GLRPPR Sector Resource: Financing Stormwater Retrofits in Philadelphia and Beyond
Financing Stormwater Retrofits in Philadelphia and Beyond
Using cost and financial return data based on a prototypical stormwater retrofit project in Philadelphia, this paper presents cash flow models for three financing scenarios: financing entirely with equity from the property owner, traditional commercial lending, and off-balance sheet "project developer" financing. (The latter two models are also generally representative of cash flows associated with PACE and on-bill financing.) These models illustrate how a property owner financing her own retrofit would realize a relatively unattractive return as compared with other financing alternatives. Traditional debt improves the rate of return for the property owner, but the best rate of return is demonstrated by the third-party project developer model, where the building owner is cash flow positive from day one and the project developer realizes a return of 20.5 percent on its investment.
To date, the authors are aware of firms that can perform the "project developer" role in the energy efficiency sphere, but are not aware of any firms that currently do so for stormwater retrofits. Similarly, while there are existing PACE and on-bill financing programs in operation for energy efficiency retrofits, there are no such existing programs for stormwater retrofits.
Accordingly, this paper concludes by offering recommendations for how a range of public and private actors--including municipalities and stormwater utilities, private firms, and state governments--can actively promote private investment in stormwater retrofits.
Successful examples of private sector investment in stormwater retrofits are critically needed, as cities nationwide are seeking cost-effective alternatives that leverage private dollars to complement necessary public investments in stormwater infrastructure. Philadelphia is a prime candidate to be an early adopter city. By doing so, it could catalyze a broader, perhaps national, market for private third-party investment in stormwater retrofits.
Natural Resources Defense Council (NRDC)
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