The use of P3s and CBP3s encourages the creation of integrated, least-cost solutions
to deliver, operate, and manage public infrastructure.
P3s and CBP3s may accelerate project delivery by better integrating project planning,
design, construction, and operating decisions.
P3s and CBP3s may attract additional private capital financing that otherwise might
not be available and provide for greater flexibility in the use of financing structures.
Disadvantages
While P3s provide long-term capital, governments must raise the revenues to pay P3
contract obligations.
Local governments frequently lack the expertise to evaluate P3/CBP3 costs and
benefits, successfully negotiate the P3 contract, and monitor and manage successful
contract implementation.
Initial transaction and ongoing monitoring costs may be high, especially if local
governments lack the required analytic and management capacity.
Best practices surrounding the use of P3s and CBP3s are still evolving, leading to the
possibility that contracts will not deliver the anticipated results and savings.
Resources
P3 Financing for Water Projects: U.S. Environmental Protection Agency, Water
Infrastructure Finance and Innovation Act
This site contains initial information on EPA's implementation of the Water
Infrastructure Finance and Innovation Act, intended to encourage the use of P3
financing for water projects.
http://water.epa.gov/grants funding/cwsrf/wifia.cfm
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U.S. Environmental Protection Agency, Water Infrastructure and Resiliency Finance
Center
This site announces the 2015 formation of EPA's Water Infrastructure and Resiliency
Finance Center, established to offer technical assistance to local governments in the
use of traditional and innovative water finance vehicles, including P3s.
http://water.epa.gov/infrastructure/waterfinancecenter.cfm
Global Use of P3s
Alastair Adair, et. al., The Global Infrastructure Challenge
The Role of PPP in a New Financial and Economic Paradigm, RICS Research, Royal
Institution of Chartered Surveyors, October 2013. This is a review of P3 markets in the
countries of Australia, Canada, India, the United Kingdom, and the United States.
http://www.rics.org/us/knowledge/research/research-reports/the-global-
infrastructure-challenge/
State P3 Enabling Legislation
U.S. Department of Transportation, Federal Highway Administration, Office of
Innovative Program Delivery, State P3 Enabling Legislation
This site Includes status material on state P3 enabling legislation as of December 2,
2014.
http://www.fhwa.dot.gov/ipd/p3/state legislation/
Community-Based P3 Resources
U.S. Department of Defense, Military Housing Privatization Initiative (MHPI)-lOl,
September 2006
This site provides comprehensive information on the DOD housing initiative.
http://www.aca.osd.mil/housing/mhpi.htm
U.S. Environmental Protection Agency, Region 3, Community-Based Public-Private
Partnerships, April 21, 2015.
Prince George's County Program:
Prince George's County, MD Urban Retrofit Public Private Partnership Model
http://www.mde.state.md.us/programs/Marvlander/outreach/Documents/PG%20Co
untv Urban%20Retrofit%20P3%20Model.pdf
12. Social Ventures
Social ventures or enterprises are businesses that generate both a social and an economic
return. In cities across the country, Gl is being used as the catalyst for creating for new social
enterprises. Many of these enterprises are founded to provide job training and employment
in Gl installation and O&M. Others are founded to sustainably harvest and/or produce a
product such as lumber or biomass fuels from the Gl itself. Social enterprises allow for an
additional level of social and/or economic benefits to be derived from Gl. In addition to the
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water quality benefits of Gl, jobs for the unemployed, a remediated brownfield site, or a new
source of sustainable fuel are created. In addition to the potential cost savings from Gl
installation, private ownership of these projects helps to overcome some of the political
hurdles associated with implementing a new way of addressing stormwater problems. Further,
job training funds or revenues generated from land remediation or harvested products can
help to defray the cost of installing and operating and maintaining the Gl.
Examples
In their April 2013 publication "Staying Green and Growing Jobs," Green For All and American
Rivers identified Verde in Portland, Oregon, and Generation Water in Los Angeles as examples
of social enterprises that hire and train targeted populations to perform landscape-related
work. In the Chicago area, a new social enterprise, High Bridge, is training and providing
transitional employment in Gl installation and maintenance for residents in the low-income
communities where the Gl is being planted.
Fresh Coast Capital is a social enterprise that will provide Gl by planting hybrid poplar trees
on brownfield sites. The trees remediate the sites in less than 10 years via phytoremediation
(a process by which trees break down pollution in the soil) and produce marketable wood
products in four to eight years for the well-established wood pulp, timber, and biomass
markets. This strategy will reduce remediation costs by 80 to 90 percent. While the majority
of Fresh Coast's investment return is obtained from the sale of the property after remediation,
these sites do not have to be sold. The income derived from the sale of wood products is
substantial and may support the costs of installation as well as the O&M of Gl on the site.
Fresh Coast Capital, formed by students at the KelloggSchool at Northwestern University, won
the Morgan Stanley International Sustainable Investment Challenge in 2014 as the best idea
to create market rate returns and scalable social impacts. Fresh Coast Capital is capitalizing
its first fundthe Fresh Coast Forest Fundto plant and remediate 5000 acres of brownfields.
As of 2015, a pilot project is underway in Gary, Indiana, to test the Fresh Coast Capital model
in an urban setting.
Utilization Considerations
Social enterprises are appropriate in situations where a capable entrepreneur is available to
launch the venture and the community is interested in achieving multiple goals from its green
infrastructure investments. For employment and training related enterprises, source(s) of job
training funds may be needed to cover the social costs of job training. A clear pipeline of
projects is also important to ensure the continuation of the enterprises. This strategy is most
appropriate in large urban areas with many Gl projects and where there is a significant history
of partnership between the public and private/nonprofit sectors. For environmental
remediation or product sales-focused ventures, larger sites are needed. Fresh Coast is
targeting brownfield sites of 40 acres or more without buildings on them.
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Advantages
By establishing new businesses, social enterprises open the realm of public and private
business financing tools and incentives to Gl installation and O&M. They also can enable
communities to meet multiple social and environmental needs by blending job training and
placement with stormwater management objectives. If well operated, these enterprises
typically develop efficient and cost-effective O&M protocols, while generating new
employment and tax revenue.
Disadvantages
Social enterprises require skilled management and sufficient capitalization. Many lack either
or both of these necessities. In addition, many social enterprises attempt to solve deeply
entrenched social problems that have been resistant to improvement. As a result, many social
enterprises, like other small businesses, have a high risk and a high probability of failure.
Resources
http://www.americanrivers.org/wp-content/uploads/2016/05/staving-green-and-
growing-iobs.pdf
www.millenniumreserve.org/Priorities/high-bridge
Video on Fresh Coast: http://video.cnbc.com/gallerv/?video=300(
13. Credit Enhancements (used in conjunction with other financing approaches)
Credit enhancements can be used to attract private capital to Gl transactions and reduce the
financing costs of Gl O&M by reducing credit risk. Organizations engaged in financing Gl
should investigate the potential use of credit enhancements when developing financing
programs. Additional policy development is needed to bring the use of credit enhancements
to fruition for Gl projects, including O&M. A number of credit enhancement strategies are
discussed below for illustrative purposes.
New Markets Tax Credits: New markets tax credits (NMTCs) give a federal tax incentive to
investors who make an equity investment via community development entities located in low-
income rural communities or urban neighborhoods. Community development entities provide
equity capital to eligible businesses and the NMTC investor receives a federal tax credit equal
to 39 percent of the investment, taken over a seven-year period (5 percent annually for the
first three years and 6 percent in years four through seven). If the investment is redeemed
before the seven-year term, all tax credits awarded in connection with the investment will be
recaptured with interest.
New markets tax credits could be used to provide equity capital to a Gl installation and
maintenance enterprise connected to a large urban Gl portfolio. The business, which can be
operated by a for-profit or nonprofit entity, would have to be located in an eligible low- income
community, and its activities would have to be conducted primarily in low-income areas. The
new market tax credit is a credit enhancement because the equity component of the loan
relies on federal tax credits for repaymentnot the income stream of the business. The equity
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provided by new markets tax credits allows project debt to be raised on more favorable terms
than would otherwise be available. While the new markets tax credit lapsed at the end of
2014, the U.S. Senate has passed bipartisan legislation to extend it through December 2016.
Clean Water SRF Loan Guarantees: Federally sponsored Clean Water State Revolving Funds
provide financial assistance for clean water programs throughout the United States. From
1990 through mid-2012, these funds have financed nearly $89 billion in clean water projects.
Clean Water State Revolving Funds frequently enjoy triple-A credit ratings. EPA's
Environmental Finance Advisory Board (EFAB) has previously recommended that state
revolving funds with strong credit leverage their financing capacity by guaranteeing loans to
finance Gl. The loan guarantees would enable the financing of Gl projects at lower interest
rates. Such guarantees could help finance public-private partnerships, water fund programs,
and other initiatives intended to install, operate, and maintain green infrastructure. EFAB has
estimated that the use of loan guarantees by Clean Water State Revolving Funds could
leverage $6 billion to $28 billion of additional financing for Gl O&M.
Examples
The state of Connecticut has established the Green Connecticut Loan Guaranty Fund to
provide first loss guarantees (guarantees of repayment for initial losses up to a specified limit)
to private lenders who finance energy conservation loans for individuals, small businesses
and nonprofit entities. The fund was initially financed with $5 million in general obligation debt
issued by the state. The fund is administered by the Connecticut Green Bank. Similar funds
could be set up by other jurisdictions to guarantee Gl O&M programs.
The International Institute for Sustainable Development has identified a variety of credit
supports used in multinational development lending that are suitable for leveraging capital
for Gl projects. These credit supports are typically provided by public entities or multilateral
development banks to bring private capital to the table. In addition to first loss guarantees,
credit supports utilized include:
Partial credit guarantees: These guarantees absorb part or all of debt service default
risk regardless of the cause.
Contingent loans: Contingent loans are activated when previously negotiated
conditions trigger the need for additional debt capital for the project. The contingent
loan provides debt financing to ensure against risk that a private lender does not want
to assume.
Viability gap funding: Viability gap funding can be provided in the form of capital grants,
subordinated loans, and/or interest subsidies to address weaknesses in the proposed
project.
A/B loans: Multilateral development banks, acting as the lead lender, lender of record,
and loan administrator, often engage in A/B loans, wherein they issue an A tranche of
debt and a secondary lender or consortium issues a B tranche. The arrangement
spreads risk and allows the lead lender to obtain preferred creditor status for the debt.
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Federal agencies and state green banks would be the most appropriate U.S. entities to create
and implement such credit supports. Bipartisan legislation, the Partnership to Build America
Act, has been introduced in the U.S. House of Representatives to create a $50 billion U.S.
infrastructure bank that would utilize credit supports.
Utilization Considerations
Existing credit enhancement mechanisms such as New Market Tax Credits and loan
guarantee funds are applicable to the business enterprises that would be responsible for
implementing the O&M activities. Enhancements can reduce the risk and costs for these
enterprises. Credit enhancement programs often have strict access requirements that should
be considered carefully before expending effort to obtain them.
Advantages
The business risks and costs for business enterprises entering or expanding into Gl O&M can
be reduced with credit enhancements. These benefits can be passed on to the community.
Disadvantages
New credit enhancement vehicles are likely to take significant time and effort to establish, if
an existing one is not available.
ronmenta/ Insurance Settlements/Judgments
Gl developed as part of an environmental remediation program might be financed pursuant
to an insurance settlement or judgment related to the contamination of the site. Depending
on insurance coverage terms, expenditures eligible for financing might include cleanup,
redevelopment, program operation, and site maintenance.
Frequently overlooked sources of insurance proceeds are historic policies once held by the
property owners responsible for the environmental damage. The premise of looking to a
historic insurance policy to finance the remediation of a polluted site is that the policy insures
against damages incurred during the coverage period, no matter when the damage is
discovered.55 Thus, judgments and settlements can be collected by policyholders against old
policies that were in force when the contamination occurred. Historic insurance coverages
that can be relevant to an environmental damage or injury claim include:
Comprehensive general liability insurance (especially policies issued before 1970,
which do not contain partial polluter exclusion language)
Umbrella insurance (especially policies issued before 1970, which are not subject to
partial polluter exclusion language)
Excess liability insurance (especially policies issued before 1970, which are not
subject to partial polluter exclusion language)
Environmental impairment liability insurance (sold since 1981)
55 Anderson Kill & Olick, P.C., A Guide to Insurance Coverage for Environmental Liability Claims, p.20.
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Ship scrapping or water quality insurance syndicate insurance (insures against
pollution caused by maritime activities)
Personal injury liability insurance
First-Party property insurance
Product liability insurance
Automobile insurance56
Jurisdictions differ in their definition of the trigger date of an event or occurrence giving rise
to an environmental damage or injury claim. Most courts adopt a continuous trigger standard,
under which the date of an insured event or occurrence extends from the date(s) the
environmental contamination begins through to the date(s) on which the damage or injury is
discovered. Alternative trigger date definitions adopted by the courts have included (1) the
date(s) on which environmental contamination took place; (2) the date(s) on which the
resultant damage or injury was discovered; or (3) the date(s) on which remediation was
ordered by a regulator or court.57
Even claims involving insolvent insurance companies can result in payment to the
policyholder. In some cases, umbrella or excess liability coverages go into force if a primary
liability insurer is no longer solvent. Most states have guaranty funds to settle claims against
insolvent insurers.58
Example
The Hunsucker Goodstein law firm successfully pursued a historic insurance claim that led to
an environmental liability settlement that allowed the remediation of a contaminated site in
Evansville, Indiana, as a municipal greenway. The site, which now houses the Mead Johnson
Trailhead and the Shirley James Gateway Plaza, is a central component of the Pigeon Creek
Gateway Passage, a 42-mile jogging, walking and biking trail being developed in Evansville
and Vanderburgh counties.59
The historic insurance litigation that resulted in the Evansville remediation began when the
City of Evansville sought to acquire for greenway use a former scrapyard run by General Waste
Products from the 1950s to 1998. Testing of the site revealed extensive contamination,
including high levels of lead and polychlorinated biphenyls (PCBs), requiring remediation by
General Waste.60
Although General Waste Products had closed its business and had no assets, Hunsucker
Goodstein located historic insurance policies for the site and negotiated a settlement with the
56 Ibid., p.17.
57 Ibid., pp. 12, 49.
58 Ibid., p. 23.
59 Michael D. Goodstein and Stacey H. Myers, Hunsucker Goodstein PC, "Funding Remediation of Environmentally
Impaired Properties," in Environment and Climate Change Law, International Comparative Legal Guides, 2013,
pp.19-20; and City of Evansville, Indiana, Pigeon Creek Gateway Passage
60 Goodstein and Myers, pp. 15-20.
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insurance carrier. The settlement established the Evansville Greenway and Remediation
Trust, paid for previous investigation and legal costs, and extended a $3.5 million loan used
for immediate site investigation and remediation.
On behalf of the trust, Hunsucker Goodstein also negotiated a $4,375 million settlement
against parties who had sent equipment containing PCBs and other contaminants to the scrap
yard for disposal and metal recycling. Settlement proceeds were used for additional
investigation and remediation activities.61 Michael D. Goodstein of Hunsucker Goodstein
notes that, in appropriate cases, historic insurance proceeds may be used for program O&M
expenses associated with environmental remediation and that the proceeds of the
settlements for the Evansville greenway were applied to O&M expenses, as well as to capital
costs.62
Utilization Considerations
The filing of a historic insurance claim in an environmental damage or injury case requires the
hiring of specialized legal counsel and investigators. Notice must be filed promptly with the
insurer/s (in some states within 10 days) when a policyholder becomes aware of a claim
against it for environmental damages or liability. Notice should be provided to every insurer
that issued coverage at any point in time that might relate to the claim.63 While historic
insurance cases typically take years to resolve at considerable expense, most cases result in
a settlement. Of the cases taken to trial, policyholders frequently prevail,64 although the
outcome of any case depends on the specific fact pattern, the quality of the evidence
advanced and legal representation provided, and prevailing statutes and case law.
Advantages
Historic insurance cases can discover and unlock financial resources that might not
otherwise be considered to finance environmental remediation, including Gl O&M
activities.
Historic insurance cases taken on a contingent fee basis may result in a relatively
modest financial outlay by the policyholder, although the policyholder may be
responsible for non-attorney expenses, such as filingfees and deposition costs. (Under
a contingent fee arrangement, the attorney agrees to accept a fixed percentage - often
61 Ibid., pp. 15-20.
62 Correspondence with Michael D. Goodstein, April 9, 2015.
63 Anderson Kill & Olick, pp. 13-15.
64 Anderson Kill & Olick, pp. 26-28. Estimates given by Anderson Kill & Olick are that more than 97 percent of all
cases settle (p. 28), and that policyholders win 85 to 90 percent of the cases that go to trial (p. 27). Policyholders
should not rely on these statistics, however, in that the outcome of any specific case depends on its fact pattern
and the applicable case law and statutes.
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one-third - of the amount recovered for the client. If the case is unsuccessful, no legal
fees are due.)65
Disadvantages
Historic insurance claims are applicable to only a subset (of unknown size) of Gl
programs. The use of historic insurance is not a generally applicable solution to Gl
financing needs, including O&M costs.
Advancing a historic insurance case can disrupt the daily business of the policyholder
due to the volume and detail of records and information requests.66
Historic insurance cases are expensive67 and may be financially untenable, unless a
contingent fee arrangement is available.
Historic insurance cases are lengthy, typically extending for years.68
Resources
Anderson Kill & Olick, P.C., A Guide to Insurance Coverage for Environmental Liability
Claims
Michael D. Goodstein and Stacey H. Myers, Hunsucker Goodstein PC, "Funding
Remediation of Environmentally Impaired Properties," in Environment and Climate
Change Law, International Comparative Legal Guides, 2013, pp. 15-20.
IV. Supports to O&M Financing
A. Operations and Maintenance (O&M) Training
It's one thing to fund ongoing O&M of a particular green infrastructure installation, it is another
to ensure that the peoples you hire are trained in O&M and understand the project. How one
integrates that training matters, especially if you contract those services out. Where training
happens also matters: on the job by a private company or public agency/utility; courses
offered through programs at a community college; a master gardeners program; or landscape
architecture program. Agencies that contract the work out can write requirements in for
training in green infrastructure O&M or the demonstration of knowledge required to maintain
the project in the request for qualifications or proposals. In states where certification
programs exist, this documentation is easier to reference.
Webinars: Webinars provide ample opportunities for training; many are free and others
offered at a low cost. Webinars offer opportunity for Q&A, materials (downloads), etc.
65 American Bar Association, "When You Need A Lawyer, Legal Fees and Expenses: What Are Contingent Fees?"
http://www.americanbar.org/groups/public_education/resources/law_issues_for_consumers/lawyerfees_con
tingent.html.
66 Anderson Kill & Olick, p.27.
67 Ibid., p.27.
68 Ibid., p. 27.
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Conferences/Workshops: Training through conferences and workshops can be found
on national, regional, state, district, and city/county levels. Some may be at no cost if
they are grant-funded.
Certification/Accreditation/Continuing Education
Examples of training sources:
North Carolina State Stormwater Best Management Practice Inspection and
Maintenance Certification Workshops: The course is short, two days, and targets
people in the field, not just engineers and landscape architects. Fees range from $215
for professionals to $160 for nonprofit or public attendees. The workshops include a
recertification/update option for $75. A suggestion for programs such as these would
be to reduce fees for private companies that intentionally seek to attract and retain
employees from targeted unemployed or underemployed areas of a community.
http://www.bae.ncsu.edu/topic/bmp-im/
Green Certifications: Firms will often pay for staff to become Leadership in Energy and
Environmental Design (LEED)-certified in a variety of areas, including LEED Green
Associate and LEED AP 0+M designation. There are pros and cons to these programs,
but agencies can include the certification as a requirement or preferred qualification
in their requests for proposals and requests for quotations.
Organization Memberships: Organizations with a clean water mission often offer
training and publications with best management practices on their websites.
Membership perks might include free training or access to webinars, conferences,
workshops, and publications.
Workforce Development: In its Staying Green and Growing Jobs report, American Rivers
provides examples of how some communities have successfully linked workforce
training, education, and economic development with green infrastructure jobs.
http://www.americanrivers.org/wp-content/uploads/2016/05/staving-green-and-
growing-iobs.pdf
The communities and organizations featured are:
o Verde, Portland, Oregon: http://www.verdenw.org/
o Ready, Howard County, Maryland:
http://livegreenhoward.com/readv-for- action/
httPs://www.voutube.com/watch?v=WvPanChbupA
o Bronx Environmental Stewardship Academy:
http://www.ssbx.org/best- academy/
o Seattle Conservation Corps: http://www.seattle.gov/parks/scc/
o Green Corps, Cleveland Botanical Gardens:
http://www.cbgarden.org/support/green-corps.aspx
o Onondaga Earth Corps, Syracuse New York:
http://www.onondagaearthcorps.org/
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Government Agencies:
o The EPA Brownfields Program provides the opportunity for funding for O&M job
training for Gl through its FY15 Environmental Workforce Development and Job
Training Grants: "Includes environmental workforce development and job
training programs focused on hazardous and solid waste management,
assessment, and cleanup associated activities, chemical safety, emergency
response, integrated pest management, and waste and stormwater
management. These grants are provided to organizations to develop
environmental programs that recruit, train, and place, unemployed and under-
employed, including low-income and minority, residents historically affected by
hazardous and solid waste sites and facilities with the skills needed to secure
full-time, sustainable employment in the environmental field and in the
assessment and cleanup work taking place in their communities."
https://www.epa.gov/sites/production/files/2015-ll/documents/16 -
Ol.pdf
o NOAA offers grants that can be used to train and educate community members
to become environmental stewards:
http://www.oesd.noaa.gov/grants/elg.html#page=about.
http://www.oesd.noaa.gov/grants/docs/MWEE-National.pdf. and
http://www.oesd.noaa.gov/grants/.
o Other federal funding sources include Department of Housing and Urban
Development Community Development Block Grant program; Department of
Agriculture; Economic Development Administration; Department of Interior's
Rivers, Trails and Conservation Assistance Program:
http://www.nps.gov/orgs/rtca/index.htm.
o States offer educational materials and programs, such as Illinois:
http://www.epa.illinois.gov/topics/water-aualitv/surface-water/green-
infrastructure/index):
o Local governments/agencies such as Louisville and Jefferson County
Metropolitan Sewer District offer education and programs:
http://www.msdloukv.org/aboutmsd/rainbarrels.htm)
B. Cost Reduction Strategies
There are many strategies to consider to reduce the cost of Gl O&M such as:
Bulk purchasing
Choosing and installing plants correctly
Leveraging job training or targeted hiring funding
Contracting with lower-cost entities
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C. Enabling Legislation
Examples of legislation or regulations that enable practices to support and sustain Gl O&M
financing include:
Urban Runoff Drainage Plan, Santa Monica, California:
http://www.smgov.net/uploadedFiles/Departments/OSE/Categories/Urban Runoff/
UR Worksheet.pdf
Standard Urban Stormwater Mitigation Plans
Urban Runoff Reduction Fee:
http://www.eli.org/research-report/lieu-fee-mitigation-model-instrument-language-
and-resources
Off-site Mitigation:
http://www.eli.org/land-biodiversitv/wetland-and-stream-mitigation-handbook-land-
trusts
Virginia Off-Site Mitigation Location Guidelines:
http://www.dea.virginia.gOv/Portals/0/DEQ/Water/WetlandsStreams/VA Offsite Mi
t Guidelines.pdf
Maryland:
http://www.mde.state.md.us/programs/Water/WetlandsandWaterwavs/Regulation
s/Pages/programs/waterprograms/wetlands waterwavs/regulations/mitigation.aspx
Watershed Protection Fee (stormwater utility fund)/state-required fund Howard
County, Maryland:
https://www.howardcountvmd.gov/Departments/Public-Works/Bureau-Of-
Environmental-Services/Stormwater-Management/Watershed-
Management/Protection-Fee
D. Partnerships
Partnerships to support the O&M of Gl investments have developed over time to compensate
for the limitations in financing. The report referenced below highlights 22 green infrastructure
projects funded under the American Recovery and Reinvestment Act and highlights how O&M
issues were addressed. There are several good examples of partnerships between local
governments and other entities such as utilities in this document.
https://www.epa.gov/sites/production/files/2015-04/documents/green infrastructure-
om report.pdf
Nonprofits and Universities: Example - Sonoran Institute & University of Arizona's "Conserve
to Enhance" (C2E) "...Since 2011, sixty pilot participants saved over 2 million gallons of water
and donated $2,000 to the restoration of Tucson's Atturbury Wash. Additional private funds
contributed via a "donation checkbox" for C2E on the Tucson Water utility bill brought in over
$30,000 for local wash restoration and will allow the completion of three projects to enhance
neighborhood washes over the coming year. If brought to scale Gust 5% of Tucson Water
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customers), donations would bringin half a million dollars peryearto restore local waterways."
http://conserve2enhance.org/
Government Agencies: US Fish and Wildlife; USDA; US Army Corps of Engineers; USEPA, as
well as State and Local governments.
Private Entities: Local governments who have access to funds for installation can garner
private entities (homeowners) to provide the maintenance of certain kinds of Gl on a voluntary
basis. Burnsville, MN serves as a clear example of the importance of community engagement
and education in projects that rely on private parties for O&M.
http://www.werf.org/liveablecommunities/studies burns mn.htm
Transportation: Developing partnerships with state and federal departments of transportation
are key to Gl projects connected to state and federal roadways. The Green Highways
Partnership is an example of an effort to bring green infrastructure to highway construction
projects but does not articulate how O&M financing can be established. Localities attempting
to install Gl in their complete street designs or even minor tree planting efforts face pushback
from state transportation departments due to a variety of issues including lack of clarity for
funding O&M for the projects.
http://www.greenhighwavspartnership.org/index.php
E. Regulatory Frameworks (e.g. trading mechanisms)
Municipal and Regional Stormwater Management Plans: Finding loopholes in plans; using a
Code and Ordinance worksheet; Real Estate Transfer regulations, Zoning and Watershed
District Overlays, Concurrency Requirements, Impact Fees, Incentive Zoning.
http://louisville.edu/landuse/Chapter 12 Regulatory Tools.pdf
The Milwaukee Metropolitan Sewer District (MMSD): a regional agency serving 28
municipalities uses easements on private property or property held by municipalities to give
the agency stake in ownership and the ability to thus use capital funds rather than O&M funds
that are historically lower since they are based on use rather than property taxes. This works
within the regulatory framework that limits how they can use capital funds. Funds based on
usage are bound to go down as more water is conserved and large utilities need to rethink
financing structures based solely on use. So the Gl O&M is written into agreements with the
municipalities that they fund as easement agreements that give them the ownership stake
mentioned and into maintenance requirement language of the contract; failure to comply
makes the partner ineligible for future district funding. The Milwaukee example also highlights
the importance of capacity to insure compliance with any new regulatory structure. MMSD is
looking at new sensors that help them monitor Gl functioning remotely, and shared data entry
mechanisms that support real-time data management in the field, not perfect but moving in
the right direction, http://www.mmsd.com/
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Residential Site Improvement Standards: Zoning ordinances, development codes and design
standards, subdivision ordinances, erosion and sediment control ordinances, stormwater
management ordinances, parks and open space plans and ordinances.
http://louisville.edu/cepm/proiects/sustainable-communitv-capacitv-building/promoting-
green-infrastructure-strategies-case-studies-resources
National Complete Streets Coalition: http://www.smartgrowthamerica.org/complete-streets
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Appendix
Selected Federal Grants with Green Infrastructure (Gl) Operations and
Maintenance (O&M) Funding Potential
Community Development
U.S. Department of Housing and Community Development. Community Development Block
Grants: HUD's Community Development Block Grant (CDBG) program, established in 1974, is
flexible funding that provides communities with resources to address a wide range of
community development needs. Larger cities (populations of 50,000 or more) and urban
counties (counties with populations of at least 200,000) receive annual funds according to a
federal formula. States award federal CDBG allocations to smaller jurisdictions, defined as
cities with populations below 50,000 and counties with populations below 200,000. The
CDBG program provides annual grants on a formula basis to 1,209 general units of states
and local government.
Stormwater management is a permitted purpose of funds awarded. Funds cannot be used for
O&M but can be used for the acquisition, construction, reconstruction, rehabilitation, and
installation of public facilities and improvements that can be incorporated in a Gl, such as
trees, parks and playgrounds. CBDG money can also be used for the acquisition and sale of
real property, including land. Eligible land acquisition and sale activities include the land
purchase price and supporting soft costs, such as legal, survey, appraisal, recordation, and
transfer tax expenses. Eligible property sales are those that support national CDBG program
objectives.
Workforce Development Opportunities
U.S. Environmental Protection Agency. Environmental Workforce Development and Job
Training Grants: These grants can be used to train unemployed, underemployed, or
disadvantaged workers for jobs related to wastewater management, including Gl design,
installation, and O&M. Funds may be used for worker recruitment, training, and placement.
Grants are targeted to communities affected by historic disinvestment, health disparities, and
environmental contamination. Permissible grantees include local and regional governments;
redevelopment agencies; native tribes and consortia outside Alaska; and certain Alaskan
native corporations. The fiscal 2015 program budget is $3.4 million, expected to support
approximately 17 grants of up to $200,000 each for a three-year period. Grants are typically
awarded annually; due to funding shortfalls, however, grants are sometimes awarded on a
two-year cycle.
An example for using Gl for workforce development or job training opportunities for under
employed or disadvantaged workers can be found in Rhode Island, which has one of the
highest unemployment rates in the country, still hovering around 6.5 percent. Limited
employment opportunities exist for its 18-to 30-year-old population. The Rhode Island Nursery
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and Landscape Association (RINLA) has found a way to help young adults and veterans and
overcome the problem of lack of operation and maintenance for green infrastructure projects.
RINLA's 600-plus members - who represent a diversity of small farms and businesses related
to supporting Rhode Island's horticulture, agriculture, and landscape community - have
organized to respond to the growing needs resulting from a poor economic environment and
an increasing problem associated with green infrastructure.
A recent Department of Housing and Urban Development grant of $2.4 million was given to
RINLA and partners from Harvard University, the University of Rhode Island, the Community
College of Rhode Island, and a veterans organization called Operation Stand Down, as well as
the White House Office of Social Innovation and Civic Participation. The grant will allow RINLA
to start a job-training program for adult youth and veterans on ways to implement and manage
operations and maintenance of Gl projects, specifically in South Kingstown and Newport,
Rhode Island. This program will utilize Gl experts from RINLA to train a new generation on how
to retrofit and redesign community green infrastructure that will allow communities to better
weather storms, improve the choices of plant material based on local climate change
conditions, and install and maintain plantings properly.
U.S. Department of Labor. American Apprenticeship Initiative: This initiative provides grants
to public-private consortia to support apprenticeship training in high-growth industries,
particularly those that typically recruit workers under HB-1 non-immigrant visas. The use of
green technology and energy-efficiency training within the construction arena can be elements
of innovation used to support submission of an application. Information technology jobs
related to the operation of a Gl program would be eligible for support under the American
Apprenticeship Initiative. Grants are also intended to provide training and work experience in
high-growth industries to low-skilled populations. Training for entry into professions related to
the operation and maintenance of Gl might qualify for funding. $100 million in American
Apprenticeship grants was to be funded in 2015.
U.S. Department of Labor. Training to Work 3 - Adult Reentry Grants: This program (T2W3)
provides job training and employment services to inmates of correctional facilities who
participate in work release programs. Grant applicants must be located in high-poverty, high-
crime areas. Grants may be used for vocational training and the payment of wages for on-the-
job training and work experience activities; participants in the program can also be placed in
unpaid work experience roles. T2W3 grants are administered by nonprofit organizations in
cooperation with employers. Local governments and Gl contractors wishing to train employees
with T2W3 funds would be required to partner with a nonprofit grant applicant to receive
funding. $27 million in T2W3 funding was available in 2015 to support 20 grants in amounts
up to $1,360,000. The cost per participant funded by the grant must be $8,000 or less,
although grantees are encouraged to leverage additional funds from other organizations.
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AmeriCorps and Corporation for National and Community Service Grants: These agencies
have partnered with the Department of Justice to present a green incentivized grant
opportunity. The Grants.gov website says:
"This funding opportunity is a program jointly sponsored by the Department of Justice Office
of Juvenile Justice and Delinquency Prevention (OJJDP) and the Corporation for National and
Community Service (CNCS) to create a Youth Opportunity AmeriCorps. The program is
consistent with the missions of OJJDP and CNCS, and within the objectives of the My Brother's
Keeper initiative. CNCS defines Opportunity Youth as economically disadvantaged individuals
age 16-24 who are disconnected from school or work at least six months prior to service.
CNCS defines 'disconnected from school or work' as unemployed, underemployed, and not in
school for at least six months prior to service. This program will target Opportunity Youth that
have been adjudicated in the juvenile justice system. The program will provide disconnected
youth with the opportunity to participate in a national service program and provide them with
meaningful mentoring while they are serving. Disconnected youth is defined as individuals at
least 17 but under 25 years old who have been adjudicated in the juvenile justice system,
convicted in the criminal justice system, or have been identified as at risk of incarceration.
Grant funding and member slots will be awarded to successful applicants to enroll
disconnected youth to serve as AmeriCorps members. Recipients will also need to enroll
additional members to provide mentoring and coaching to the disconnected youth members
throughout their service. Programs should target recruitment of two distinct types of
AmeriCorps members: 1.) disconnected youth who will be engaged in full-time or less than
full-time direct service to address a compelling community need. 2.) Individuals who will have
mentoring experience and/or applicable life experience to serve as mentors for disconnected
youth. In addition to providing direct service that addresses the community need, these
AmeriCorps members will provide direct service as coaches and mentors to guide and to
support the successful participation of the Disconnected Youth members in the program and
position them for success after their service ends. The program may enroll individuals over
age 25 in this capacity, and members may be full-time or less than full-time. Program
objectives will include:
Engaging AmeriCorps members in an evidence-based or evidence-informed approach
to provide a service intervention that will result in intended solutions to community
problems.
Matching Disconnected Youth AmeriCorps members with the one-on-one mentoring
and support services needed to establish a self-sustaining, law-abiding life and
successfully reintegrate into the community.
Developing and implementing comprehensive and collaborative member development
strategies that address the challenges posed by offender reentry, recidivism reduction,
and youth at risk of incarceration.
Stabilizing communities by reducing recidivism and reintegrating offenders into the
community. Proposed programs should:
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o Establish and maintain a mentoring relationship between the experienced
member(s) and the Disconnected Youth AmeriCorps members,
o Be cognizant of and collaborate with other entities that also provide reentry or
reentry-related activities. This includes engagement with probation and parole
offices for partnerships, collaboration, and sharing of data and information if
the members are court involved."
Departments of Labor and Education Release Workforce Innovation and Opportunity Act
(WIOA) Draft Regulations for Public Comment: On July 22, 2014, President Obama signed the
Workforce Innovation and Opportunity Act (WIOA), the first legislative reform of the public
workforce system in more than 15 years. Draft regulations to implement WIOA are available
on the Federal Register website. The regulations come in five "Notices of Proposed
Rulemaking," which address different aspects of the law.
Opportunity with National Science Foundation and a Cooperative Activity with Department of
Energy Programs for Education and Human Resource Development (Request for
Supplement):
https://www.nsf.gov/funding/pgm summ.isp?pims id=5632&org=NSF&sel org=XCUT&fro
m=fund
The NSF Grants.gov Application Guide is available on the Grants.gov website and on the NSF
website at: http://www.nsf.gov/publications/pub summ.isp?ods kev=grantsgovguide
Rural Assistance
U.S. Department of Agriculture Rural Community Development Initiative: This program
provides matching grants of $50,000 to $250,000 to facilitate the provision of technical
assistance to nonprofit housing and community development organizations, low-income rural
communities or native tribes. The grant amount must be matched by the grantee. The grantee
must provide the recipient with technical assistance or training that will allow the recipient to
provide new functions or expand existing functions related to housing, community
development, community facilities, or economic development, including sustainable
development activities. Subjects on which technical assistance can be offered include, but
are not limited to, organizational management; accessing alternative sources of financing;
developing training programs; and procuring up to $10,000 in computer equipment, software,
and printers to support program execution. Grant funds must be expended within three years
of the award.
U.S. Department of Agriculture Water & Waste Disposal Loan and Grant Program. While
USDA's water and waste assistance program primarily provides long-term, low-interest loans
for rural areas, project grants are provided as funds permit. Project monies can be used for
rural stormwater management, including startup operations and maintenance; and the
purchase or rental of equipment to operate, maintain extend or protect facilities; and the
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enlargement, extension, or improvement of existing facilities. Eligible applicants include most
local and state jurisdictions, private nonprofit organizations, and native tribes.
U.S. Department of Agriculture. Water and Waste Disposal Training and Technical Assistance
Grants: Nonprofit organizations may apply for training and technical assistance
reimbursement grants related to the sourcing, collection, storage, treatment, distribution, and
disposal of water and waste in rural areas. Program support includes technical assistance
and training to improve system management, operations, and maintenance. Grantees apply
for funding on a national, regional, or local basis and provide support to rural towns and areas
and on tribal lands.
Transportation
U.S. Department of Transportation. Transportation Investment Generating Economic
Recovery (TIGER) Grants: TIGER grants, awarded competitively, provide discretionary funding
for up to 20 percent of the planning and/or capital expenditures for significant transportation
projects, including highways, bridges, public transit, pedestrian/bicycle projects, passenger
freight systems, ports, and multi-modal uses. A key ranking criterion is environmental
sustainability, and Gl development can be included in funded projects. TIGER grants provide
an opportunity for local governments to plan, construct, or expand Gl programs in the context
of surface transportation or broader development projects with a surface transportation
component. Eligible grantees include state and local governments, tribes, regional and multi-
jurisdictional authorities, and planning organizations. Grantees must procure at least 80
percent of project financing from non-TIGER sources, including the private sector. From 2009
to 2014, the TIGER grant program provided $4.1 billion to 342 projects in all 50 states, the
District of Columbia, and Puerto Rico. $500 million in funding for TIGER grants was announced
for award in 2015.
Publication #800R17002
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