Communities across the country are struggling to respond to a variety of stresses – from climate change to changing development patterns. Today, Secretary Castro announced the allocation of $500 million in disaster recovery funding to Louisiana, Texas and West Virginia to help those states and most affected counties recover from 6 separate Presidentially-declared disasters in 2016. The impacts of Hurricane Matthew are still being assessed, but that storm cut a swath of destruction across 4 states – Florida, Georgia, and North and South Carolina.
In fact, since 2010, 85 percent of all U.S. counties have suffered a declared disaster; and 223 counties have had 5 or more major declared disasters since 2010. In 2016 alone, our nation has witnessed two “once-in-a-thousand-year floods” and several 500-year events with 38 federally declared major disasters. And until Matthew, only one of this year’s damaging weather events was a named storm (Hurricane Hermine).
At the same time, many states and local governments are struggling to maintain their essential infrastructure –like roads, water and sewer systems, aging public facilities, sidewalks, and parks. Organizations, from the Bi-Partisan Policy Center to the Ford Foundation, are calling for America to invest in infrastructure in a different, more forward-thinking way…High-performance infrastructure that’s built to last. In these tight fiscal times and increased climate uncertainty, communities need to design infrastructure investments that achieve multiple benefits, in the most cost-effective way.
High-performance infrastructure is rooted in deep public engagement and engages multiple disciplines to design infrastructure solutions that do double- or even triple-duty. For example, the City of New Orleans is installing a series of integrated green infrastructure practices to manage stormwater. These approaches reduce the risk of flooding and provide community amenities like parks and bike lanes. Fiscal budgets are tight and planners are embracing the idea that public works need to be designed for more than one purpose.
HUD Offers Technical Assistance!
We know that more than 1,200 state and local governments receive HUD Community Development Block Grants (CDBG). Of the CDBG funding that goes to states, half is for infrastructure. Of the funds that go to local communities, nearly one-third is spent on infrastructure projects.
That is why HUD is launching a Community Resilience Program to encourage Community Development Block Grant grantees to apply for technical assistance to maximize their infrastructure investments by emphasizing resilience to protect their communities from future threats. The fact of the matter is every park, school, road and drainage project has the potential to provide a community greater protection from the threats of future storms.
The Community Resilience Program will rely on partnerships with other Federal Government agencies, HUD’s technical assistance providers, and philanthropy. This program will help institutionalize resilience throughout HUD’s field staff and state and local grantees by assisting individual states or communities and cohorts of communities with incorporating resilient design into their capital projects. HUD will make lessons learned available.
We know that beyond physical design, high-performance infrastructure also relies on innovative project and financial design. Communities are increasingly turning to innovative forms of finance, value capture strategies, and procurement practices to bring projects to execution.
There is a growing range of debt instruments that recognize that not all capital projects are created equal and that some of them can be distinguished by the ways in which they reduce investor risk. According to Bloomberg News, a record $71.8 billion of climate-friendly bonds are set to be issued in 2016. These ’green bonds’ differ from traditional municipal bonds in three ways: they are labeled “green” by their issuer, proceeds are earmarked for green investments, and proceeds are tracked to ensure green compliance. These bonds often carry lower risk and realize a variety of benefits such as reduced utility, maintenance, and insurance costs.
A couple of weeks ago, the DC Water and Sewer Authority (DC Water), and its investors, Goldman Sachs and Calvert Foundation, issued the first Environmental Impact Bond (EIB), an innovative bond to fund the construction of green infrastructure to manage stormwater runoff and improve the District’s water quality. The proceeds of the EIB will be used to construct green infrastructure to reduce the incidence and volume of combined sewer overflows that pollute the District’s waterways. If the green infrastructure control measures financed by this EIB are successful in managing stormwater runoff, green infrastructure will be further validated as an effective climate adaptation tool. The EIB is based on an innovative financing technique whereby the costs of constructing the green infrastructure are paid for by DC Water, but the performance risks of managing stormwater runoff are shared amongst DC Water and the investors. As a result, payments on the EIB may vary based on the proven success of the environmental intervention as measured by a rigorous evaluation.
Value capture is a method of funding improvements that recovers all or some of the increase in property value generated by public infrastructure investment. This can be accomplished through special assessment districts or the sale/lease of publically-owned land. The Rebuild by Design project in Hoboken, New Jersey called “Resist-Delay-Store” explores this concept. It anticipates that the benefits accrued through investment in resilience can generate considerable new value. By funding a project that protects waterfront and manages flood waters, new development in the area is defended, decreasing flood risk and insurance costs and increasing land value. More development on the protected land generates incremental city and state taxes which can be applied into funding more resiliency measures or affordable housing.
When funding is available, communities often pull old project designs off the shelf without re-examining the outcomes these projects are attempting to achieve or the assumptions that these original projects were based upon. Cities are increasingly looking to performance-based contracting as a vehicle to solicit the best and most effective approaches to addressing community and infrastructure needs. They recognize that we have much more uncertainty about future trends calling for both consideration of multiple future scenarios AND for designs that allow for adaptation. A recent publication on high performance infrastructure released by the Natural Resource Defense Council spotlights one example, where Prince George’s County, Maryland recently issued a Request for Qualifications to identify approaches for Clean Water Act compliance that also achieved social and economic outcomes. In addition, Regional Infrastructure Accelerators, like the West Coast Infrastructure Exchange, are helping communities aggregate projects and explore full lifecycle contracts to attract private capital.
At HUD, we’re taking steps to drive high-performance infrastructure investments by our state and local grantees. Public investment can and should go beyond just modernizing our aging infrastructure to make sure that we address our most vulnerable residents.
Harriet Tregoning is the Principal Deputy Assistant Secretary for Community Planning and Development.