Obama Administration Announces Water Finance Center, New Municipal Bond

On Jan. 16, the Obama Administration launched the new Water Infrastructure and Resiliency Finance Center at the U.S. Environmental Protection Agency and announced a new municipal bond to encourage public private partnerships. The announcement took place at the Anacostia River Tunnel Project Site in Washington, D.C., where DC Water is working to reduce the 2 to 3 billion gallons of combined sewer overflows (CSOs) that reach the Anacostia River annually.

The goal of the water finance center will be to help local and state governments access federal loan and grant programs to get more water and wastewater projects off the ground, including those focused on CSOs and wet weather. The Administration also looks to level the playing field for municipalities seeking public-private partnerships by proposing the creation of an innovative new kind of municipal bond, Qualified Public Infrastructure Bonds (QPIB). In the stormwater sector, public-private partnerships have come to the forefront as an innovative financing option. In December, for instance, Prince George’s County, Md., approved a first-of-its-kind, community-based, public-private partnership with Corvias Solutions. Under a 30-year partnership, Corvias will manage the design, construction, and long-term maintenance of stormwater management systems for up to 1620 impervious hectares (4000 ac).

Public-private partnerships that combine public ownership with private sector management and operations expertise cannot currently take advantage of the benefits of municipal bonds. QPIBs, however, will extend the benefits of municipal bonds to public-private partnerships, including partnerships involving long-term leasing and management contracts, which will lower the cost of borrowing and attracting new capital. Read more.

Overall, green bonds like this are expected to play a larger role in helping cities and municipalities fund projects that create environmental improvements and increase climate change resiliency, according to the Climate Bonds Initiative. The green bond market has historically been dominated by development banks, but municipality participation is increasing. For instance, DC Water issued $350 million in taxable, green century bonds in July 2014, a first for the municipal sector. Project costs will be repaid over 100 years, and proceeds from the century bonds will finance a portion of the DC Clean Rivers Project.

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