Green Infrastructure Toolkit

 

How to Pay for Green Infrastructure: Funding and Financing

Introduction

Communities are increasingly turning to green infrastructure as a vital tool to help manage stormwater and improve climate resilience. However, many local governments seeking to establish green infrastructure programs face budget constraints that may limit the scope or effectiveness of program implementation. Fortunately, local governments have the opportunity to draw upon a wide range of funding sources, revenue models, and financing strategies to support green infrastructure programs. This Funding and Financing Chapter provides strategic guidance on how to pay for green infrastructure. 

Stormwater management is increasingly becoming a major expense for local governments addressing persistent flooding or responding to legal and regulatory mandates, such as combined sewer overflow (CSO) consent decrees,1  total maximum daily load waste load allocations,2  or municipal separate storm sewer system (MS4) permits.3   

Investing in green infrastructure can cost-effectively help communities manage stormwater while also producing significant co-benefits. Examples of co-benefits include improvements in air quality and public health, increased climate resilience, opportunities for community recreation, and enhanced community aesthetics.4 Designing green infrastructure programs to maximize co-benefits may open up funding sources that would otherwise not be available for stormwater management projects or programs. For example, communities can use funds for programs such as transportation and street design, open space and wildlife conservation, or disaster relief to pay for green infrastructure programs. Additionally, communities can implement innovative financing strategies to capture the economic value created by flood costs avoided, increased health benefits, or increased property values. Communities can aggregate multiple funding and revenue sources, or combine a funding source with financing options such as low-interest loans or green bonds.

Green Infrastructure Cost Effectiveness

Green infrastructure can effectively manage the “first flush” of stormwater while producing significant cost savings for local governments. For example, Philadelphia’s city-wide Green City, Clean Waters program is projected to save the city $8 billion over a twenty-five year implementation period compared to the traditional gray infrastructure that would have been required under an agreement with the U.S. EPA to control the city’s stormwater.5 Similarly, Chicago, Illinois, has reported that its green infrastructure installations are more effective at managing stormwater than traditional techniques on a per-dollar basis.6 The Chicago Green Alley Program is estimated to manage stormwater between 3 and 6 times more effectively per dollar compared to traditional stormwater infrastructure.7 However, it can still be hard to find the funds to build and maintain green infrastructure.

This chapter provides descriptions of multiple strategies that a local government can use to pay for green infrastructure program implementation.  The tools covered in this chapter are broken down into five categories. For each of the funding or financing strategies, this toolkit provides an overview of how the mechanism can be used to pay for green infrastructure projects or programs. Linked resources in the Georgetown Climate Center Adaptation Clearinghouse provide more detailed information about funding programs or descriptions of jurisdictions that have successfully paid for green infrastructure projects or programs using the various funding or financing tools. This Chapter explores federal funding sources, state funding sources, local funding models, government financing options, and private financing options (each described in more detail below).8  

Each funding or financing strategy can be compared under a set of decision-making criteria, including:

  • Funding Availability, which includes the ease of getting funds and the ability to sustain them over time. For example, whether a federal program is available every year and calculated by a formula, as opposed to being a competitive grant program.
  • Funding Flexibility, meaning the amount of discretion the local government has to decide how to use the funds, or the breadth of activities that the funds can support.
  • Municipal Budget Impact, meaning whether the particular funding strategy takes money out of the local government’s general fund.
  • Administrative Burden, which includes the time and resources necessary for the local government to administer or manage that funding strategy, in addition to any potential administrative process to begin the program (writing new regulations, for example).
  • Legal Constraints, such as whether the funding strategy is constrained by state statutes that may give the local government legal authority for that strategy (or not), or by related state laws such as, for example, caps on borrowing.

Funding and Financing Options

Federal Funding

Federal programs can provide significant funding for local green infrastructure programs. Local governments may be eligible for federal government grants administered by a range of departments and agencies (e.g., DOT, EPA). Federal funding can come in multiple forms: some in competitive grants, and some in formula programs that local governments are already likely to be receiving. Federal grants may be used to supplement money available to local governments through traditional budgeting or financing. However, federal grants can be highly competitive, may require lengthy application, are limited in size and scope, and often are awarded on a one-time basis.

Local Funding

Local governments can also pay for green infrastructure using local revenue sources, including the government’s general fund appropriations and capital budget, or through user fees or stormwater utility fees. These local funding sources, if implemented, may be consistently available and more flexible for application to green infrastructure projects; general funds, however, may present a strain on municipal budgets because green infrastructure projects could compete for money with other projects without an increase in revenue.

Government Financing

Municipal governments may also be able to use public financing methods, such as municipal bonds, to pay for green infrastructure projects. Local governments may be able to use Clean Water State Revolving Fund money to finance green infrastructure projects. Additionally, local governments can explore strategies that capture the value created by installing green infrastructure, such as tax increment financing.

Private Financing

Communities may also explore innovative strategies to leverage limited municipal funds to attract private capital. One approach that is common to infrastructure projects but has been limited in green infrastructure stormwater management is the use of public-private partnerships (P3s). P3s provide access to private capital and may provide a means to rapidly scale up green infrastructure project installation; however, local governments must take care to ensure that the program will take into account and ultimately reflect the community’s needs.

  Government Operations Federal Funding