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The WaterNow TIR Toolkit

Find everything you are looking for in one place.

Welcome to the Tap into Resilience Toolkit

Are you a water leader interested in learning more about investing in localized infrastructure? What is localized infrastructure? Is it green infrastructure? Is it distributed infrastructure? Water conservation? YES, localized water strategies are all of these and much more, and you’ve found a resource with answers to your financing, tax, accounting, and legal implementing questions.

Explore the “What are my financing options” section of the Tap into Resilience Toolkit below to learn about accessing capital dollars and other revenue streams to pay for decentralized water infrastructure and solutions to common legal, financial and accounting questions that arise when increasing investments in these environmentally friendly programs.

Explore the “Localized water infrastructure implementation strategies” section of the Tap into Resilience Toolkit below to learn about common challenges that arise when public utilities deploy decentralized strategies on public property not directly owned or controlled by the water utility, i.e., “public non-utility property,” and private property and corresponding solutions to those challenges.

Further down the page you will find information on quick references to Toolkit resources, example documents, and case studies, Tap into Resilience expert panelists, and local utilities and cities across the country, municipal financing and legal experts, and other contributors to the TIR Toolkit.

What are my financing options?

This map is a reference guide to the financing sections of the TIR Toolkit.

Click through the following sections to learn about financing decentralized infrastructure through operating budgets, municipal and other types of bonds, and state, federal, and philanthropic funding options. The materials are revealed as you move through the Toolkit. In each section you’ll find an overview of that topic including legal, tax, and accounting information, in-depth resources for download and further reading, explanatory videos, a searchable database, example ordinances and agreements, and much more. Sort the All Resources library by “TIR Toolkit” if you’re looking for quick access to a specific resource.

Explore for yourself to start implementing!

Operating Budget

Utility operating budgets are essentially the “cash” on hand used to pay for day-to-day operating and maintenance needs. These budgets are funded with revenues from rates, parcel taxes, and special fees. These revenue streams can also serve as a means for a utility to fund localized infrastructure. Click through the sub-sections below to learn about options for structuring rates, parcel taxes, and special fees and explore examples from Tucson Water and Central Arkansas Water – two communities already using these revenues to fund decentralized strategies

Utility rates

How utilities set rates can vary widely depending on local and state requirements and needs. At a very high level, utility rates are set so that the utility can maintain a specified level of service by apportioning costs fairly to its customer base.

Once rates are set, the revenues generated can be used to pay for new infrastructure out of the operating budget on a pay-as-you-go basis or can be leveraged to enable a water agency to borrow to finance a project using the dedicated fee as a steady stream of debt repayment. 

To learn more about drinking water rates and stormwater utility fees click through the sections below. Click here to explore ways to debt-finance localized solutions. 

Drinking water rates

In the drinking water context, the rate is the amount the water provider charges its customers so that the water provider can cover the costs of delivering and treating drinking water.

As utilities rely on rate revenues to operate and decreased water consumption can mean reduced funds for delivery and treatment of water; certainly, this is not a novel issue. Responding to this reality has been the subject of much discussion since at least the mid-1990s.

Implementing one or a combination of the conservation-oriented rate structures listed below can help.

Repeal of volume discounts

Increasing block or tiered rates

Seasonal rates

Drought pricing

Flat fee combined with a variable, tiered rate

Water budgets  

While water is an essential resource, conservation pricing can yield on average a 15% reduction in water consumption and up to a 22% reduction in per capita use. Indeed, pricing policies making water more expensive, at least at higher tiers, inherently incentivizes business and residential consumers to use water more efficiently, either through technology or behavior changes. For example, San Antonio Water System (SAWS) uses a tiered rate structure to incentivize lower water consumption, together with other efficiency programs. Over the past 25 years, SAWS customers have reduced their consumption by nearly half from 225 gallons per capita per day (GPCD) to 117 GPCD. Boulder Water Utility provides an example of a water budget rate structure. 

Further, communicating with ratepayers early and often about rate increases and conservation efforts is essential. You can find about more WaterNow’s “Communicating with Ratepayers” workshop. And a recent Environmental Law Institute article highlights the need for the public to support investment in water infrastructure and the importance of communication with ratepayers.

WaterNow has also created a primer on how rates, fees, and incentives can motivate individuals and businesses to employ localized strategies.

Communicating with Ratepayers: Getting Past Paying More for Less

Workshop on communicating with ratepayers that provides actionable strategies and helps water leaders to begin to build a vision around communications for their utility

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The Public Needs to Support Proactive Officials

Article for the Environmental Law Institute about the importance of public support for innovative water management

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Motivating Private Property Owners: Rates, Fees, Incentives

COMING SOON - Primer on the role rates, fees, and financial incentives play in motivating ratepayers to employ localized water solutions

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Stormwater utility fees

Stormwater utility fees can be structured in a number of ways, including:

Tiers of stormwater rates based on diameter of a property’s potable water pipe based on assumptions about usage

Linked directly a property’s “usage” or gallons of stormwater that a property generates per inch of rainfall

A usage-based charge means impervious area becomes an important determinant of fees. When rain runs off impervious surfaces such as streets or sidewalks, it can collect a wide range of toxic pollutants, which are then routed, usually untreated, into local waterways. Many cities are under Clean Water Act obligations to reduce the amount of polluted water that flows into local waterbodies—and building the infrastructure needed to reduce polluted runoff can be costly. Because the amount of runoff a property creates is directly proportional to the impervious area a property has, it is fair for a property with a large amount of stormwater infrastructure to pay a higher stormwater fee.

Western Kentucky University’s most recent stormwater utility survey provides a comprehensive overview of the range of stormwater utility rate structures nationwide. WaterNow has also created a primer on how rates, fees, and incentives can motivate individuals and businesses to employ localized strategies. For example, the City of Portland uses its stormwater utility fee to encourage residents and businesses to manage stormwater onsite.

Stormwater Utility Survey

Survey by Western Kentucky University researchers to identify and compile information on stormwater utility fees in the US and Canada

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Motivating Private Property Owners: Rates, Fees, Incentives

COMING SOON - Primer on the role rates, fees, and financial incentives play in motivating ratepayers to employ localized water solutions

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Portland: Clean River Rewards

Portland's Clean River Rewards program – the City’s stormwater utility discount program that rewards ratepayers that manage stormwater onsite

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Parcel Taxes

A parcel tax is a form of real estate tax that can be levied as a flat fee or be based on a factor connected to the end-use of that tax revenue. A parcel tax is distinct from a user fee in that tax-exempt entities, such as local nonprofit or educational properties, will be exempt from the parcel tax. For this reason, some communities may find a parcel tax easier to implement than a user fee.

For example, the County of Los Angeles passed a parcel tax called Measure W in November 2018. Measure W is a parcel tax that will be assessed to every property on the County’s existing tax roll. The tax will be based on the amount of stormwater each property generates, measured in terms of impervious area. The revenue generated by Measure W will be used to help the County make much-needed localized water infrastructure investments that help the County manage its water supply as well as County water quality. Click here to learn more about LA County’s Measure W. 

In general, parcel-based fee structures can more readily be coupled with financial incentives designed to encourage reduced impervious areas in exchange for reduced fees. Click here to read WaterNow’s primer on motivating private parties to employ localized water infrastructure solutions by leveraging rates, fees, and incentives.

Special Fees

In addition to utility rates, some utilities levy special fees to help pay for key programs that can help the utility fund important strategies to help achieve water quality or quantity goals. Examples include “conservation fees” which collect funds to pay for water conservation programs, or “watershed protection” fees which help fund land acquisition efforts to protect water quality.

As explained in the sub-sections below, the City of Tucson, Arizona, and Central Arkansas Water use special fees to fund localized water infrastructure in their service areas.

Tucson Water

The City of Tucson implements a “conservation fee” that collects $0.10 per every 100 cubic feet (748 gallons) of water used by commercial and residential property owners. The revenue collected from the conservation fee, in turn, is used to fund Tucson Water’s rebates and grant programs, which reimburse residential and commercial property owners for replacing inefficient water fixtures and installing water re-use systems. Projects that Tucson Water reimburses include replacing high-usage toilets and clothes washers with water-efficient models, and installing rainwater harvesting and graywater systems.

The below resources provide additional details on Tucson Water’s conservation fee and rebate programs.

COMING SOON - Tucson Water

Prioritizing conservation over traditional sources of supply through residential and commercial financial incentives and free programs for income-qualified households.

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Tucson Water: Water Conservation Program Annual Report

Report summarizing the revenues generated and the programs funded by Tucson Water's conservation fee

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Central Arkansas Water

The Central Arkansas Water implements a “watershed protection fee” that generates approximately $1 million in annual revenues. The fee has been in effect since 2009, and is added to the monthly bills of all customers based on the diameter of a property’s water meter. 

The watershed protection fee revenues are then used to repay the agency’s bonds. The bond proceeds are partly used to buy land in Central Arkansas’ watershed that is then protected by a conservation easement. This decentralized strategy helps the agency protect the community’s drinking water from increased pollution that may result from development and other land disturbances.

Click here to read more about Central Arkansas’ watershed protection fee and debt-financed localized water infrastructure program.  

Debt Financing

Utility capital budgets represent the utility’s long-term investments that are financed, mostly, with debt. Debt financing is often attractive to water utilities because it enables them to fund major projects with a minimal impact to ratepayers because the investments can be paid back over time. Traditionally, most utilities have only accessed debt-financing for centralized water infrastructure such as wastewater treatment plants, dams, reservoirs, drinking water conveyance systems, and sanitary sewer collection systems. However, localized water infrastructure can also be financed as part of capital budgets.

Click through the sub-sections below to learn about different types of debt-financing mechanisms including municipal bonds, green bonds, and environmental impact bonds, to gain insights into legal, tax, and accounting issues that can arise when using debt to pay for localized water infrastructure, and to explore case studies on how other communities have scaled their investment in decentralized strategies by moving these projects from their operating to their capital budgets.

If you would like to connect with an expert for further, pro bono assistance on these issues, click the “Ask an Expert” button below to submit an inquiry to WaterNow’s team of specialists.

Ask an expert

Municipal Bonds

Municipal bonds are bonds issued by local governments to raise funds for public capital projects. Municipal bonds provide up-front capital that is paid back over the life of the bond out of general revenues. Municipal utilities often have bonding authority as well, which allows them to borrow against expected revenue from ratepayers.

Municipalities benefit from a federal law that exempts investors’ interest earnings on the bonds from federal income tax. These “tax exempt” bonds translate to lower interest rates for some forms of municipal debt. Over the past century, tax-exempt municipal bonds have been the primary way that municipalities pay for water infrastructure investments.

Communities are already using municipal bonds to pay for localized infrastructure, including:

Seattle Public Utilities has used $2.2 million in municipal bond proceeds to fund its water conservation rebates programs as well as its low-income direct installation program allowing the utility to implement its market rate program on a regional scale and its low-income program citywide

Los Angeles Department of Water and Power pays for its turf rebate replacement program using capital dollars

Central Arkansas Water finances its conservation easement program aimed at protecting its source watershed with municipal bonds

The resources linked below provide additional information on how utilities can finance localized water infrastructure using municipal bond proceeds.

Bond Financing Distributed Water Systems

As extreme weather events exacerbate challenges already faced by communities across the US, this report, by our partners at Ceres, explores how to make better use of current market mechanisms…

Read more

A Water Leaders Guide to Financing Localized Solutions

A water leader's guide to finance distributed infrastructure.

Read more

Go Green: Muni Bond Financing for Distributed Water Solutions

A primer for water leaders on how to debt-finance distributed infrastructure projects and consumer rebates.

Read more

GASB 62: How Does It Work?

Video with Ed Harrington about "Regulated Operations" and GASB 62 and the potential to unlock an alternative way to finance localized infrastructure solutions

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Alternative Ways to Fund Innovation and Water

Report analyzing how successful energy financing structures can be applied to water infrastructure innovations.

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Public Finance Authority Water/Wastewater Finance Pool

Learn how cities, counties, towns and districts can finance and refinance water and wastewater projects through the Public Finance Authority (PFA) at AA rates.

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Green Bonds

Green Bonds are instruments in which the proceeds will be used exclusively for projects and activities that serve environmental sustainability purposes. Many traditional bond underwriters are increasingly developing green bond financing packages. As explained in a Ceres report issued in 2014, there are at least four types:

Green use of proceeds bond

Green use of proceeds revenue bond

Green project bond

Green structured bond

The appropriate type of green bond for a particular project depends on available revenues and collateral to secure the bonds.

Functionally, “green bonds” are municipal bonds, and are secured by a general obligation, project or asset, or revenue. “Green Bonds” differ from traditional bonds because they have undergone a certification process that attest to the environmental benefits of the bond-financed projects. For example, The Water Consortium, a global group of climate finance and sustainability organizations such as Ceres, the World Resources Institute, and Climate Bonds Initiative, launched new Water Infrastructure Criteria of the Climate Bonds Standards. The criteria “defines and evaluates low carbon and climate resilient water infrastructure projects by encompassing two broad components: 1) climate mitigation and 2) climate adaptation and resilience.” Water infrastructure projects that meet the criteria can be included in green bond investment and receive Climate Bond Certification. Click here to download a playbook for issuing green bonds.

Green bonds have been used for a range of environmentally-beneficial projects, and are increasingly being used to finance localized water infrastructure projects, including:

In 2016, the San Francisco Public Utilities Commission issued a $240 million green bond to support sustainable stormwater management and wastewater projects

In 2014, District of Columbia Water and Sewer Authority, also known as DC Water, issued a $350 million green bond to support the utility’s Clean Rivers Project

 

How to Issue a Green Muni Bond

Playbook for cities interested in issuing green bonds to finance sustainable water investments

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Green Bond Principles

Report outlining voluntary process guidelines for cities and utilities interested issuing green bonds

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SFPUC Issues World's First 'Climate Certified' Water Bond

Article detailing SFPUC's Climate Certified Green Bond that supports localized infrastructure

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DC Water: Green Bond

Case study on DC Water green bond to support the Clean River Project

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Environmental Impact Bonds

Environmental impact bonds (EIB) are an innovative financing tool that leverages private investment to support high-impact environmental programs. EIBs use a “Pay for Success” approach where private investors provide upfront capital for environmental projects and the beneficiary—either a public entity or a private institution that benefits from the project—repays the investors based on the achievement of the agreed-upon project outcomes.

The “pay for success” aspect means that if a project funded by an EIB does not perform in accordance with pre-determined outcomes, then the water agency may not have to repay the entirety of its the debt (and investors in that bond may lose some amount of their principal, depending on the terms they agreed to when they bought the bonds.) If, on the other hand, the project performs perfectly or even exceeds expectations, investors are repaid if full or could receive a premium out of the budgetary savings created by outperforming projects.

Because repayment of an EIB is benchmarked against specific performance outcomes EIBs create incentives to deploy innovative solutions. And EIBs can be an attractive option for a water agency looking to scale up investment in localized infrastructure projects while also mitigating some of the performance risks.

Click the image below to watch Quantified Venture’s Eric Letsinger explain how EIBs work and provide examples of existing EIBs in Washington, D.C. and Atlanta Georgia.

COMING SOON - DC Water

Green stormwater infrastructure credit-trading program for private property owners to help address combined sewer overflows.

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COMING SOON - Atlanta Dept. of Watershed Management

Comprehensive plan to build localized infrastructure throughout Atlanta using public and private land

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Environmental Impact Bonds: How do they work?

Video with Quantified Venture's Eric Letsinger explain how EIBs work

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Legal issues that arise when using debt

What is localized water infrastructure from a legal perspective? What legal mechanisms provide cities and utilities the authority to employ localized solutions to combat their water management challenges? Are there existing debt constraints for financing decentralized strategies? Does my state’s “gift prohibition” preclude the use of public dollars to pay for improvements on private property or benefits to individuals or businesses?

Click through the sub-sections below to find information on each of these questions related to legal issues that arise when debt-financing localized infrastructure.

Distributed or “localized” infrastructure from a legal perspective

“Distributed infrastructure” is not a legal term of art. Rather, it is a concept encompassing improvements, technologies and practices spread across many locations with the goal of enhancing a utility system by supplementing the traditional centralized infrastructure. In contrast to centralized infrastructure, which typically refers to largescale treatment and transmission facilities that are owned and operated by a utility, distributed infrastructure describes dispersed facilities located at or near the point of use. Unlike traditional centralized infrastructure, distributed infrastructure assets are generally situated on or consist of improvements to property not owned by the utility, which may call into question the utility’s ownership or control of the assets.    

With a focus on conservation rather than production, distributed infrastructure seeks to achieve a reduction in water use or volume of storm water and wastewater requiring treatment.  It typically functions to conserve resources through technologies that capture rainwater, reuse graywater, or reduce consumption. These technologies and strategies include:

Permeable pavement

Turf buyback programs

Graywater reuse systems

Rain cisterns

Smart irrigation

Bioswales

Green roofs

Water catchment facilities

Water efficient toilets

You can explore examples of these solutions by clicking through the resources below.

From a legal standpoint, distributed infrastructure assets can consist of interests in real property, fixtures (personal property permanently affixed to real property), or personal property (including certain rain cisterns and items that can easily be removed from real property). Moreover, ownership interests in real property assets from a legal standpoint may be held by a single party in fee or the various rights ownership brings may be divided among several parties through easements and leasehold interests. Although related, “ownership” and “control” are separate concepts. Depending on the distributed infrastructure asset, the utility may retain different legal rights of control in the asset. For example, water efficient appliances and graywater systems attached to a customer’s home may become fixtures that leave the utility with little to no legal rights over the asset. On the other hand, a utility may retain control over permeable pavement and turf buyback installations if real property rights such as easements or liens are granted by the customer. Control may also be sought through contractual arrangements. You can find an example agreement here.

Explore Strategies: Opportunities for Localized Solutions

This report dives into the big picture benefits of localized water strategies and how to finance them.

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Incentive-based Instruments for Freshwater Management

Synthesis report and interactive tool that provides a detailed review of incentive based instruments for managing water; includes set of additional resources re studied incentives

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Case Studies on New Water Paradigm

Study analyzing new water infrastructure in Tuscon/Pima County, AZ and Northern Kentucky.

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Sources of legal authority

To finance distributed infrastructure with debt, utilities must have the requisite legal authority. Depending on the statutory regime and the distributed infrastructure to be financed, the requisite authority for some utilities will be clear. For others, the utility may need to structure financings to preserve ownership interests or control over distributed infrastructure assets to comply with the governing laws or even seek to amend existing legislation.

Generally, utility powers may be express or implied by such express powers. A local governmental agency, special districts, or regional water districts’ powers may be derived from:

State constitution

State statute

Other enabling legislation

Utilities wishing to issue debt for the purpose of financing distributed infrastructure will need to consider whether their express and implied powers restrict the purposes and types of financeable projects, as the authority to spend money on distributed infrastructure may be broader than the authority to issue debt to finance distributed infrastructure.

For example, many statutes provide broad authority to finance facilities of benefit to the utility even if not owned or controlled by the utility. Some statutes, however, provide only for the financing of improvements to real property or physical assets related to specific portions of the water or sewer system, while others require that the utility maintain ownership or control over the asset. There may also be specifications that limit the term or the source of repayment of debt.

Additionally, most state constitutions limit the ability of government entities to grant, donate or gift assets or anything of value to private individuals, associations, or corporations. In some states, such “gift clauses” are broad prohibitions on any transaction of the type. For distributed infrastructure, which is frequently located on private property, this can present challenges. However, most states have interpreted their “gift clauses” to allow for exceptions for the government providing funds to private entities if such funds will be used for a public purpose or provide a public benefit. To find out what your state’s constitution says about “gifts” click here.

WaterNow: State Gift Prohibitions Database

WaterNow's 50-state database of state constitutional gift prohibition laws

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Existing debt constraints

In addition to state constitutional and statutory authority, a utility’s ability to issue debt for the purpose of financing distributed infrastructure may be governed by the utility’s contractual commitments to lenders, credit providers, and bondholders. Holders of a utility’s debt generally require protection against the utility’s voluntary incurrence of new debt if that would have the effect of weakening the security for such existing debt. “Additional debt tests” in bond resolutions or indentures, loan agreements and credit agreements require that certain requirements be satisfied before the utility may occur additional debt (often only debt payable from the utility’s revenues at the same or at a higher priority level).

Additional debt tests typically limit the purposes for which new debt may be issued. A concern with respect to distributed infrastructure is that improvements to property not owned by a utility may not constitute “improvements to the utility system.” If an additional debt test only requires that improvements financed by such debt “benefit the system,” financing distributed infrastructure should not be impeded. If, however, an additional debt test requires that such debt finance “improvements to the system,” it could constrain the utility’s ability to finance distributed infrastructure.

Holders of debt payable from a utility’s enterprise revenues also generally require that the utility establish rates and charges each year sufficient to produce net revenues (revenues less operation and maintenance expenses) that are a specified percentage of the debt service payable in such year (e.g., net revenues equal to at least 120% of debt service). For such purposes, terms such as “revenues” and “operation and maintenance expenses” are calculated with reference to Generally Accepted Accounting Principles (GAAP). Additional debt tests generally require that the utility demonstrate its ability to continue to comply with this “rate covenant” taking into account the debt service or the proposed additional debt. If distributed infrastructure costs are not capitalized under GAAP but instead constitute operations and maintenance expense, “debt service coverage” will be reduced and satisfying additional debt tests may be more challenging. Learn more about capitalizing the cost of improvements to private property in the “Accounting issues that arise when using debt” section of the toolkit.

You can find additional resources about debt-financing localized infrastructure in the links below.

Go Green: Muni Bond Financing for Distributed Water Solutions

A primer for water leaders on how to debt-finance distributed infrastructure projects and consumer rebates.

Read more

A Water Leaders Guide to Financing Localized Solutions

A water leader's guide to finance distributed infrastructure.

Read more

A Handbook for Understanding Natural Capital

From our partners at Earth Economics, check out this guidance manual for understanding relationship between economics and natural systems.

Read more

State gift prohibitions

Because localized infrastructure is implemented across many locations, installing these strategies on property not owned by the city or utility is key. Using public dollars to improve privately owned land can implicate state gift laws, however.

If you’re curious about your state’s relevant constitutional sections, potential exceptions to prohibitions against the use of public funds for private purposes, and any potentially relevant state-specific case law, attorney general opinions or other local agency opinions on the subject you can search WaterNow’s 50-state database below. Simply choose the state from the dropdown menu and the relevant information will be provided. You can also select multiple states by clicking the “Search Another State” button. And select the “Email this to Me” option to receive a record of your search.

State Gift Prohibition Lookup

State Gift Prohibition Lookup

Tax issues that arise when using debt

Debt-financing localized water infrastructure can raise certain tax issues utility and city leaders should consider when using debt to scale their investments in these sustainable solutions. Two of the most common tax related issues — issuing tax exempt bonds and taxability of incentives customers receive to employ decentralized strategies — are discussed in the sub-sections below. These sections provide insights on how bond issuances to finance distributed infrastructure can be tax free, the tax treatment of rebates and other financial incentives, and how other communities have successfully navigated these tax questions.

Issuing tax exempt bonds

If debt issued by a utility to finance distributed infrastructure can be issued as “tax-exempt bonds,” the utility can achieve significant savings because the interest paid on “tax-exempt bonds” is excluded from gross income for federal income tax purposes because purchasers are willing to accept a lower rate of interest than they would require for comparable taxable debt.  Although the federal tax code provides a general rule that interest on bonds issued by state and local governments, including municipal utilities, is tax-exempt, there are a variety of requirements that must be satisfied. These are explained below.

Issuing Governmental Bonds. Generally, municipal utilities seeking to issue tax-exempt bonds for the purpose of financing assets owned and operated by said utility will do so through the issuance of “governmental bonds.” A bond will be a governmental bond and not a “private activity bond” if:

No more than five percent of the proceeds are loaned to a nongovernmental person and

No more than ten percent of the proceeds are used in a private trade or business (“Private Business Use Test”) unless (i) the payments in respect of such private trade or business are no more than ten percent of the debt service on the bonds or (ii) the financed property (or in certain cases other property) secures an amount equal to the 10% of the debt (“Private Payment or Security Test”).

Because these requirements apply to the entire proceeds of a bond issue, a utility may be able to address private activity concerns by including the financing of distributed infrastructure in a larger bond issue financing conventional infrastructure, although the ten percent thresholds are reduced to five percent if the distributed infrastructure is unrelated to the primary purpose of the bond issue.

Private Business Use Test. Private business use of a financed asset is any use other than that by a governmental entity or the general public. Ownership by a nongovernmental entity, leases, management contracts or preferential legal entitlements with respect to the financed assets can create private business use. The Private Business Use Test can present challenges for utilities when issuing tax-exempt bonds for distributed infrastructure that encompasses or extends into private property used in a trade or business. If, however, the financed assets are available for use by nongovernmental entities on the same basis as the general public, then the bond issue will likely fit within the restrictions of the Private Business Use Test and could be issued as tax-exempt bonds.   

Private Payment or Security Test. This requirement focuses on payments from the private businesses that use the financed assets and the security for the bonds, as well as potentially other payments directly or indirectly related to such private business use. A bond issued to finance distributed infrastructure would likely fit within the restrictions of the Private Payment or Security Test if:

There is a grant of bond proceeds to a private business owner without an expectation of repayment

Cumulative payments made in respect of the private business use do not exceed 10% of the debt service on the bonds

Weighted Average Maturity. Another requirement for tax-exempt bonds is that the weighted average maturity of the issue not exceed 120 percent of the reasonably expected average life of the financed assets. This limits a utility’s ability to finance distributed infrastructure assets with relatively short economic useful lives with long term tax-exempt bonds. However, this constraint can be addressed by combining short term distributed infrastructure assets with long term conventional assets with a long average life in the same financing.

Notwithstanding a utility’s expectation that the bonds will satisfy the requirements for tax-exemption at issuance (see TIR Toolkit section above), the utility will also need to take appropriate measures to track the use of proceeds throughout the life of the bonds to ensure continuing compliance.

Taxability

As explained in the “Issuing tax exempt bonds” section of the TIR Toolkit, municipal bond dollars are generally tax free. An entirely separate tax question can arise when utilities use financial incentives to motivate private parties to employ localized water infrastructure solutions:

Are rebates or grants utility customers receive for increasing water efficiency or managing stormwater onsite taxable income?

Answering this question from federal, state, and local tax perspectives can be a key issue when developing and scaling investment in a financial incentive program. Communities across the country have already grappled with these issues and provide useful examples for others facing similar challenges:

In Washington D.C., the utility’s stormwater credit trading program raised local tax issues for area nonprofits participating in the program, as the money they earned from the sale of their stormwater credits potentially threatened their tax exempt status. To address this challenge, the utility worked with other local leaders to revise their municipal code. For more details on this local tax issue click here. And click here to learn more about DOEE’s stormwater program.

In California, the State Legislature has permanently exempted rebates and other financial incentives for water efficient toilets, clothes washers, and certain types of recycled water plumbing from state income tax for both individuals and businesses. Click here to learn more about state tax considerations that might apply to incentive programs in the 41 states that collect income taxes at the state level.

At the federal level, it is possible that consumer rebates and other financial incentives are taxable income. Click here to learn more about federal tax issues, including arguments for non-taxability and options for public water agencies to structure programs to enhance the likelihood that the rebate payments not be taxable to the property owner.

Taxability of Financial Incentives: Local Tax Issues

Overview of taxability of financial incentives for localized water infrastructure at a local level

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Taxability of Financial Incentives: State Tax Issues

Overview of taxability of consumer rebates for water efficiency and stormwater management at the state level

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Taxability of Financial Incentives: Federal Tax Issues

Overview of taxability of consumer rebates and other financial incentives at the federal level

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DOEE: Local Stormwater Ordinance

Read about Washington, D.C.'s Department of Energy and Environment stormwater management ordinance that requires onsite stormwater capture for certain development projects

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Motivating Private Property Owners: Rates, Fees, Incentives

COMING SOON - Primer on the role rates, fees, and financial incentives play in motivating ratepayers to employ localized water solutions

Read more

Accounting issues that arise when using debt financing

Debt-financing localized water infrastructure can raise certain accounting issues utility and city leaders should consider when using debt to scale their investments in these sustainable solutions. Two accounting related issues — capitalizing the cost of improvements to private property and how to use the regulated assets approach to debt-finance localized infrastructure — are discussed in the sub-sections below.

Capitalizing the cost of improvements to private property

Broadly speaking, “capital expenditures” under Generally Accepted Accounting Principles (GAAP) are expenditures for fixed or capital assets. For a distributed infrastructure expenditure to be an expenditure for a fixed or capital asset under GAAP, the expenditure must, among other things, result in the acquisition, improvement or creation of an “asset” of the utility. Distributed infrastructure on public property not owned or controlled by the utility, i.e., public non-utility property, and private property localized infrastructure may constitute an asset of the utility if the distributed infrastructure expenditure creates a “regulatory asset” under Governmental Accounting Standards Board (GASB) Statement No. 62 or if the utility exercises “control” over the asset sufficient to satisfy the requirement of GASB Statement No. 4.

The requirements of GASB 62 are detailed in the “Explanation of GASB 62 regulated assets” section of the TIR Toolkit, and through the links below.

If GASB 62 is not applicable (e.g., because cost recovery is not available), “asset” status may be achieved under GASB 4 if the distributed infrastructure program is structured to provide the utility sufficient “control” over the property in question. As a general matter, control results from the utility’s ability to “determine the nature and manner of use” of the capacity of a resource. This may consist of a right on the part of the utility to:

Directly use the capacity to provide service

Exchange the capacity for another asset or for cash or

Employ the capacity in other ways that provide benefit

Control may be retained through an easement or established by contract. You can find an example easement in the link below.

Go Green: Muni Bond Financing for Distributed Water Solutions

A primer for water leaders on how to debt-finance distributed infrastructure projects and consumer rebates.

Read more

Bond Financing Distributed Water Systems

As extreme weather events exacerbate challenges already faced by communities across the US, this report, by our partners at Ceres, explores how to make better use of current market mechanisms…

Read more

MMSD: Conservation Easement

MMSD enters into conservation easements with private property owners that install green infrastructure and receive a reimbursement from MMSD for doing so

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GASB 62: How Does It Work?

Video with Ed Harrington about "Regulated Operations" and GASB 62 and the potential to unlock an alternative way to finance localized infrastructure solutions

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The Financing Fix to Scale Water Innovation

This document is a quick 2-page overview of the new GASB policy guidance and how it opens up new channels to transform our water infrastructure.

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A Water Leaders Guide to Financing Localized Solutions

A water leader's guide to finance distributed infrastructure.

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Explanation of GASB 62 regulated assets

For years, water agencies interested in employing localized infrastructure were not sure whether they could access municipal debt financing for those projects. Without access to municipal debt, localized infrastructure programs and projects had to be funded by operating budgets, which meant that, for the most part, programs remained limited or else run the risk of massive increases in utility rates. As a result of a 2-year WaterNow campaign, in May 2018 the Governmental Accounting Standards Board (GASB) issued new guidance making it clear that municipal bond proceeds can be used to fund localized water infrastructure. The new GASB guidance is a game changer. If even a tiny percent of the billions in annual capital spending for local water infrastructure nationwide is redeployed to distributed solutions, it would represent vast new investment capacity and a major expansion in the adoption of these technologies and programs. WaterNow’s Tap into Resilience campaign—that includes numerous resources and a financing toolkit—is aimed at encouraging public water utilities to take advantage of this new financing mechanism.  Cities and public utilities now also have the option of financing localized water infrastructure by pooling bond issuances with other cities, counties, towns, and districts. This type of aggregation can be more cost-effective and bring needed capital to smaller communities with less capacity to issue their own municipal bonds.

GASB Statement 62 allows public agencies to book the cost of “business-type activities” as assets instead of annual expenses. These are called “regulatory assets” and can be capitalized by public water resource entities. The regulated assets approach is a complete alternative to traditional public agency accounting for capital assets. To meet the regulated assets approach and access debt-financing for localized infrastructure, local water providers need to have a governing board that:

  1. Is empowered to set rates
  2. Can set those rates at levels to cover the cost of the specific programs to be financed, and
  3. Can commit to setting rates in the future to pay for the cost of these programs

Click on the image below to watch a video with TIR Expert Ed Harrington on how GASB 62 works.

Virtually all public water providers are positioned to meet these criteria, and communities across the country have already used debt to make significant investments in localized infrastructure, including:

Seattle Public Utilities has used $2.2 million in municipal bond proceeds to fund its water conservation rebates programs as well as its low-income direct installation program allowing the utility to implement its market rate program on a regional scale and its low-income program citywide

Los Angeles Department of Water and Power pays for its turf rebate replacement program using capital dollars

Central Arkansas Water finances its conservation easement program aimed at protecting its source watershed with municipal bonds

A primer for water leaders on how to debt-finance distributed infrastructure projects and consumer rebates can be found here, and additional resources are linked below.

If you would like to connect with an expert to talk about how you can use bond proceeds to scale your community’s investment in sustainable, localized water solutions, click below and submit an “Ask an Expert” request today. WaterNow will put you in touch with one of our pro bono expert panelists.

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A Water Leaders Guide to Financing Localized Solutions

A water leader's guide to finance distributed infrastructure.

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Go Green: Muni Bond Financing for Distributed Water Solutions

A primer for water leaders on how to debt-finance distributed infrastructure projects and consumer rebates.

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COMING SOON - Seattle Public Utilities

Debt financing efficiency and green infrastructure rebates for private property installations.

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GASB 62: How Does It Work?

Video with Ed Harrington about "Regulated Operations" and GASB 62 and the potential to unlock an alternative way to finance localized infrastructure solutions

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Bond Financing Distributed Water Systems

As extreme weather events exacerbate challenges already faced by communities across the US, this report, by our partners at Ceres, explores how to make better use of current market mechanisms…

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LADWP: Turf Replacement Rebates

LADWP's Turf Replacement program that provides rebates to residential and commercial customers who replace turf with sustainable landscapes

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Central Arkansas Water: Watershed Protection Fee

Central Arkansas Water uses a watershed protection fee to fund its conservation program aimed at protecting its source water

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Public Finance Authority Water/Wastewater Finance Pool

Learn how cities, counties, towns and districts can finance and refinance water and wastewater projects through the Public Finance Authority (PFA) at AA rates.

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State, Federal, and Philanthropic Funding

In addition to operating budget funds and debt proceeds, utilities can access state, federal, and philanthropic dollars to help finance localized water infrastructure in their communities. These sources of funding are attractive because, although they may require more administrative work and advance planning to obtain, they can offer some very low-cost debt and, in some cases, grants or debt forgiveness.

Click through the sections below to learn about State Revolving Funds, the Water Infrastructure Finance and Innovation Act, and the role philanthropy can play in increasing investments in localized water infrastructure.

State Revolving Fund

The Clean Water and Drinking Water State Revolving Fund programs are a federal-state partnership that provides communities a permanent, independent source of low-cost financing for a wide range of water infrastructure projects. Communities that make use of the State Revolving Funds benefit from below market interest rate loans and loan forgiveness (similar to grants) offered for both disadvantaged communities and often for “green” projects, such as water efficiency and green stormwater projects.

SRF Eligibility

Drinking Water and Clean Water State Revolving Funds (CWSRF) are managed at the state level, whereby each state receives new capital (“capitalization grants”) from U.S. EPA on an annual basis. States must provide one dollar of match for each five dollars received through U.S. EPA capitalization grants. States may use SRFs to provide the following types of assistance to communities:

Direct loans

Purchase or refinancing of existing debt

Credit enhancement

A source of revenue or security for municipally-established revolving funds

As a condition of eligibility for SRF financing, each financing recipient must pledge one or more dedicated sources of revenue toward payment of its SRF obligation. For its Drinking Water and Clean Water SRFs, each state must develop Intended Use Plans, which lay out the current and expected future pipeline of SRF-financed projects.

Overview: State Revolving Funds

Summary overview of Clean Water State Revolving Fund and Drinking Water State Revolving Fund programs

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California Drinking Water State Revolving Fund

California's Drinking Water State Revolving Fund Intended Use Plan establishing how state funding for drinking water projects will be spent

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Inter-agency Coordination: An Example from City of Lancaster

Learn how the City of Lancaster, Pennsylvania has worked with its intra-city partners to implement its green stormwater infrastructure program

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SRF for private property localized infrastructure

Many states allow revolving loan funds to be used to pay for localized water infrastructure projects, including:

Consumer efficiency rebate programs

Meters

Gray water systems

Leak detection programs

Lead service line replacements

The resources linked below provide further information about using SRF funds to pay for private property localized infrastructure.

California Drinking Water State Revolving Fund

California's Drinking Water State Revolving Fund Intended Use Plan establishing how state funding for drinking water projects will be spent

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Funding Water Efficiency Through State Revolving Funds

EPA primer on how State Revolving Fund dollars can be used to fund water efficiency programs

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Overview: State Revolving Funds

Summary overview of Clean Water State Revolving Fund and Drinking Water State Revolving Fund programs

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Green project reserve

The American Recovery and Reinvestment Act (ARRA) of 2009 requires all CWSRF programs to use no less than 10% of their annual federal grant for projects that address:

green infrastructure

water and energy efficiency, or

other environmentally innovative activities

These four categories of projects are the components of the Green Project Reserve (GPR). Click here to download a copy of the Environmental Protection Agency’s GPR eligibility guidance. 

 

Water Infrastructure Finance and Innovation Act

The Water Infrastructure Finance and Innovation Act (WIFIA) was enacted in 2014 to accelerate investment in local water and wastewater infrastructure. It basically supplements the SRF programs by providing long-term, low-cost supplemental credit assistance to local utilities for major projects. A rare bipartisan effort Congress passed a water infrastructure bill—dubbed “America’s Water Infrastructure Act”—in 2018 that includes a 3-year reauthorization of WIFIA for 2 years and $100 million. This program is separate from, but implemented in coordination with, the SRF programs to provide subsidized financing for large dollar-value projects. Projects eligible for WIFIA funding include energy efficiency projects at drinking water and wastewater facilities and drought prevention, reduction, or mitigation projects.

Click through the sub-sections below to learn about the types of projects eligible for WIFIA funding, how to apply for these federal dollars, and access additional WIFIA resources.

Eligibility

The WIFIA program offers loans with low, fixed interest rates and flexible financial terms. Borrowers eligible to receive WIFIA funding include local governmental entities that can use the funds to pay for projects aimed at:

drought prevention, reduction, or mitigation

aquifer recharge

water reuse

alternative water sources

Localized water infrastructure strategies can meet each of these aims.

In addition, there are certain important program features for utilities or cities interested in apply for WIFIA funding should consider, including:

Minimum project size for large communities is $20 million

Minimum project size for small communities (population of 25,000 or less) is $5 million

WIFIA funds can be used to pay for a maximum of 49% of project costs

Total federal assistance may not exceed 80% of a project costs

Projects must be substantially completed in 35 years

Repayment may be deferred for a maximum of 5 years following substantial project completion

Projects must be creditworthy and have a dedicated source of revenue

Localized water infrastructure strategies can likely satisfy each of these considerations.

Additional information about eligibility for the WIFIA program is provided in the links below.

 

 

WIFIA Program Summary

EPA's summary of the WIFIA program aimed at accelerating investment in the nation's water infrastructure

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WIFIA Program Benefits

EPA’s summary of the benefits of the WIFIA program that is aimed at accelerating investment in the nation’s water infrastructure

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Application process

Applying for WIFIA funding is a two-phase process.

Phase 1: Project Selection

In phase 1 of the application process, the Environmental Protection Agency (EPA) announces the amount of funding that will be available for eligible projects and solicits letters of interest from prospective borrowers. n its FY 2019 NOFA, the WIFIA program opened its third selection round and allowed prospective borrowers to submit letters of interest by July 5, 2019 at 11:59 p.m. EDT. It also announced four priorities:

Readiness for a project to proceed toward development

Provide for clean and safe drinking water, including reducing exposure to lead and emergent contaminants in the nation’s drinking water systems

Repair, rehabilitate, and replace aging infrastructure and conveyance systems

New or innovative approaches including water reuse and recycling

For FY 2019 projects, EPA estimates being able to finance $12 billion in water infrastructure investments. The resources linked below provide more information about the NOFA and letter of interest processes.

Phase 2: Project Review, Negotiation, and Closing

In phase 2, EPA invites selected prospective borrowers to apply for its WIFIA loan. These invitees will then undergo EPA’s detailed financial and engineering project review, which provides the basis for EPA’s proposed terms and conditions for the project and loan. The applicant and EPA work together to come to a mutually agreeable loan agreement and term sheet. Upon approval by the EPA Administrator and the Office of Management and Budget, the borrower will execute a credit agreement–the legally binding document that allows the borrower to receive WIFIA funds.

Certain WIFIA application materials are linked below.

WIFIA Letter of Interest Checklist

EPA’s Water Infrastructure Finance and Innovation Act of 2014 letter of interest checklist

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WIFIA Application Review Process

EPA's summary of the Water Infrastructure Finance and Innovation Act of 2014 funding application process

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WIFIA Application

EPA’s Water Infrastructure Finance and Innovation Act of 2014 funding application

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Additional WIFIA resources

Check back soon for links to additional WIFIA resources.

In the meantime, check out the other TIR Toolkit materials by sorting the All Resources Library by “TIR Toolkit.”

Philanthropy

Charitable organizations can be another option for financing localized water infrastructure. In the sub-sections below you will find an overview of the role philanthropy already plays, information about who might be eligible for charitable funding, and an opportunity to make your voice heard on how philanthropic organizations can better leverage their contribution to scaling up investment in sustainable solutions.

Role of charitable organizations in financing localized solutions

In addition to state and federal funding mechanisms, cities and public utilities may also be able to access charitable sources for financing for localized water solutions. These include private foundations like The Cynthia and George Mitchell Foundation, Walton Family Foundation, Pisces Foundation, Water Foundation, The William and Flora Hewlett Foundation, Spring Point Partners, The Kresge Foundation, and The Rockefeller Foundation.

Many of these organizations have formed the Water Funder Initiative (WFI) “to identify and activate promising water solutions through strategic philanthropic investments in the United States, starting in the West where scarcity and reliability of clean water are urgent issues,” and offer “a blueprint for philanthropy to advance sustainable water management at a scale never before attempted in the water field.”

Click here to download a copy of WFI’s Toward Water Sustainability: A Blueprint for Philanthropy report.

Philanthropic funding eligibility

The availability of private grants or investments can vary depending on the type of project proposed, the location of the project, and a particular foundation’s priorities and theory of change. For example, philanthropic priorities in the north east include funding:

on-the-ground, place-based green stormwater infrastructure projects

telling success stories where green infrastructure has been deployed

efforts to make it easier for cities and utilities to finance these projects installed on both public and private property by improving funding standards, e.g., grant and loan eligibility criteria.

These priorities directly align with scaling investments in localized solutions.

Further, Water Funder Initiative’s blueprint calls for funding for data-driven decision making and accelerating innovation, among other priorities. Decentralized water infrastructure such as advanced metering infrastructure, onsite non-potable reuse systems, consumer-side leak detection devices, smart irrigation controllers, green roofs, and blue roofs easily fits within these goals.

Getting water managers involved with charitable program development

Because widespread adoption of decentralized water infrastructure is still a growing concept, some private foundations are currently in the process of building their water infrastructure priorities and internal funding strategies. These organizations are interested in hearing from water managers across the country about their needs and how charitable giving can have the most impact in advancing the water infrastructure transformation. In particular, the philanthropic community wants the water community’s feedback on:

  1. Whether public water managers are debt-averse and why;
  2. How will a proposed project help underserved communities;
  3. Whether there is a need for additional place-based work or whether funding should focus on developing national decentralized infrastructure tools;
  4. Is there a lack of “best practices” for deploying decentralized infrastructure, and, if so, is that a barrier to implementation.

If you are a water manager with insights on these, or other topics that might inform where philanthropic dollars can have the most impact on building 21st century water infrastructure, fill out the form below to submit your comments to WaterNow.

Click here

Explore localized water infrastructure implementation strategies

Click through the following sections of the Tap into Resilience Toolkit to learn about common challenges that arise when public utilities deploy decentralized strategies on public property not directly owned or controlled by the water utility, i.e., “public non-utility property,” and private property and corresponding solutions to those challenges. In each section you’ll find an overview of that topic, in-depth resources for download and further reading, explanatory videos, a searchable database, example ordinances and agreements, and much more. Additional materials are revealed as you move through the Toolkit. Or if you’re looking for quick access to a specific resource click here and sort by “TIR Toolkit.” For a reference guide to the implementation strategies sections of the TIR toolkit click here.

Explore for yourself to start implementing!

Public Non-Utility Property Localized Infrastructure

Deploying localized water strategies often involves the use of public property not directly owned or controlled by the utility or agency that is paying for the program, i.e., public non-utility property. This can mean public property owned or controlled by another department within the same city, i.e., “intra-city” departments or property owned or controlled by an entirely separate public entity outside of the utility’s jurisdiction.

Click through the below sub-sections to explore examples of public non-utility property localized infrastructure, to learn about the intra-city issues that can arise when implementing localized water infrastructure strategies, and to review case studies on how other cities have navigated coordinating with entirely separate public agencies to employ decentralized solutions.

Examples

Localized or onsite water infrastructure programs represent resilient and affordable alternatives to conventional infrastructure, capable of addressing a wide range of water resource challenges. Localized strategies that leverage public non-utility property can effectively meet drinking water, stormwater, and wastewater needs. Click through the sections below to reveal example public non-utility property strategies.

Drinking Water Solutions

Public non-utility decentralized water infrastructure that can address drinking water challenges include high efficiency appliances, onsite reuse, and graywater systems installed in city and other publicly owned buildings. You can find additional drinking water solutions here.

 

Explore Strategies: Opportunities for Localized Solutions

This report dives into the big picture benefits of localized water strategies and how to finance them.

Read more

Storm Water Solutions

Public non-utility decentralized water infrastructure that can address stormwater and mitigate its effects on local water quality include bioswales, constructed wetlands, green streets, urban tree canopies, and other green infrastructure that can be built in the public right-of-way or in city parks and open spaces. Cities can also employ strategies such as green and blue roofs on publicly owned and other government buildings to meet stormwater management needs.

You can find additional stormwater solutions here and here.

Explore Strategies: Opportunities for Localized Solutions

This report dives into the big picture benefits of localized water strategies and how to finance them.

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Wastewater Solutions

Public non-utility decentralized water infrastructure that can address wastewater needs and access the significant potential for reuse as non-potable – and even potable – water supply include advanced onsite non-potable reuse systems, constructed wetlands, and graywater reuse systems installed in city and other publicly owned buildings. You can find additional wastewater solutions here.

And click the button below to sign-on to WaterNow’s comments on EPA’s Water Reuse Action Plan Framework (deadline to sign-on is June 26, 2019).

Click here

 

Explore Strategies: Opportunities for Localized Solutions

This report dives into the big picture benefits of localized water strategies and how to finance them.

Read more

Intra-City Issues

There are a few common issues or challenges that can arise when using water utility dollars to pay for localized solutions that will leverage non-utility property. Click through the sub-sections below to learn how to address potential roadblocks presented by your city charter, how to identify and coordinate with other key intra-city departments, and ensure public non-utility property localized infrastructure is properly operated and maintained for the long-term.

Reviewing Local Charters & Ordinances

It is possible that a city charter or other local ordinance could present a roadblock to a utility funding a decentralized water infrastructure program that implements, builds, installs or otherwise uses public non-utility property. For example, in San Francisco the City Charter did not clearly allow the San Francisco Public Utilities Commission to finance projects on property over which the utility did not have jurisdiction. To address this challenge, the SFPUC worked with the City Attorney to amend the City Charter, which now, in relevant part, specifies:

the Public Utilities Commission is hereby authorized to issue revenue bonds … for the purpose of reconstructing, replacing, expanding, repairing, or improving water facilities, clean water facilities, power facilities, or combinations of water, clean water, and power facilities … for any [] lawful purpose of the water, clean water, or power utilities of the City…

You can find the full text of this section of the San Francisco City Charter here.

San Francisco City Charter

In 2018, the City of San Francisco amended its City Charter to allow the San Francisco Public Utilities Commission to finance localized water infrastructure on public non-utility and private property

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Coordinating with Key Intra-City Partners

Identifying and coordinating with key intra-city partners is an important step in implementing a decentralized water infrastructure program that leverages public non-utility property.

There are a few helpful ways to identify these key partners, including:

Assessing which agencies within you city have jurisdiction over key public non-utility property that would meet the criteria for the planned infrastructure, e.g., your city’s parks department or the city department responsible for operating and maintaining city roads

Assessing which agencies within your city will also benefit from the planned infrastructure

Assessing which agencies within your city share common sustainability goals–goals that are often defined in a city’s master plan, sustainability plan, or climate action plan

How best to coordinate with identified stakeholders will depend on your local governance structure. For example, some cities may have integrated utilities, where drinking water, energy, and stormwater are all managed by a single department. Another city might have a local water department that handles drinking water only, with stormwater managed by a different local department, such as a transportation department. Having a local “public works” department that includes all the stakeholder departments can make things easier, but in most cases coordination across separate city departments is necessary.

Click here to learn about how the City of Lancaster, Pennsylvania has worked with its intra-city partners to implement its green stormwater infrastructure program.

Including identified intra-city stakeholders in the entire capital planning process has several benefits, including:  

Early identification of ways share the upfront cost of the project construction

Early discussion of creative ways to share labor and operation and maintenance costs

Early identification of additional project funders

For example, if a water agency is considering decentralized green infrastructure on city street medians, the local transit district might be willing to pay for some traffic calming benefits; perhaps a local flood control district will pay for benefits it receives from improved onsite water management, and perhaps neighborhood beautification justifies a contribution from the city’s general fund.

Click here to learn about how the Philadelphia Water Department shares costs with other city departments.

Inter-agency Coordination: An Example from City of Lancaster

Learn how the City of Lancaster, Pennsylvania has worked with its intra-city partners to implement its green stormwater infrastructure program

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Intra-agency Coordination: Philadelphia’s Cost-Sharing

Learn how the Philadelphia Water Department shares costs with other city departments

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Maintaining Public Non-Utility Property Localized Infrastructure

Ensuring that decentralized water solutions on public non-utility property are properly operated and maintained is vital to securing the success of these strategies. Options for addressing this challenge include:

Cost-sharing agreements that establish a way to pay for long-term maintenance of public non-utility property localized infrastructure

The Philadelphia Water Department’s Memorandum of Understanding with Philadelphia’s Parks Department provides a great example of how these agreements work. A detailed description of Philadelphia’s program and a copy of their MOU can be found here.

Intra-agency Coordination: Philadelphia’s Cost-Sharing

Learn how the Philadelphia Water Department shares costs with other city departments

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Coordinating with Entirely Separate Public Entities

At times implementing decentralized infrastructure necessitates coordination between departments in a single municipality, i.e., “intra-city coordination.” Common challenges when coordinating with intra-city departments and existing ways to navigate them can be found in the Intra-City Issues section of the Toolkit.

In other instances, deploying localized water strategies requires cities and utilities to collaborate with separate utilities or cities in their region, i.e., “inter-jurisdictional coordination.” It could be the case that both types of sustainable management are needed to carry out a truly holistic water strategy. Check back soon to learn about how other communities have navigated working with separate public entities to implement decentralized water infrastructure. 

In the meantime, you can read about San Antonio’s water conservation programs that include regional cooperation and Milwaukee Metropolitan Sewerage District’s — a regional agency serving multiple cities — green infrastructure program by clicking the links below.

Milwaukee Metropolitan Sewerage District

Public and private property green stormwater infrastructure already reduce combined sewer overflows by 60% per year.

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San Antonio Water System

San Antonio Water System is treating conservation as a source of supply implemented through residential and commercial financial incentives. Learn about the success of their programs.

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Private Property Localized Infrastructure

Deploying localized water strategies often involves the use of private property. This can mean residential property–both indoors and outdoors–and commercial, industrial, and institutional properties.

Click through the below sub-sections to explore examples of private property localized infrastructure, to learn how to motivate private property owners to employ distributed solutions, find ways to secure the benefits of private property strategies for the long term, and to review case studies on how other cities have navigated equity, affordability, and administrative challenges.

Click here for a short list of considerations a utility may want to take into account as it develops the scale and location a private property localized infrastructure program.

Examples

Localized or onsite water infrastructure programs represent resilient and affordable alternatives to conventional infrastructure, capable of addressing a wide range of water resource challenges. Localized strategies that leverage private property can effectively meet drinking water, stormwater, and wastewater needs. Click through the sections below to reveal example private property strategies.

Localized Drinking Water and Water Conservation Solutions

Private property decentralized water infrastructure that can address drinking water challenges include high efficiency appliances, smart irrigation systems, onsite reuse, rain barrels, lead service line replacements, and graywater systems installed on residential or commercial, industrial, or institutional properties. You can find additional drinking water solutions here.

Communities across the country are already using these solutions to meet their drinking water needs, including:

San Antonio Water System which treats conservation as a source of supply implemented through a conservation ordinance and residential and commercial financial incentives

Madison Water implemented a city-wide lead service line replacement program to comply with drinking water standards

Austin Water has a 100-year One Water plan to increase local water supplies and mitigate climate change impacts

Moulton Niguel Water District’ has substantial financial incentive programs for residential and commercial indoor and outdoor conservation

Santa Fe Water Division has a local water conservation ordinance regulating indoor and outdoor use implemented through financial incentives

Tucson Water prioritizes conservation over traditional sources of supply through residential and commercial financial incentives and free programs for income-qualified households

Localized Stormwater Solutions

Private property localized infrastructure water strategies to manage stormwater directly where the rain falls and address stormwater management needs include blue roofs, green roofs, land conservation, permeable pavement, rainwater harvesting, and rain gardens installed on residential or commercial, industrial, or institutional properties.

With land development reducing permeable surfaces and increasing runoff challenges, programs to manage stormwater and mitigate its effects on local water quality have become critical for ensuring environmental health. Water leaders nationwide are already turning to these solutions, including:

In New Orleans, through the Community Adaptation Program the New Orleans Redevelopment Authority offers the low-to-moderate income homeowners in the Gentilly Resilience District up to $2,500 to install green stormwater management practices such as rain gardens, stormwater planter boxes, rain barrels, detention basins, increasing pervious surfaces, planting trees, and infiltration trenches on their residential property

In Philadelphia, through the Greened Acre Retrofit Program Philadelphia Water Department incentivizes commercial property owners to install green stormwater infrastructure retrofits their properties by offering up to $150,000 per acre of impervious area “greened”

In Boulder, through the City’s comprehensive water conservation programs residents and businesses receive rebates and other financial incentives for employing localized, community-based strategies such water efficiency fixtures and appliances and systems that reduce outdoor irrigation, and Boulder has a water budget rate structure to encourage conservation

In Seattle, Seattle Public Utilities provides consumer rebates for homeowners and businesses that employ water efficiency and green infrastructure strategies on their property, and pays for these programs using bond proceeds

In Los Angeles, the Los Angeles Sanitation District’s comprehensive One Water LA 2040 Plan prioritizes distributed green infrastructure best management practices on private properties in the City

Localized Wastewater Solutions

Private property localized infrastructure water strategies to meet wastewater needs include systems that can safely reuse wastewater onsite or redirect it to other uses without centralized treatment such as advanced onsite reuse systems or graywater systems. Decentralized solutions such as private sewer lateral replacements and constructed wetlands can also effectively help utilities manage their wastewater challenges. You can find details on wastewater solutions below.

And click the button below to sign-on to WaterNow’s comments on EPA’s Water Reuse Action Plan Framework (deadline to sign-on is June 26, 2019).

Click here

 

Explore Strategies: Opportunities for Localized Solutions

This report dives into the big picture benefits of localized water strategies and how to finance them.

Read more

Motivating Private Property Owners to Employ Localized Solutions

Motivating homeowners, businesses, and institutions to employ localized water infrastructure strategies is essential to leveraging private property and reaping the multiple benefits of these strategies. There are several ways available to utilities to motivate private property owners, which fall into two broad categories: mandates and voluntary incentive programs.

Explore the below sub-sections to reveal details on implementing mandates and incentives and how to secure the many benefits of these programs.

Mandates

There are a variety of ways to mandate that private property owners employ localized water infrastructure, including:

Communities across the country are already using these methods, including:

San Antonio Water System’s Comprehensive Conservation Ordinance sets requirements for indoor water efficiency, outdoor irrigation restrictions, and water reuse for residential and non-residential property owners

Santa Fe Water Division’s Comprehensive Conservation Ordinance sets requirements for leak repair, plumbing fixtures, commercial businesses including hotels and restaurants, daytime outdoor irrigation, and water offsets for new development

Boulder Water Utility’s block water budget rate structure designed to promote water conservation

Eugene Public Works’s local stormwater management ordinance requires that developers creating at least 1,000 sq. feet of new or replaced impervious surface manage stormwater onsite using a defined hierarchy of green infrastructure strategies

New Orleans’ local stormwater ordinance requires new and re-development over 5,000 sq. feet manage the first 1.25 inches of rainwater that falls on the private property onsite or, alternatively, developers may elect to pay a fee in lieu of onsite rainwater capture

Washington D.C. Department of Energy and the Environment’s local stormwater ordinance requires that development or redevelopment activity that disturbs a land area of 5,000 sq. feet or more must deploy localized stormwater infrastructure capable of managing the first 1.2 inches of rainfall and allows for a credit trading system as an alternative compliance mechanism

San Francisco’s Recycled Water Ordinance requires property owners that meet the defined criteria to install recycled water systems

The EPA has also compiled a summary of post-construction standards for stormwater discharges from newly developed and redeveloped sites for all 50 states and the District of Columbia. You can find more information about that overview here.

Incentives

There are a variety of ways to motivate residential, commercial, industrial, and institutional customers to voluntarily employ localized water infrastructure, including:

Ways to motivate ratepayers

In many cities, incentive programs that encourage private property localized water infrastructure  can be much more cost-effective than programs that consider only projects located on public non-utility property. This is likely why these programs are so ubiquitous. Click here to see the results of WaterNow’s survey of local elected officials and water managers, asking: Is your community exploring consumer rebates to implement water efficiency or green infrastructure?

Motivating existing property owners or developers to voluntarily install water-saving or stormwater-managing infrastructure and scaling investments in these cost-effective programs can, however, be challenging. This links below connect you to sections of the TIR Toolkit about what you need to know to set up a private property incentive program, including information on funding incentive programs, leveraging rates, fees, and financial incentives, and overcoming financing challenges including state gift laws and local, state, and federal taxability, marketing incentive programs.

Resources on these topics are available in the links below.

Funding Incentive Programs

In May 2018, GASB issued new guidance making it clear that municipal bond proceeds can be used to fund localized water infrastructure

Read more

Leveraging rates, fees, and incentives

Overview of how the existence of a utility rate or fee can provide a lever to motivate private parties’ participation in localized infrastructure solutions

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WaterNow: State Gift Prohibitions Database

WaterNow's 50-state database of state constitutional gift prohibition laws

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Taxability of Financial Incentives: Local Tax Issues

Overview of taxability of financial incentives for localized water infrastructure at a local level

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Taxability of Financial Incentives: State Tax Issues

Overview of taxability of consumer rebates for water efficiency and stormwater management at the state level

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Taxability of Financial Incentives: Federal Tax Issues

Overview of taxability of consumer rebates and other financial incentives at the federal level

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Overview: Marketing Financial Incentive Programs

COMING SOON - Overview of consumer incentive programs marketing strategies

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Securing the Benefits of Private Property Localized Infrastructure

So, you’ve decided to or are thinking about how to incentivize your customers to employ localized water solutions — either through mandates, rebates, direct installations, by reducing their utility fees, or other incentives. Explore the below sub-sections to learn about steps to take to ensure you realize the long-term benefits of these solutions and to read about communities already navigating these issues.

Steps to Ensuring Long-term Benefits

There are several steps every city or utility should take to ensure that they will realize the long-term benefits from decentralized, community-based infrastructure:

  1. Create accountability on the part of the individual or business who will employ the localized infrastructure for the long-term performance of localized infrastructure that the utility has helped to fund. This can be accomplished in a number of ways, including:
    • Legally-binding agreements such as operations and maintenance (O&M) contracts
    • Deed recordations
    • Covenants
    • Easements
  2. Establish clear performance metrics to be achieved by the utility. Performance metrics can include:
    • Acre-feet of water saved
    • Gallons of stormwater managed per square foot
    • Carbon sequestration or green house gas emissions reductions
    • Biodiversity
  3. Establish measures allow the utility to measure the costs and benefits of the localized infrastructure.
    • Costs will include both the direct costs of the payments to property owners or utility fee reductions and the indirect costs, which are the costs to create, publicize and manage a  property-focused program and the costs to track projects or manage service providers.
    • Benefits include amount of drinking water conserved, peak drinking water demand reduced, total water system demand reduced, volume of stormwater managed, number of combined sewer overflows reduced, concentrations of pollutants in stormwater runoff reduced, jobs created, or energy saved.
  4. Define the value of the performance of deployed localized infrastructure. This valuation can be in terms of:
    • Avoided costs
    • Social benefit
    • A combination of avoided costs and social benefit

Find additional resources below.

MMSD: Conservation Easement

MMSD enters into conservation easements with private property owners that install green infrastructure and receive a reimbursement from MMSD for doing so

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Roadmap for Sustainable Water Resources

This article outlines 4 key strategies for water managers, planners, and utilities to address the water problems facing the southwestern US.

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Blueprint for One Water

This blueprint explores critical steps for developing One Water approaches.

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Communities Securing Long-term Benefits

Communities across the country are already taking steps to secure the benefits of localized water infrastructure, including:

  • Washington, D.C.’s RiverSmart Rewards program that provides stormwater fee discounts for private property owners that install green infrastructure and manage stormwater onsite and requires that participants enter into a maintenance plan
  • New Orleans’ Community Adaptation Program that provides grants of $10,000 to $25,000 to property owners in the Gentilly Resilience District to build green infrastructure and manage stormwater onsite and requires that participating homeowners agree to maintain the installation for at least two years after construction
  • Philadelphia’s Greened Acre Retrofit Program that provides property owners that can manage stormwater onsite for 1 acre of impervious area up to $250,000 and requires the participants to enter into a legally binding 45-year Operations and Maintenance agreement that is recorded with the property so as to bind subsequent property owners as well

Check back soon to learn about other success stories from cities and utilities that have realized the long-term benefits of decentralized strategies.

In the meantime, check out the resources below to explore what the benefits of localized infrastructure are and communities’ already diving in.

Boulder Water Utility

Learn how Boulder Utilities Division used conservation and green infrastructure to combat drought and urban flooding.

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Case Studies on New Water Paradigm

Study analyzing new water infrastructure in Tuscon/Pima County, AZ and Northern Kentucky.

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Change Making and Communication

How to talk about localized infrastructure with ratepayers.

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County-Scale Rainwater Harvesting

Report providing county-level analysis of the potential of roof-based rainwater harvesting for urban water use in the U.S.

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Madison Water Utility

In this WaterNow Alliance case study, we document Madison's city-wide lead service line replacement program to comply with drinking water standards.

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Milwaukee Metropolitan Sewerage District

Public and private property green stormwater infrastructure already reduce combined sewer overflows by 60% per year.

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One Water LA 2040 Plan

The One Water LA 2040 Plan takes a holistic and collaborative approach to consider all of the City’s water resources as "One Water"

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Overview of Greywater Reuse

Report analyzing how greywater reuse can reduce demand and improve water system resilience

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Addressing Equity, Affordability & Administration Challenges

When implementing either a mandatory or voluntary program, utilities often face challenges related to equity and affordability and administration.

Explore the below sub-sections to reveal case studies and example documents on how other communities have addressed these challenges.

Overcoming Equity & Affordability Challenges

COMING SOON – Learn about ways to overcome equity and affordability challenges when motivating your customers to employ localized water solutions.

In the meantime, check out the resources on localized infrastructure programs and their benefits below.

LIFT-UP Financial Empowerment through Utility Payments

Check out this report from our partners at the National League of Cities (NLC) on the impact of Local Interventions for Financial Empowerment through Utility Payments (LIFT-UP), a model that…

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Innovative and Integrated Stormwater Management Report

Report analyzing 35 cities implementing innovative stormwater planning.

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The Cost of Alternative Water Supply & Efficiency in California

Report providing a comprehensive analysis of the cost of various strategies throughout California to augment local water supplies and reduce water demand in urban areas; determines "levelized" costs of each…

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Why Water Efficiency is the Best Solution for the Southeast

The Southeast United State faces extreme water supply challenges, learn how water efficiency can be our best source of affordable water from our partners at American Rivers.

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LADWP: Turf Replacement Rebates

LADWP's Turf Replacement program that provides rebates to residential and commercial customers who replace turf with sustainable landscapes

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Lifecycle Analysis of Stormwater Infrastructure Costs

A project intended to provide communities with a tool that takes into account the costs associated with planning, designing, acquiring, constructing, operating, maintaining, renewing, and replacing stormwater infrastructure.

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Overcoming Administration Challenges

COMING SOON – Learn about ways to overcome administration challenges when motivating your customers to employ localized water solutions.

In the meantime, check out the resources on localized infrastructure programs and their benefits below.

Inter-agency Coordination: An Example from City of Lancaster

Learn how the City of Lancaster, Pennsylvania has worked with its intra-city partners to implement its green stormwater infrastructure program

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Explore Strategies: Opportunities for Localized Solutions

This report dives into the big picture benefits of localized water strategies and how to finance them.

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Legislative Options for Financing Water Infrastructure

Report addressing several options considered by Congress to address the financing needs of local communities for wastewater and drinking water infrastructure projects and to decrease or close the gap between…

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Go Green: Muni Bond Financing for Distributed Water Solutions

A primer for water leaders on how to debt-finance distributed infrastructure projects and consumer rebates.

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Alternative Ways to Fund Innovation and Water

Report analyzing how successful energy financing structures can be applied to water infrastructure innovations.

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A Water Leaders Guide to Financing Localized Solutions

A water leader's guide to finance distributed infrastructure.

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Quick Reference: Toolkit Resources, Example Documents, and Case Studies

The Toolkit covers over 60 different topic areas related to localized water infrastructure. But are you looking for quick access to a specific Tap into Resilience Toolkit resource? You can find a specific resource by sorting the All Resources Library by “TIR Toolkit” available here

For a reference guide to the financing sections of the Toolkit click here. For a reference guide to the implementation strategies sections of the TIR toolkit click here.

Tap into Resilience Expert Panelists

The TIR expert panel is a team of tax, accounting, financing, auditing, municipal bond, and water infrastructure experts including attorneys, accountants, auditors, investors, economists, and consultants to help make sustainable, localized water management a reality for communities across the nation. As of June 2019, our panelists are:

Craig Holland, The Nature Conservancy

Ed Harrington, Municipal finance consultant

Eric Letsinger, Quantified Ventures

Janet Clements, Corona Environmental Consulting

Jeff Odefey, American Rivers

Jim Gibbs, Sperry Capital

Nicole Chavas, April Mendez, Laura Kimes, Rose Jordan, Jim Sparber, and Ryan Wilson, Greenprint Partners

Peter Yolles, Water Insight

Roger Baneman, Shearman & Sterling LLP, Of Counsel

Rowan Schmidt, Earth Economics

Scott Harder, Environmental Financial Group, Inc.

To connect with one of the TIR experts fill out the Ask an Expert form by clicking the button below.

Ask an expert

Acknowledgements

The TIR Toolkit was developed and produced by WaterNow Alliance with contribution and support from local utilities and cities across the country, municipal financing and legal experts, and other WaterNow partners.

Thank you to our city and utility partners

Bay Area Water Supply & Conservation Agency

Camden County Municipal Utility Authority

Central Arkansas Water

City of Hayward

City of Hoboken

City of Lancaster

City of New Orleans

City of Tacoma

City of Tucson

DC Dept of Environment & Energy

Los Angeles Department of Water and Power

Milwaukee Metropolitan Sewerage District

New Orleans Redevelopment Agency

North East Ohio Regional Sewer District

Philadelphia Water Department

San Antonio

San Francisco Public Utilities Commission

Seattle Public Utilities

Sonoma County Water Agency

Washington Suburban Sanitary Commission

Thank you to our industry and organizational partners

Alisa Valderrama, Neptune Street

American Water Works Association

Earth Economics

Green Infrastructure Leadership Exchange

Jesse Albani, Orrick

Judson Greif, Greenfield Government Strategies LLC

Kresge Foundation (informational interview)

New Jersey Future

New Jersey Infrastructure Bank

Roger Baneman, Natural Resource Defense Council

Spring Point Partners (informational interview)

Stephen Spitz, Orrick

DISCLAIMER

These materials are not offered as or intended to be legal advice. Readers should seek the advice of an attorney when confronted with legal issues. Attorneys should perform an independent evaluation of the issues raised in these materials. By providing these materials WaterNow does not endorse, either expressly or by implication, their accuracy or legality and expressly disclaims any and all liabilities and warranties related to their use.

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