Stacey Isaac Berahzer is a Senior Project Director for the Environmental Finance Center at the University of North Carolina, and works from a satellite office in Georgia.
The country is experiencing record breaking temperatures today. Here in Atlanta for example, the 7 degree Fahrenheit temperatures have not been seen in about 44 years. In many places ice and snow are in the mix too. November 5th, 2013, marked the first measurable snowfall in Minnesota for the season. Despite the weather, a group of State Revolving Fund (SRF) managers representing eleven (11) different states and EPA still went on an optional tour of two green infrastructure sites in the Minneapolis metro area.
Evolution of Water Quality Management in the US
Water quality management in the US started out with the obvious focus on point sources of pollution, such as wastewater treatment plants. Over the last few decades, significant progress has been made in this area, leaving room for more resources to be shunted to non-point source management. Indeed research has shown that non-point sources, mainly due to their ubiquitous nature, are a significant source of water pollution, especially with today’s fewer point source failures. So, while we need to continue the programs to manage factories and other point sources, understandably, there is now more attention on projects to address non-point sources. But, not all non-point projects are created equal, especially when it comes to financing strategies.
While more engineered, single-site, larger projects still seems to be dominant for funding among SRF programs, there is another “layer” of water quality management projects that have been catching on (see the diagram below). These “green infrastructure” (GI) projects tend to be more distributed in nature, in an attempt to treat stormwater closer to where precipitation falls. As a result, there is a more natural feel to these projects and they also tend to have aesthetic and recreational side-benefits (think triple bottom line). But, their distributed nature can pose some challenges to traditional local government financial systems.
The EFC at UNC is working on addressing some of the barriers to green infrastructure financing for water quality projects. How such projects get financed is one of our key areas. The SRF program is a major source of funding for water projects across the country, but even with federal pushing of these projects since 2009, only about 5% of overall SRF funding has been spent on GI projects.
Competing Varieties of Water Projects
Early adopters of GI approaches to water quality management have often been entities such as soil and water conservation districts and watershed organizations. However, local governments make up the majority of the clientele of most SRF programs. An obvious question when in a room of 70 state revolving fund (SRF) managers is, “which state SRF programs fund conservation districts and watershed organizations?” At the annual SRF conference in November, 2013 we had the chance to ask this question. Note that the following results do not reflect a robust survey, but merely a few informal polling questions that were asked of SRF managers at an annual conference session. However, the managers did represent most of the states in the country. As can been seen below, the question attempted to see which state programs have the ABILITY (in terms of written policy) to fund non-governmental entities, while the second iteration of the question is getting at whether or not states exercise this ability. The results are interesting in that while 61% of the respondents say they can fund these entities, only 38% have actually made those types of loans. The explanation for the discrepancy is probably two fold. Perhaps such non-governmental entities do not seek out the SRF program as a financing source for their GI projects. There may also be features of the project priority setting process within the SRF programs that disfavor GI projects.
The fact is that since SRF programs can fund a large diversity of water projects, scoring diverse projects alongside each other in order to prioritize projects for funding can be a challenge. One way to address this is to create separate pots of money for the different types of projects. So, the next question we posed to our captive audience of SRF managers was “would your state develop a separate pot of SRF funds for distributed GI projects?” As can be seen below, about a quarter of the folks in the room said that their state already had such delineation. Close to 40% of them indicated that this was something that their states were considering, while about a third of them did not see this as something their states would consider.
With so many responses of “Maybe Soon” and the fact that a group of the SRF managers elected to spend three cold hours to participate in a GI tour might be a testament of warming interest in funding green infrastructure water quality projects, something that GI proponents might want to capitalize on.