Stormwater Finance: The Status of Federal Funding and the Future Role of Private Capital

Transcription

1 Stormwater Finance: The Status of Federal Funding and the Future Role of Private Capital Water Infrastructure and Resiliency Finance Center Jim Gebhardt, Director Maine Stormwater Conference, Portland, Me. October 23-24, 2017

2 Topic Areas The Federal Funding and Project Eligibility Landscape National Stormwater Utility Trends The Emerging Role of Private and Social Capital What Can We Expect From Washington Now?

3 Federal Funding and Project Eligibility Landscape Is there a seat at the table for Stormwater?

4 Clean Water State Revolving Fund (CWSRF) The CWSRF program provides low-cost financing for a wide range of water quality infrastructure projects - $118.7 Billion thru 6/30/17. State implemented and operated program Flexible authority for states to incentivize projects Type of assistance: loans, refinancing, guarantees Loan terms: interest rate, projects funded Additional subsidization (negative interest, principal forgiveness or grants) Non-point source projects account for $4.8 billion of the $118.7 billion in total assistance There is been substantial effort made to boost NPS projects, including Green Infrastructure ( GI ) From 2010 thru 2017, EPA required states to set aside dollars for dedicated GI projects (the Green Project Reserve ). President s FFY 2018 Budget maintains prior funding levels for the CW and DWSRFs at $2 bn and $1 bn, respectively. 4

5 Clean Water State Revolving Fund Green Infrastructure Policy Green Infrastructure Policy for the CWSRF (January 2016) to increase financing of green infrastructure projects nationally through actions including prioritizing projects, marketing the program and providing financial incentives, such as additional subsidization. Financing Green Infrastructure: A Best Practices Guide for the CWSRF (2015) - illustrates incentives states can use to encourage financing of green infrastructure and foster sustainability within their programs. Innovative financing mechanisms Co-funding - with other federal or state programs Sponsorship POTW project paired with GI project Conduit Lending - pass-through and linked deposit loans Guarantees See: 5

6 Clean Water State Revolving Fund Water Resources Reform and Development Act (WRRDA) of 2014 amended Clean Water Act ( CWA ) Expanded Eligibilities for Green Infrastructure - amended CWA, Section 603(c)(5) - publicly and privately owned, permitted and unpermitted projects that manage, reduce, treat, or recapture stormwater or subsurface drainage water are eligible Up to 30 year loan terms or the useful life of the project (the lesser of the two) Additional subsidization - permanent authority to offer principal forgiveness, negative interest loans, and grants See: EPA WRRDA Guidance

7 Water Infrastructure and Resiliency Finance Center Clean Water State Revolving Fund New Report: Financing Options for Nontraditional Eligibilities in the CWSRF This paper (May 2017) developed by the EPA HQ CWSRF Branch focuses on how varied types of financial assistance available to the CWSRF program can fund eligibilities such as privately owned green infrastructure, privately and publicly owned projects for reusing or recycling stormwater, and watershed projects. https// 7

8 Water Water Infrastructure Infrastructure Finance and and Resiliency Innovation Finance Act ( WIFIA ) Center Water Infrastructure Finance and Innovation Act program authorized under WRRDA was funded in December WIFIA is a loan and guarantee program that was underwritten by an administrative appropriation to EPA ($5 million) and a loss reserve ($25 million). The Act allows EPA to leverage the loss reserve to originate loans funded by the U.S. Treasury or to provide guarantees for eligible projects and to eligible project sponsors. $25 million loss reserve will be leveraged approximately 60 x resulting in initial program capacity of $1.5 billion. Value Proposition: provides project sponsors with access to cost of funds at the U.S. Treasury rate with flexible repayment terms and security requirements. Project thresholds are: $20 million for large communities and $ 5 million for communities under 10,000. The Act allows WIFIA assistance for up to 49% of eligible project costs. Loan Process runs in three stages: Notice of Funding Availability issued in January 2017 ( called a NOFA ) - Letter of Interest, which provides information that EPA reviews to determine who it will invite to submit a loan application. - Loan application which comes with processing fees 8

9 Water Water Infrastructure and Finance Resiliency and Finance Innovation Center Act (WIFIA) Water Infrastructure Finance and Innovation Act program invited 12 entities (including the Saco River Water Treatment Project in Biddeford, Me.) with projects in 9 states to apply for more than $2 billion in WIFIA loans. Selected projects that include stormwater: City of Baltimore, MD will repair, rehabilitate, replace, and upgrade its wastewater collection and treatment, water treatment and distribution, and stormwater management systems. City of Omaha, NE will construct a new retention treatment basin to address combined sewer overflows in the Saddle Creek Basin. King Co., WA treatment station, conveyance pipelines and outfall structure to treat combined sewer overflows to the Lower Duwamish Waterway. Saint Louis, MO replace parts of the sanitary sewer to address combined and sanitary sewer overflows to Deer Creek. For more Information see: 9

10 National Stormwater Utility Trends

11 Emerging National Response to the Stormwater Challenge Number of Stormwater Utilities Nationwide Western Kentucky Stormwater Survey

12 *According to Western Kentucky University Stormwater Survey

13 New England Stormwater Utilities Communities Name Year Created 2000 Population Type ERU (sq ft imp) Fee Annual Revenue MA Chicopee Fall River Gloucester Newton Northampton Reading Westfield ,653 91,938 30,273 83,829 28,592 24,145 41,094 ERU ERU Fixed Rate Two-Level Fixed Rate Two- Level Fixed Rate 2,000 2,800 3,100 3,210 $8.33 $11.67 $4.42 $2.08 $5.00 $3.33 $1,000,000 $4,660,000 $575,000 $1,980,000 $357,000 $600,000 ME VT NH RI CT Lewiston Augusta Bangor Long Creek Watershed Portland Burlington South Burlington Williston ,690 18,560 33,011 38,889 15,814 8,698 Two-Level ERU ERU Two-Level ERU Tiered Tiered ERU 2,700 3,000 43,560 12,000 1,200 1,000 2,700 4,000 $4.17 $7.54 $1.83 $6.89 $6.00 $1.69 $5.94 $4.25 *According to Western Kentucky University Stormwater Survey $1,400,000 $1,500,00 Two Level System (commercial/ residential) 13

14 Why are Stormwater Utilities Gaining Traction? Historically the cost of stormwater management has been funded through taxes paid into a general fund or thru a community s dedicated water and wastewater enterprise fund. In the competition for dollars, stormwater management has typically been low priority unless the municipality is reacting to a recent major storm or regulatory action. As a component of a water and wastewater budget, fees collected for stormwater are generally based on meter flow which bears no relationship to the amount of stormwater generated on a parcel. Stormwater Utilities are designed to address these challenges by establishing a dedicated operating platform and revenue stream yielding: More equitable cost distribution: Cost is based on the amount of stormwater a property contributes to the system due to impervious cover or other metrics ( Polluter Pays Model) o Can include tax-exempt properties, such as government properties, schools, colleges and universities, which can be major contributers of stormwater. Financial resources for long term planning for capital projects and O&M. Stable revenues that can attract investment capital and foster partnerships. 14

15 The Emerging Role of Private and Social Capital

16 Three Active Models That Are Leveraging Public, Private & Social Capital Community-based Public Private Partnerships Prince George s County, MD City of Chester, PA Stormwater Volume Retention Credit Program Washington DC Department of Energy and Environment Environmental Impact Bond Washington DC DC Water 16

17 Community-Based Water Infrastructure and Public Resiliency Private Finance Partnership Center (CBP3) A Performance-Based, Community Economic Development Program designed to: Design, Finance, Build and Operate large-scale green infrastructure through aggregated, integrated development. Drive down costs of green infrastructure, while providing multiple community benefits, including small business and job growth for the local population. Accelerate the pace of green infrastructure implementation. Provide for high-value investments and smart, resilient infrastructure. Create long-term Performance Partnership that expands local capacity to improve the community and its water resources. 17

18 The Community Based Public-Private Partnership: the Value Proposition Cost Savings and Project Acceleration Gain economies of scale to reduce costs and accelerate delivery Long-term operations and maintenance plan ensuring sustainable infrastructure program Community Benefits Improvement of quality of life through opportunities for local small businesses and residents Increased affordability through innovation and standardization New revenue source for the community Strategic land development benefiting the environment and the Community 18

19 Community Based P3 Model Municipality/Public Entity Ownership and Control retained by the public partner Private Entity Provides surety of execution and adopts shared goals managed through performance metrics Integrated program services that lowers delivery costs and incentivizes private sector delivery to be outcome based. Design/Build CBP3 Entity Performance- Driven Contract Focus on lower procurement barriers and procuring local disadvantaged businesses and jobs. Operate/Maintain Traditional P3 Value Proposition Lower life cycle costs Project delivery time Transfer of risk Long term O&M commitment Shared economic and social goals Alternative private financing option CBP3 Adds to the Value Proposition Community is priority Mixed public/private financing can reduce financing costs, (SRF loans or guarantee can be a factor) Municipality has high degree of control/input Savings reinvestment into project Fixed-fee; Performance goals 19

20 Water Infrastructure and Resiliency Finance Center Prince George s County, MD Urban Stormwater Retrofit CBP3 Pay for performance service delivery model to improve water quality through implementation of high impact stormwater control measures. - The approach delegates project selection, design, construction, operation, and maintenance responsibility to a team of private partners. The agreement also requires the development and implementation of social and economic development programs. - The County relies primarily on stormwater utility fees to back debt issuances for the initial installations and to cover ongoing operation and maintenance costs. Highlights - Driven by Chesapeake Bay TMDL - 30 year partnership - County invests $100 million contract to Corvias for the initial 3 year retrofit of 2,000 acres, - County plans to retrofit 8,000 acres focusing on green infrastructure - EPA Region 3 Leadership to develop the partnership - Maximize Local Benefits - Business Development - Jobs - Community Wealth 20

21 Chester, PA Community Based Public Private Partnership (CBP3) CBP3 Demonstration Partnership launched June 2017: City of Chester (population 34,000, severe financial distress) Stormwater Authority of Chester (formed in Oct. 2016) EPA Region 3 To plan, finance, build and maintain up to $50 million in green stormwater infrastructure over the next years on approximately 350 acres to address significant pollution and flooding issues; improve neighborhood quality of life; assist small, minority-owned businesses; drive economic growth. Financial Support for Planning: Chester Water (Regional Drinking Water Authority)- Cosignatory for Pennsylvania SRF $$ with newly created Stormwater Utility Pennsylvania SRF Program (PENNVEST) provided $1MILLION preconstruction grant due to large-scale delivery/o&m capacity of the CBP3 EPA as Demo Partner Provided: Background Review of Regulatory, Technical, and Community Needs Stakeholder Engagement Development of Triple Bottom Line RFQ/RFP for Chester SW Authority CBP3 program Technical Assistance with SRF/Pennvest GI Projects ID & Planning/Design Application 21

22 Chester, PA Community Based Public Private Partnership (CBP3) Goals: to make strategic and impact investments in the City of Chester s stormwater infrastructure that will: Revitalize the community and create low barrier to entry jobs and economic growth opportunities for Chester residents and businesses Increase property values and promote development opportunities in key community corridors Provide public education and outreach opportunities around water quality and more sustainable development and preservation Comply with Federal and State Clean Water regulatory compliance requirements as outlined in the City s MS4 permit 22

23 Chester, PA Community Based Public Private Partnership (CBP3) CBP3 Program Solicitation September 2016: Request for qualifications & proposals (RFQ/P) for establishing a CBP3 for the Stormwater Authority of the City of Chester, PA issued November 2016: Evaluations of proposals submitted in response to the RFP/Q completed (Corvias selected as primary, prospective partner) January 2017: Award made March 2017 : Impervious Cover and Stormwater Fee Study Completed March 2017: Project Screening and Ranking Completed Community Based Public-Private Partnership Formation Under a partnership approach, the private party (Corvias) and public party (the Stormwater Authority of Chester) have entered into a 30-year partnership to improve the stormwater infrastructure and make a commitment to impact the local economy with the following key transitions from prior approaches: Private Sector Involvement; Social Value Creation; Long Term Sustainability; Site Flexibility For RFP/Q: 23

24 Stormwater Retention Credit Program Washington D.C. Department of Energy and Environment Properties generate Stormwater Retention Credits (SRCs) for voluntary green infrastructure that reduces stormwater runoff. Owners trade their SRCs in an open market to others who use them to meet regulatory requirements for retaining stormwater. Revenue creates incentives to install green infrastructure that protects rivers and provides other benefits. 24

25 Stormwater Retention Credit Program Washington D.C. Department of Energy and Environment Credit Program can increase retention by allowing off-site mitigation Greater retention for smaller storms (90% of DC storms are less than 1.2 ) Strict On-Site Trading 5,000 gallons 5, ,000 = 10,000 gallons To learn more go to : 25

26 DC Water Environmental Impact Bond (EIB) DC Water structured their EIB to finance first two of eight GI projects The express purpose of the EIB is to mitigate DC Water s risk of financial loss associated with a failure of GI Investors will be repaid, in part, based on GI s measured effectiveness EIB follows Contingent Pay Pay for Success Models 26

27 DC Water Environmental Impact Bond (EIB) Performance Outcome Payment GI Over Performs Runoff reduced > 41.3% DC Water makes outcome Payment of $3.3 million to investors Expected Likelihood 2.5% DC Water & GI Cost savings less GI needed and future GI projects downsized. OR Accelerate scale, deployment of GI GI as Expected Runoff reduced as expected 18.6% < reduction < 41.3% Neither party makes a contingent payment 95% Continue original GI plan with confidence GI Under Performs Runoff Reduced < 18.6% Investors make Shared Risk Payment of $3.3 million to DC Water 2.5% Scale back GI, remediate GI or deploy gray infrastructure 27

28 Water Infrastructure and Resiliency Finance Center Pay for Success White Paper New Report: DC Water s Environmental Impact Bond: A First of its Kind (April 2017) The Center developed an in-depth technical report of the first Environmental Impact Bond. This new Pay for Success financing structure was developed by DC Water to privately fund the construction of green infrastructure to manage stormwater runoff as part of DC Water s Clean Rivers Project. See : And the webinar at: 28

29 Environmental Impact Bonds (EIB) Rockefeller Foundation is Sponsoring an Initiative to Pilot the DC Model in Two Additional Locations Project Scope and Eligibility Applicants should identify green infrastructure or other resilience projects that are already in the planning stages and could be construction-ready by Fall of The applicant may propose one project or a bundle of projects. Projects should be large enough to warrant an EIB issuance, ideally amounting to $5 million or above. Projects should provide benefits to poor and vulnerable communities. Project Timeframe May 1, 2017 to September 31, 2018 Phase 1: Select Municipalities (May Oct 2017) Phase 2: Provide Technical Assistance for EIB Issuance (Oct 2017 Sept 2018) underwritten by Rockefeller Application Process Notice of Intent to Apply was due August 25. Webinar available at: Proposal Submission Deadline: September 15 Selection: October 29

30 Water Infrastructure and Resiliency Finance Center Stormwater Finance Webinar Series Upcoming Webinars Financing Stormwater & Green Infrastructure with the CWSRF (Date TBD) Presenting (TBD): San Francisco Public Utility Commission, CA; Dubuque, Iowa; Syracuse, NY Stormwater Fee / Utility Community Successes (Date TBD) Presenting (TBD): Northeast Ohio Regional Sewer District, Cleveland, OH; Abilene, TX; Hampton, PA Past Webinars DC Water s Environmental Impact Bond, May 11, 2017 (Recording on our website) DC s Stormwater Retention Credit Program, May 23, 2017 (Recording on our website) Clean Water State Revolving Fund: Flexible Funding for Urban Tree Canopy, March 29, 2017, (Recording on CWSRF website). 30

31 Water Infrastructure and Resiliency Finance Center Stormwater-Focused Regional Finance Forums Region 1: Stormwater Finance Forum Durham, NH, Nov , 2016 Region 9: Stormwater Finance Forum Alhambra, CA, April 3, 2017; Oakland, CA, April 5, 2017 Agenda: Water as a Resource Opportunities and Challenges Understanding Your Costs Harnessing Technical Assistance and Tools to Access and Plan for Stormwater Funding State Sources of Funding Innovative Public Funding Approaches Integrating Public-Private Investment Workshop: Setting a Financially Healthy Stormwater Fee for a Resilient Future Panel: Public Consensus-Building Agenda: Framing the Challenges & Opportunities in Funding Stormwater Programs Planning for Success What Program Managers Need to do to Win Financing Engaging the Public and Decision- Makers to Market Your Program Public Grant/Loan Programs to Fund Stormwater Projects Fee Programs and Other Ongoing Local Funding Sources Unconventional Funding Sources 31

32 Water Infrastructure and Resiliency Finance Center An easily navigable web-based portal to help communities locate information and resources that will assist them in making informed decisions for their drinking water, wastewater, and stormwater infrastructure needs. 32

33 Environmental Finance Center Network Operate in EPA Regions The Environmental Finance Centers deliver targeted technical assistance to, and partner with states, tribes, local governments, and the private sector in providing innovative solutions to help manage the costs of 10 environmental financing and program management. Rural Community Assistance Corporation California State University at Sacramento Wichita State University University of New Mexico Michigan Technological University University of North Carolina at Chapel Hill University of Southern Maine Syracuse University University of Maryland 33

34 Water Infrastructure and Resiliency Finance Center The EFC at The University of Southern Maine Current Activities Doing work in RI and MA to help communities use BMP resources in practical ways, and with how to pay for climate adaptation in a landscape of increasing extreme weather events and Sea Level Rise. Doing work with the State of Maine Drinking Water Program to leverage available SRF's for source water protection. Networking with water utilities, land trusts, municipalities and others who have a shared goal to protect the natural landscape around water sources. The New England EFC will be making a presentation tomorrow at 8:30 on resources they developed for a model to assist New England communities enact stormwater utilities. It is based on Portland s experience creating the most recent stormwater utility in New England, which was approved unanimously by the Portland City Council. It is entitled Moving From Contemplation to Implementation of Your Stormwater Management Plan. Contacts: Martha Sheils: martha.sheils@maine.edu. Ed Suslovic: ed.suslovic@usm.maine.edu 34

35 Water Infrastructure and Resiliency Finance Center Products in The Works: Finance Learning Module The Center is developing several learning modules in conjunction with the Clearinghouse including: Stormwater Finance (Contact us if you are interested in helping to develop this module!!) Water Loss Finance Disaster/Resiliency Finance Septic Finance Municipal/Animal/Ag Finance DWSRF/CWSRF Conservation Finance 35

36 What Can We Expect From Washington Now?

37 There is the Outline of an Infrastructure Investment Plan Administration is Looking at Four Focus Areas: Rural Infrastructure Needs Projects that are Transformative Increasing size and scope of existing lending programs Revising federal tax law and policy to equalize capital costs for privately owned projects that serve the public 37

38 There is the Outline of an Infrastructure Investment Plan The Administration is Looking to leverage up to $200 billion in federal dollars over the next 10 years to incentivize state and local investment/revenue creation. Looking to use these dollars to reverse auction project selection relying on the following: Intent of applicant to apply alternative procurement methods ( P3 models ) Advancement of state-of-the-art technologies Plans that demonstrate sustainable lifecycle operations ( asset management ) Anticipated social and economic return on investment The % non-federal investment share of the project (the greater the non-federal share, the greater the project score) 38

39 Contact Jim Gebhardt, Director US EPA Water Infrastructure and Resiliency Finance Center

40 APPENDIX

41 Global, U.S. and Regional Precipitation Trends Key Points The world s average temp is C higher than in Each one degree Centigrade rise in temperature increase the moisture carrying capacity of the atmosphere by 7%. ( the Clausius-Clapeyron Equation ) On average, total annual precipitation has increased over land areas in the U.S. and worldwide (see Figures 1 and 2). Since 1901, global precipitation has increased at an average rate of 0.08 inches per decade, while precipitation in the contiguous 48 states has increased at a rate of 0.17 inches per decade. Some parts of the U.S. have experienced greater increases in precipitation than others. A few areas, such as the Southwest, have seen a decrease in precipitation (see Figure 3). Not all of these regional trends are statistically significant, however. 41

42 Global Precipitation Trends 42

43 U.S. Precipitation Trends 43

44 Change in Precipitation in the U.S., Alaska data started in 1925 NOAA National Centers for Environmental Information. Accessed February U.S. EPA Climate Change Indicators in the U.S. 44

45 U.S. Decadal Precipitation Trends

46 U.S. Precipitation Trends 46