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.^{See footnote 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.^{See footnote 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.^{See footnote 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.^{See footnote 4}