Traditional means for stormwater infrastructure finance, such as bond issues, federal and state dollars—are becoming increasingly untenable, and it seems inevitable that private investment will be needed as cities contemplate future stormwater management planning. This presentation will discuss Philadelphia’s plan to use GI to mitigate stormwater run-off and how its parcel-based stormwater billing and credit system may present significant opportunities for private investors in local GI investment.

1. Drawing Private Capital to Green Infrastructure
Clean Water America Alliance
October 2012
Presented by:
Larry Levine and Alisa Valderrama
Natural Resources Defense Council

2. The U.S. Water Alliance has met the standards and
requirements of the Registered Continuing Education
Program. Credit earned on completion of this
program will be reported to RCEP at RCEP.net. A
certificate of completion will be issued to each
participant. As such, it does not include content that
may be deemed or construed to be an approval or
endorsement by RCEP.
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3. Purpose
To promote the national dialogue on resource recovery and
green infrastructure
Conference Learning Objectives
At the end of this presentation you will be able to:
 Define the range of benefits of green infrastructure practices
 Identify barriers and costs to implementation of these practices
 Evaluate options and opportunities for funding, financing, and valuing
green infrastructure
 Develop practical actions that government, communities, and others can
implement to promote adoption of green infrastructure solutions
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4. Presentation Objectives
• Understand the role of impervious area-based stormwater charges in
stimulating private investment in green infrastructure
• Identify challenges that must be addressed to realize the investment
potential
• Explain pro-active strategies that municipalities (and others) can use to
overcome these challenges
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5. Objectives
• Understand the role of impervious area-based stormwater charges in
stimulating private investment in green infrastructure
• Identify challenges that must be addressed to realize the investment
potential
• Explain pro-active strategies that municipalities (and others) can use to
overcome these challenges
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6. Overview
• Deploying green infrastructure at a citywide or regional scale can help meet
Clean Water Act goals for stormwater (MS4) and sewage overflows (CSOs).
• Major, long-term investment is required to green the existing built environment
in our cities.
• Need to take advantage of both public and private funding sources.
• Cities can leverage private investment through policies that:
(i) Establish design/performance standards for redevelopment projects;
(ii) Drive private property owners to retrofit existing developed parcels; and
(iii) Create or enhance opportunities for private capital to underwrite up-front
costs of retrofits.
• With appropriate public policy and financial toolkits, private capital investment
can enable and accelerate green infrastructure retrofits.
• Philadelphia provides an excellent test case!
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8. Philadelphia’s Green City Clean Waters Plan
• Relies on green infrastructure for a majority of the required reductions in sewage
overflows
• City can claim credit for “greened acres” on private property
• Greened acres through redevelopment standards
• Greened acres through voluntary retrofits on existing developments
• Stormwater fees and credits incentivize private property owners to retrofit
existing development
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9. Philadelphia’s parcel-based stormwater rate
structure
• Previous stormwater fee based on water usage (measured by water meter)
• New fee based on: impervious surface area + gross area + min. parcel charge:
For fiscal year 2014 (proposed):
 Impervious area= $4.50 per 500 sf
 Gross area rate= $0.56 per 500 sf
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10. The new fee structure may also improve the
“financeability” of green infrastructure retrofits:
• Substantial discount on fee available for owners who manage first inch of
stormwater on their parcel.
• Parcel owners need to re-apply for the credit every four years.
• Over time, retrofits will pay for themselves through avoided stormwater fees.
Example: Under Philadelphia’s current rate and fee, for example, project costs
should fall below $36,000 per acre ($0.82 per square foot) if the project is to pay
back within 10 years.
 Limited data to generalize about retrofit costs
 Value of credit will go up over time as stormwater rates increase
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11. Many parcel owners lack the cash to pay the upfront
costs of retrofits and will likely seek financing
• Traditional financing mechanisms are likely unavailable because of:
 Existing leverage on assets and lack of collateral
 No track record of repayment for such loans
• As a result, many property owners are unable to respond to the incentives created
by the credit and fee structure
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12. Government actions can help overcome the barriers
to private investment in retrofits (1 of 2)
• Credit enhancement
• On-bill financing
• Tax lien financing
Credit enhancement, such as a loan loss facility
o Lenders are reluctant to take risks in an unproven market.
o Creating a cash reserve that acts as a guarantee against some or all
investment losses can stimulate investment.
o The source of capital for the loan loss can come from either public or
philanthropic source.
o Benefits:
o Can improve private financing terms or enable project financings which
otherwise may not have succeeded.
o Can create a track record of investment performance and lay
groundwork for a functioning market in retrofit finance.
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13. Government actions can help overcome the barriers to
private investment in retrofits (2 of 2)
• On-bill financing
o Lenders work in coordination with stormwater utility.
o Utilizes existing stormwater bill collection process to disburse funds for retrofits
and collect repayment.
o Benefits: increases ease of participation by property owners and reduces cost of
capital by lowering risk of non-repayment.
• Tax lien financing, such as Property Assessed Clean Energy (PACE) programs
o Utilizes municipal authority to issue special revenue bonds to raise capital, which
is then disbursed to property owners to pay for qualifying retrofits.
o Municipality collects repayment in the form of tax assessments.
o Benefits: provides dedicated source of upfront capital available for lending;
attractive to investors because tax lien stays with property in event of sale or
transfer.
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14. Recommendations for Local/Regional Utilities
1. Establish and publicize appropriate fee and credit structure
• Adopt stormwater charges based on impervious area, often known as
“parcel-based billing”
• Provide a “credit” (i.e., fee reduction) for installing stormwater retrofits,
commensurate with avoided costs to the stormwater utility and generous enough
to provide a return on investment to those relying on avoided fees as a “cash
flow”
• Publicize information about the availability of credits, their value, and the
process for obtaining them
• Invest in further research into the costs of stormwater retrofits and make
that data publicly available, to facilitate more robust cost-benefit analyses of
stormwater projects
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15. Recommendations for Local/Regional Utilities (cont’d)
2. Implement, support, and/or explore public policy interventions
that can catalyze private investment:
• Credit enhancement facilities
• On-bill financing
• Tax lien financing
• Help bring individual projects together, to reduce “transaction costs” and
achieve economies of scale
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16. Recommendations for Fed/State Governments
For USEPA:
• Update Clean Water Act regulations to include strong stormwater retention standards for new
development and redevelopment, as well as retrofit requirements for existing developed areas.
• Promote parcel-based billing as part of a strategy for enhancing financial capability to pay for
green infrastructure investments (e.g., as part of the “Integrated Planning” initiative).
• Encourage the use of SRF funds to underwrite credit enhancement facilities that leverage
additional private investment, in local jurisdictions with stormwater fee-and-credit systems.
For state governments:
• Issue municipal stormwater and CSO permits with strong standards for stormwater retention
for new development and redevelopment, as well as retrofit requirements for existing developed
areas.
• Provide financial incentives to municipalities to implement parcel-based billing practices
and/or on-bill financing programs.
• Authorize and encourage local jurisdictions with fee-and-credit systems to use state
infrastructure funding to underwrite credit enhancement facilities that leverage additional
private investment.
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17. Looking Ahead…
Large scale potential for private investment in green infrastructure retrofits
• Nationwide:
o About 1,000 communities already have impervious area-based stormwater fees;*
many of those offer credits for property retrofits that reduce runoff
o 770 CSO communities, over 7,000 MS4 communities
• Philadelphia is an incubator for green infrastructure financing ideas
o Philadelphia has one of the most enticing stormwater fee reductions available
o NatLab (Natural Infrastructure Financing Laboratory)
 NRDC, TNC, & EKO Asset Management Partners
 Working with the City to develop and implement financing strategies
*http://www.wku.edu/engineering/civil/fpm/swusurvey/
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18. Report Links and Contacts
Report Links:
Financing Stormwater Retrofits in Philadelphia and Beyond
http://www.nrdc.org/water/files/StormwaterFinancing-report.pdf
Rooftops to Rivers II: Green Strategies for Controlling Stormwater and Combined Sewer
Overflows
http://www.nrdc.org/water/pollution/rooftopsii/files/rooftopstoriversII.pdf
Contacts:
Alisa Valderrama | Senior Project Finance Attorney, Center for Market Innovation
Office: 212-727-4438 | 40 West 20th Street, New York, NY 10011
avalderrama@nrdc.org | www.nrdc.org
Lawrence Levine | Senior Attorney, Water Program
Office: 212-727-4548 | 40 West 20th Street, New York, NY 10011
llevine@nrdc.org | www.nrdc.org
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