Green Infrastructure Toolkit

 

Private Financing

Overview

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. Even more innovative strategies to engage private sector capital include pay-for-performance funding mechanisms such as social impact bonds.

Public-Private Partnerships

A public-private partnership (P3) is a collaboration between a government and one or more private sector partners. Under a P3, the private sector partner contracts to fulfill one or more traditional government functions, including financing, delivery, operations, and/or maintenance of public infrastructure.  

A P3 may allow a local government to make significant upfront capital investments without straining its municipal debt limit, by leveraging limited public funds to attract private capital.1  Commonly cited benefits of P3s include more cost effective and faster program implementation, due to potential economies of scale and technical expertise that a private-sector partner can provide.

However, local governments exploring a P3 must examine several significant legal and policy considerations.  A local government must first determine whether its state has passed enabling legislation for P3s, as well as any restrictions in the enabling legislation on the categories or structures of P3s.2  Additionally, there can be some degree of public opposition to private-sector management of traditional public functions such as operations and maintenance post-installation.3  Prior to establishing a P3, local governments should conduct meaningful stakeholder and community outreach to ensure that the goals of the P3 and terms of the contract agreement align with community interests and achieve community objectives.

For example, local governments can structure a P3 to achieve those community objectives such as community development and local jobs growth by adding local workforce training and hiring requirements into the P3 contract agreement. Prince George’s County, Maryland, has entered into a P3 to address its stormwater management problems through a comprehensive, county-wide green infrastructure program.  Corvias Solutions, the private sector partner, assumes responsibility for design, construction, operations, and ongoing maintenance. As part of the P3 agreement, Corvias will use small and minority businesses in Prince George’s County for at least 30 to 40 percent of the total project.  To verify the effectiveness of the P3, Prince George’s County is independently conducting its own green infrastructure program using conventional public processes during the first three years of the contract. After three years, the county will evaluate the effectiveness of the P3 and determine whether or not to extend the agreement with Corvias.4 

Related Resources

 
  DC Water Environmental Impact Bond

DC Water and Sewer Authority (DC Water), the water utility in Washington, D.C., has announced the nation’s first Environmental Impact Bond (EIB), an innovative bond to fund the construction of green infrastructure to manage stormwater runoff and improve the District’s water quality. The $25 million, tax-exempt EIB was sold in a private placement to the Goldman Sachs Urban Investment Group and Calvert Foundation to fund the initial green infrastructure project in its DC Clean Rivers Project, a $2.6 billion program to control stormwater runoff that pollutes the Anacostia River, Potomac River and Rock Creek. The linked case study from the US Environmental Protection Agency's Water Infrastructure and Resiliency Finance Center provides an overview of how the transaction was structured.

  Public-Private Partnership (P3) Model State Legislation

The Bipartisan Policy Center prepared model legislation to help states pass legislation authorizing the use of public-private partnerships (P3). Before a local government can use a P3 to implement green infrastructure projects, it must determine whether its state has passed enabling legislation for P3s, as well as whether the enabling legislation is broad enough to allow for green infrastructure or stormwater management P3s. As of December 2015, 33 states have passed some form of P3 enabling legislation. Many states’ enabling laws contain specific limitations on the types of P3s, the length of P3 agreements, and the process for negotiating P3s. 

  Community Based Public-Private Partnerships (CBP3s) and Alternative Market-Based Tools for Integrated Green Stormwater Infrastructure

This report is a comprehensive guide for local governments developed by U.S. EPA Region 3. The Community Based Public-Private Partnerships provides background on Public-Private Partnerships (P3s) and a detailed case study of the Prince George’s County green infrastructure P3. The guide provides more general information about the cost and cost-effectiveness of green infrastructure techniques for stormwater management and includes an overview of traditional and innovative strategies for communities funding green infrastructure programs.

  Prince George’s County Clean Water Partnership FAQs

The Clean Water Partnership Frequently Asked Questions document provides an overview of the green infrastructure P3 agreement between Prince George’s County, Maryland, and Corvias Solutions, the private-sector partner. The document includes an overview of the project goals and schedule, and explains the role of the private and public-sector parties.

  Government Financing Communication Strategies for Green Infrastructure