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seedlingGreen Infrastructure (GI), a common term to refer to a range of different types of small and mid-scale installations that support water management and other environmental goals, has become a growing component of many local government’s environmental stewardship strategies. Rain gardens, restored urban water-ways, increased tree plantings, permeable pavement and other distributed “nature mimicking” infrastructure installations are making their way into Green Infrastructure plans across the country (like one recently created in Durham, NC). While many local governments are making strides in implementing these installations, other local governments are still in the pilot phase – experimenting with demonstration projects but nowhere near scale with their investing, at least compared to other types of their infrastructure investing.  As these installations become an accepted part of a local government’s infrastructure investment portfolio, the inevitable “How to pay for it?” questions will arise. While many smaller scale demonstration projects across the country have attracted external grant funding, full scale implementation will require a robust financing approach.

CERES recently released a report looking at the challenges and opportunities of using debt financing to fund these installations. Whether local governments used debt financing or pay as you go financing, they will need to find a reliable source of revenue to pay for these installations. Water and wastewater utilities have water fees. Landfill managers have tipping fees. Road managers tend to rely on a mix of local, state and federal taxes augmented with toll roads. What will be the dominant bottom up revenue for Green Infrastructure? Will we see Green Infrastructure utilities? Green Infrastructure taxes? The answer, as is the case with most local environmental finance questions, will be “it likely will depend” on the region and financial culture of the local government.

As part of a USEPA Cooperative Agreement to develop innovative financing mechanisms, the EFC recently worked with three communities across the country on different aspects of GI Financing.  The EFC is developing a Green Infrastructure Finance Strategy for Durham, North Carolina. Durham has recently shown itself to be a regional leader in GI, particularly related to GI that promotes water quality.  Durham has a stormwater fee that generates approximately $8 million a year in revenues and is assessed to all property owners based on their impervious surface. Revenue from the fees has to support a range of structural (“grey infrastructure”) and management initiatives, but the city has also freed up some funds to begin rolling out innovative GI programs – often leveraging stormwater fees with grants funded by state taxes.

While the fee approach has gained ground in some parts of the country including high profile programs in Washington and Philadelphia that revolve around fees, other programs have turned to taxes as their primary revenue source. Outside of Minneapolis, the Ramsey Washington Metro Watershed District (RWMWD) has rolled out GI as well, but in this case the funding has come from a special property tax on all properties within the watershed. The EFC has worked with RWMWD to share their approach and successes with state water bankers from across the country interested in lending funds for these types of programs. Not surprisingly, the bankers were interested in how they will be paid back and were impressed with the stability and capacity of the watershed improvement tax.

Some communities like Rincon, Georgia where the EFC has made initial introductory presentations to the Board, are interested in GI but are reluctant for a variety of political and economic reasons to create new fees and taxes. In fact, Rincon does not even have a property tax, let alone a stormwater fee. In these situations without a bottom up financing mechanism, the local government will not likely play a key financing role in GI, although the town is optimistic that through planning and regulatory requirements they can at least promote GI with new construction funded as part of development process.  Local governments interested in taking an active role in financing do not all have to choose the same path or revenue source, but they will likely have to choose something.

What revenue does your town use to pay for Green Infrastructure?

 

Jeff Hughes is the Director of the Environmental Finance Center at UNC Chapel Hill.

 

Additional Resources on Green Infrastructure Finance:

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