| Innovative risk-share bond finances DC Water green infrastructure project
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Innovative risk-share bond finances DC Water green infrastructure project

DC Water is modernizing its combined sewage and stormwater system with green infrastructure, pioneering an innovative risk-share financing approach to pay for it. 

Seth Charde“It’s really in support of a fishable, swimmable future,” said Seth Charde, senior advisor for green infrastructure at DC Water.
DC Water provides water and wastewater services to more than 700,000 residents in the District of Columbia, as well as wastewater service for about 1.6 million people in neighboring jurisdictions. A portion of the district has a century-old combined sewer system, in which stormwater and wastewater are collected and treated together. 
Historically, during intense rainstorms, these old systems were designed to overflow, sending roughly three billion gallons of sewage and stormwater to nearby waterways during an average year. 

“At the turn of the last century, these combined sewer systems replaced open sewage canals and cesspits in backyards. They were a huge public health improvement at the time. Dilution was the solution,” Charde said. “We know better now, and separate systems are the modern systems. Solving the overflow problem is not necessarily a change in urgency, it’s more of a change in awareness and valuing clean water.”

Hybrid approach for DC Clean Rivers Project

Parklet with green infrastructureDC Water has embarked on a $2.7 billion, 25-year effort called the DC Clean Rivers Project to capture and clean wastewater during major storms and prevent the overflow from reaching area rivers. (Pictured right, a DC Water green infrastructure parklet)

To do that, the utility is taking a hybrid approach by building gray infrastructure — 18 miles of massive underground tunnels to capture and store wastewater so it can be treated — as well as green infrastructure — vegetation and permeable surfaces that help absorb and delay stormwater runoff.  

The first green infrastructure effort within the DC Clean Rivers Project was Rock Creek Green Infrastructure Project A. Completed in 2018, it included 20 acres of rain gardens in planter strips and curb extensions, permeable pavement on streets and alleys, and two green infrastructure parks. 

“Originally, we had planned all gray — tunnels, sewer separation. Fast forward to 2011 and green infrastructure was really being seen as a tool in the toolbox for reducing overflows farther downstream,” Charde said. “Over the course of a number of years, DC Water studied pilot projects, conducted technical analysis, and by 2015/2016, we were able to make the case for bringing in green infrastructure in a big way.”

Shared risk through environmental impact bond

Vegetation in curb extension to retain stormwaterBut green infrastructure had never been done at that scale in the District of Columbia before, and trying it out involved financial risk.

So, the utility tried something new. It issued a $25-million tax-exempt environmental impact bond to provide the upfront capital to construct Rock Creek Project A. 

If the project worked the way it was supposed to, retaining 18.6% to 41.3% of runoff, DC Water would only pay back the principal and interest portion of the loan. If the project did worse than expected, retaining less than 18.6%, investors would pay $3.3 million to DC Water. (Pictured above, a curb extension full of vegetation helps retain stormwater)

Ivan BoykinIf it worked better and retained more than 41.3% of runoff, DC Water would pay $3.3 million to investors. Though that’s a potential additional upfront cost, over the buildout of the program, the utility would actually need to spend less on future projects because of better-than-expected performance on the first. 

“We thought, ‘let’s take a chance with a shared risk,’” said Ivan Boykin, finance director for DC Water.  “And we were the first in the U.S. to do that.”

After three years of third-party evaluation and measurement, Rock Creek Project A worked as intended, reducing runoff into the creek by 20%. 

“There’s a lot of work that went into this,” Boykin said. “The outcomes, performance tiers all have to be measurable.” 

The utility worked with Goldman Sachs, the Calvert Foundation, Quantified Ventures, and a Harvard fellow to structure the bond. 

Setting the stage for future green infrastructure 

Now the funding mechanism DC Water pioneered can be used by other utilities to increase the use of green infrastructure to address a variety of environmental improvement goals, such as source water protection, flood relief, climate change resilience, stormwater volume and pollution reductions, floodplain restoration, and rainwater harvesting and reclamation.

Permeable parking laneAs an added benefit, the project is creating a local green workforce in partnership with the University of the District of Columbia, in which local residents are trained in green infrastructure and certified through the National Green Infrastructure Certification Program. The utility has committed to fill 51% of new green infrastructure jobs created by the DC Clean Rivers Project with District of Columbia residents. (Pictured left, parking lane lined with permeable pavement)

“We have trained folks who know what they’re doing and are making improvements in construction and maintenance practices,” Charde said. “If green infrastructure elements aren’t maintained properly on a regular basis, they won’t perform well, and they’ll become eyesores.”

DC Water’s next chapter of DC Clean Rivers is the Rock Creek Green Infrastructure Project B, which includes permeable pavement and bioretention sites in other parts of the service area. It is slated to begin construction in early 2022. 

“We’ve gathered a lot of lessons learned,” Charde said. “There’s plenty more exciting green infrastructure to come.”