In November 2018, the United States Global Change Research Program released the 4th National Climate Assessment (NCA4), amplifying long-standing warnings that – in the context of a changing climate – the United States’ aging water infrastructure puts regional populations, ecosystems, and economies at an unacceptable risk. America’s wastewater and stormwater systems require a $271 billion investment over a 20-year period, and failure to act will contribute to an estimated $3.9 trillion hit to the U.S. GDP by 2025. But even among the trailblazer cities with forward-looking plans to invest in resilient stormwater management systems like green infrastructure, progress to fully implement these plans has been slow.[i]
Faced with these staggering sums, it’s not surprising that many believe the key to unlocking greater investment in green infrastructure will be found in innovative financing tools. However, there is a wide variety of financing solutions already available that can support green infrastructure development. The more immediate challenges include 1) getting projects to the right scale and structure to be able to leverage existing financing tools, and 2) an inherent mismatch between procurement and contracting norms and the nature of distributed infrastructure. Today, several U.S. cities are shaking up the status quo and successfully piloting green infrastructure incentive programs that mirror the structures of well-established energy utility and energy efficiency programs.[ii]
Philadelphia Water Department’s (PWD) Greened Acre Retrofit Incentive Program (GARP), Metropolitan St. Louis Sewer District’s (MSD) Large Scale Rainscaping Grants Program, and Washington DC’s Stormwater Retention Credit Trading Program are active examples. The San Francisco Public Utilities Commission and New York Department of Environmental Protection are launching programs in 2019. These resourceful cities faced six key barriers to scaling green infrastructure and are leading the charge to establish a new best practice: Green Infrastructure Incentives (GI2).
THE GREEN INFRASTRUCTURE INCENTIVE (GI2) MODEL
Through GI2 programs, water departments and utilities publish project specifications and pay-for-success reimbursement structures and then open green infrastructure project development to the private market.
Private developers deliver bundles of projects through the following process:
- Target eligible landowners to originate pre-qualified green infrastructure projects.
- Aggregate portfolios of projects and secure financing to ensure landowners do not face cost barriers to participation.
- Design projects to fully meet utility specifications.
- Manage engineering and construction.
- Deliver validated projects to property owners for maintenance; accept performance-based reimbursements from the utility.
Barrier 1: Reliance on Traditional Public Sector Procurement Processes
For hundreds of years, United States city water departments and utilities have relied on large, centralized grey infrastructure installations like pipes and storage tanks to manage stormwater. Due to the scale and relative infrequency of these projects, lengthy, resource-intense public procurement processes are an acceptable cost. However, for municipalities pursuing citywide green infrastructure installations, public works staff are finding that status quo procurement processes are preventing green infrastructure from scaling rapidly.
Faced with this barrier, PWD developed GARP, a GI2 program designed to procure $550 million worth of green infrastructure to help cost-effectively meet their goal to transform a third of the combined sewer zone into green space by 2036. PWD published detailed project guidelines and the desired project cost range, then turned to the market for private developers to identify, aggregate, and submit projects for approval. This ingenious solution has allowed PWD to rapidly procure green infrastructure without the barriers of traditional procurement channels or the need to change any existing procurement rules. As a result, private developers with proven green infrastructure program design and management experience from work in other cities (and even other industries) have been drawn to the Philadelphia market to maximize program success and capacity.
Barrier 2: Greater Budgetary Uncertainty and Risk
Green infrastructure has been identified as one of the smartest investments cities can make in resilience, sustainability, and quality of life. As cities seek more information about how to translate their green infrastructure goals into projects, there is no shortage of confusion about how these should be funded and misunderstandings about the role that financing can play in accelerating cities toward their goals. Financing can help a city shed risk, spread out payments over time, and establish pay for success contracts; however, it cannot replace the need for a dedicated funding stream. The good news is that green infrastructure can be very cost effective relative to grey infrastructure, and the GI2 program model can help cities keep even tighter control on costs. MSD has committed to investing $100 million in green infrastructure projects, with an overall goal of reducing combined sewer overflows to the Mississippi River, and, like PWD, their GI2 model overcomes the budgetary uncertainty that hinders other cities’ green infrastructure investments.
In contrast to a traditional public project in which the sewer district manages development and assumes the majority of project and budgetary risk, MSD’s Project Clear Large-Scale Rainscaping Grant Program transfers project and budget risk to the private sector while maintaining firm control of the annual operating budget allocated to green infrastructure development. In doing so, authorities like MSD also tap into the economies of scale of a well-functioning market to access green infrastructure at a lower cost per acre than the all-in cost to do it themselves.[iii] To make such a solution even more attractive, MSD only funds projects once they are approved and contracted, ensuring only projects that meet the sewer district’s needs are built.
Barrier 3: Lengthy Project Cycles
Publicly managed construction projects are notoriously lengthy, not only because of procurement requirements, but also due to the number of project phases involved, from site selection, to geotechnical analysis, to design, public engagement, construction, and validation. At any point, unexpected roadblocks can make timelines less predictable, a serious problem for cities with stringent regulatory deadlines. For example, Peoria, IL, which is seeking to become the first U.S. city to meet the requirements of their future consent decree with the Environmental Protection Agency (EPA) with 100 percent green infrastructure, will have only six years from the time the consent decree is signed to complete 30 percent compliance in combined sewer overflow reduction.
By making a public, long-term commitment to funding their GI2 program, PWD attracted a robust set of private green infrastructure developers and stimulated a burgeoning local green infrastructure supply chain. As a result of private market efficiencies, the average GARP project is completed in just 18 months, whereas the typical green infrastructure project lifecycle at PWD takes four to five years from project origination to completion. And with multiple portfolios of projects advancing simultaneously, lengthy project cycles no longer stand in the way of scaled impact.
Barrier 4: Insufficient Sites
So far, every city rolling out green infrastructure has begun with projects in the public right-of-way. However, as cities seek to scale early successes, they often run into challenges identifying sufficient sites that meet the project criteria cost effectively. This is not surprising; the right-of-way represents a fraction of the land in a city and is frequently complicated by the presence of underground utilities, the need to coordinate with other agencies, and traffic disruptions.
St. Louis’ MSD overcame this barrier by thinking beyond the right-of-way through a GI2 program. MSD has made any public or privately-owned property within the combined sewer zone eligible to pursue an incentive, dramatically increasing the available land. This broadened pool of available sites allows cities to invest in more cost-effective, low-risk projects, and therefore take advantage of the “low-hanging fruit” in their pursuit of regulatory compliance. And as an added benefit, cities need not burden their existing staff resources with many time-consuming tasks (e.g., landowner outreach and project identification) because the private sector takes on this role, as well as the risk involved in feasibility analysis on eligible properties.
Barrier 5: Lack of Public Support
Nearly all public sector projects involve commitments to community engagement to engender understanding of – and support for – publicly-funded projects. Right-of-way green infrastructure projects are highly visible; they change the landscape, and often the streetscape, so it’s natural that communities will have opinions. Particularly, when projects impact available parking or constrict the right-of-way, it’s not uncommon for the public to push back. In the best-case scenario, this causes project delays. In the worst case, a project can fail if it loses public support.
By engaging communities early in the process around the co-benefits of green infrastructure and incorporating equitable distribution of funds into the program design, public skepticism can be transformed into public demand. Youngstown, Ohio is an example of a city where a co-benefits-focused integrated communications campaign resulted in active demand for green infrastructure and led Youngstown to invest in a comprehensive, community-benefits-driven citywide green infrastructure master plan well before their EPA consent decree required it.[iv] When water departments and utilities in cities like Youngstown, St. Louis, and Philadelphia offer opportunities for communities to participate in green infrastructure siting and design decisions and optimize the co-benefits that are most important to them, they can unlock greater public support for their green infrastructure programs. GI2 programs offer the ideal opportunity to engage landowners and their communities, sharing the broad menu of co-benefits that come with green infrastructure, asking communities to prioritize these benefits, then intentionally designing green infrastructure to maximize these prioritized outcomes. And this approach doesn’t have to cost more; it just needs to be planned with greater intention.
Another critical factor in garnering public support is to acknowledge that a one-size-fits-all approach to designing and delivering GI2 programs does not work. Often, lower income communities are located in the parts of cities most prone to flooding and pollution, so they stand to benefit the most from green infrastructure and its co-benefits. A targeted approach within the GI2 program is required to help resource-constrained property owners that serve low-to-moderate income (LMI) communities (e.g., public housing authorities, non-profits, and faith communities) participate. Therefore, if equity is a priority for a given city, then its outreach, engagement, contracting, and financial structuring must also be customized to LMI communities.
Barrier 6: Planning for Long-term Maintenance
Historical approaches to water infrastructure implementation focus on asset construction and leave maintenance planning to future operating budgets. While upkeep costs for green infrastructure are relatively low, ongoing, long-term maintenance is essential to its performance and cannot be deferred under budgetary pressure. For traditional green infrastructure in the right-of-way, maintenance is the responsibility of the city, and fluctuations in operating budgets can threaten the success of the installations.
Every existing GI2 program assures long-term maintenance of constructed assets by requiring the property owner to sign a contract to guarantee maintenance for a given term, reducing the risk that future maintenance will not be funded. In cases such as Philadelphia where PWD offers stormwater fee rebates of up to 80 percent on properties with green infrastructure, the annual savings on the property owner’s water bill more than offset the long-term maintenance costs they assume as part of their contract. In markets like St. Louis where MSD does not bill ratepayers a stormwater fee, cities may consider a variety of alternate options to ensure long-term maintenance requirements do not dissuade property owners from participating, such as setting up an endowment fund that landowner partners could tap into or even providing a performance-based dollar-per-greened acre allocation annually to cover all maintenance costs.
Green infrastructure is an essential strategy in the goal to fortify U.S. cities against the present and growing threat of changing weather patterns, and it comes with additional benefits like cost effectiveness, long-term local job creation, and a host of additional co-benefits. However, in order to realize its potential, it must be designed holistically in partnership with the community, delivered at scale, and maintained for the long-term. GI2 programs offer great promise to help cities overcome barriers to scale and avoid the economic consequences of continued failure to upgrade America’s wastewater infrastructure. And while the GI2 approach is nascent in the U.S. water utility industry, it is not untested. By drawing lessons from the energy efficiency industry and learning from the markets where GI2 programs have been active for a number of years, cities can draw on best practices and lessons learned to design programs that meet their stormwater management goals.
ROSE JORDAN is the VP of Marketing + Business Development at Greenprint Partners, a mission-driven green infrastructure developer that helps cities achieve high-impact, community-driven stormwater solutions at scale. Learn more at greenprintpartners.com and contact Rose at [email protected].
[ii] Faced with similar challenges and drivers, the adjacent energy utility industry perfected a model that has unlocked $60-115 billion in investments per year (ACEEE). Unable to cost-effectively meet energy saving goals through internal improvements alone, energy utilities turned to the private market, incentivizing their residential, commercial, and industrial ratepayers to upgrade non-utility infrastructure with energy-saving technologies.
[iii] According to an NRDC Issue Brief, “Based on experience to date, PWD estimates that it costs approximately $250,000-$300,000 for each greened acre constructed on city-owned land.” The typical reimbursement rate for GARP is $150,000-$200,000 per greened acre. https://www.nrdc.org/sites/default/files/philadelphia-green-infrastructure-retrofits-IB.pdf