OJ McFoy, General Manager, Buffalo Sewer Authority
Sanjiv Sinha, Ph.D., P.E, Senior Vice President, Water Resources, Environmental Consulting & Technology, Inc.
Municipalities are wrestling with cost-effective options to manage stormwater in locations that use combined sewer systems and/or are prone to chronic flooding, especially as available right-of-way areas for public projects become exhausted. Green stormwater infrastructure (GSI) on private property can lower costs and spread the responsibility for stormwater management, but property owners need incentives to implement these projects on behalf of their community. The Buffalo Sewer Authority (Buffalo Sewer) is pioneering a new approach to incentivizing GSI on private property and worked with Quantified Ventures and Environmental Consulting & Technology, Inc. (ECT) to structure an Environmental Impact Bond (EIB) to finance this work. EIBs are a relatively new financial tool and take the form of a municipal bond issuance, with a few additional features, including outcome evaluation and disclosure beyond labeled use of proceeds for environmentally and socially beneficial projects, and often, payments or rates linked to performance. In Buffalo, the EIB will provide incentives in the form of reimbursements for private property owners to install GSI on their property. While other municipalities offer incentives for private property installations, Buffalo Sewer is planning to offer these incentives on a larger scale through the issuance of this EIB, providing a pool of capital upfront for the program. The EIB will also support the construction of public projects, demonstrating Buffalo Sewer’s multi-pronged approach to managing stormwater, while enabling it to better understand the most effective approach toward public vs. private projects in future progress toward its stormwater management goals. Buffalo Sewer will report on acres of impervious surface managed as part of its annual disclosure to investors, and in addition, plans to report on several equity and community impact metrics throughout program implementation. The novel structure of this EIB incentivizes Buffalo Sewer to manage more acres of impervious surface through the grant program, as the coupon rate on the bond will step down if Buffalo Sewer achieves its goal for acres managed through the incentive program. Overall, Buffalo Sewer’s EIB aligns financial relationships with private investors by providing performance incentives while delivering quality-certified GSI projects. This structure creates a feedback loop for future decision making and is a model for similar initiatives across the country.