Chapter 6: Funding Natural Infrastructure
Learn more about the benefits of natural infrastructure in Naturally Stronger, which illustrates the importance of equitable investments in natural water infrastructure by highlighting successes across the country including contributions to national and local economies. Chapter 6 describes different ways to equitably fund natural water infrastructure.
The question of financing is central to the water infrastructure challenge. The evidence is clear that investments have failed to keep up with demand. From major metropolitan areas to unincorporated rural communities — particularly those home to people of color and those surviving on a small incomes — our water infrastructure is inadequate, failing, or both. While our infrastructure needs face budgetary restrictions at all levels of government, integrated approaches to water management offer new funding models that deliver huge overall cost savings.
We must acknowledge that equity has hitherto been missing from our conversations on infrastructure funding, and take corrective steps. Addressing equity concerns will not only achieve greater fairness and opportunity, but can create the conditions necessary to sustain economic growth. Successfully building equity into infrastructure planning, decision-making, and spending can result in the political consensus needed for new funding and can yield projects that more effectively address the unique needs of communities. Below is a brief overview of currently available funding mechanisms.
Municipal Bonds
The most commonly used method to finance water infrastructure is the sale of municipal bonds — long-term, often tax-exempt debt issued by local governments or the public water systems they operate. Most frequently, the bonds issued to finance water infrastructure are issued directly by the water system. Water systems serving over 100,000 people are able to go to the financial markets directly to raise capital, though they sometimes may also use State Revolving Fund loans to reduce their borrowing costs.
State Revolving Fund
State Revolving Funds (SRFs) are two low-interest loan programs generally used for water planning and capital projects. The Clean Water SRF is dedicated to stormwater and wastewater systems, and the Safe Drinking Water SRF is dedicated to drinking water systems. The program funds are allocated by Congress and directed to states by the EPA. State fund managers then distribute funds to water utilities through an application process. In addition to treatment plant upgrades, the SRF program can be used for natural infrastructure projects.
One example is the project to reduce sediment pollution flowing into the Jordan River near Salt Lake City, Utah. A partnership project between Salt Lake City and Salt Lake County received $484,200 in CWSRF funds to restore four sites along the Jordan River. It is expected that this project will effectively eliminate approximately 950 cubic yards of sedimentation from the Jordan River annually, improving water quality by reducing erosion and increasing dissolved oxygen levels.
Grants
State and federal grants provide additional funding for water quality improvements provided by both new development and retrofit projects. The EPA-administered 319 Grant Program funds projects that reduce nonpoint source water pollution. Some states use a portion of their SRF allocation for grants. One such state, California, gives priority to projects in underinvested communities.
Taxes and General Funds
Tax revenue, predominantly from property, income, and sales taxes, usually contributes the greatest amount to municipal general funds, and many communities rely on taxes to fund their public works, including stormwater management. Though appropriated for specific purposes through the budget process, general funds are relatively consistent from year to year and may be used by local governments for any legal purpose.
Public Private Partnerships
Public-private partnerships can take many different forms. This approach engages the private sector more deeply in funding infrastructure projects to meet public service needs and could encompass a wide range of projects and interventions, such as local companies sponsoring natural stormwater infrastructure projects in exchange for advertising placed in or by the project. While public-private partnerships have the potential to expand the sources of capital available to water systems, at present public-private partnerships comprise only a very small portion of the funding for water infrastructure.
Stormwater Utilities
Communities have created dedicated stormwater utilities that charge a fee to residential, industrial, and commercial water customers. Stormwater utilities are similar to water, sewer, or fire districts in that they are stand-alone service units within a government that generate revenues through user fees for services related to the control and treatment of stormwater, separate from the general tax fund and used only for those services. Cities like Milwaukee, Wisconsin, have a specific credit that goes toward natural stormwater infrastructure projects.
Just Add Water
All kinds of infrastructure, whether they are roads, buildings, or parks, manage water either intentionally or unintentionally. Thus all types of infrastructure funding have the potential to incorporate natural water management practices. Transportation projects, for example, now commonly include natural stormwater infrastructure installations, and many states have infrastructure banks, which also offer opportunities to invest in multiple benefit projects. By integrating natural water infrastructure into other types of infrastructure projects such as buildings, roads, and parks, it is possible to scale up natural infrastructure to a degree not achievable using only dedicated water infrastructure funding.
Learn more about equitable investment in natural infrastructure:
· Chapter 1: Naturally Stronger
· Chapter 2: Our Communities At Risk
· Chapter 3: A New Approach to Natural Infrastructure
· Chapter 4: Natural Infrastructure: An Economic Engine
· Chapter 5: Community Benefits of Integrated Infrastructure
· Chapter 6: Funding Natural Infrastructure
