Green Infrastructure Bond 1996
U.S. Environmental Protection Agency
Internaal Correspondence to Linda Rimer
Here is a (hopefully final) draft on the green bonds idea. Thanks to
everyone who submitted comments and additions. They helped make it a
stronger product. I have attached a word and word perfect versions of the
text for those who want it in that form. If anyone has additional
comments, please let me know.
Environmental Improvement/Green Infrastructure Bonds
Background:
The use of bonds to fund environmental policy objectives is not new.
States and municipalities frequently use bonds to fund large scale capital
projects, including drinking water treatment facilities, sewage treatment
plants, and parks - all of which relate to protecting and restoring
environmental health.
In recent years, some states have become more creative in deriving
environmental benefits for the revenues raised by selling bonds. New York
state voters passed a referendum in 1996, approving sale of $1.5 billion
in new bonds to be used for a wide variety of environmental concerns,
including clean water, air quality, safe drinking water, solid waste, and
brownfields redevelopment. The wide range of activities sponsored by the
new bonds helped win the initiative broad support, including business
groups and municipalities who saw the financial benefits to communities
that could come from such things as state support of brownfield cleanup
projects. A federal program, aimed at reducing the costs of environmental
improvement bonds to support projects that are necessary to help cities
create liveable communities, should similarly include a diversity of
potential uses and derive a wide range of environmental, economic and
quality of life benefits to local communities.
Proposal:
Municipalities typically fund new environmental infrastructure through
tax-exempt bonds that currently carry interest rates of about six
percent. The new initiative would provide an interest subsidy of as much
as 50 percent. That would mean, for example, instead of paying an
interest rate of six percent, an interest rate would be effectively
reduced to three percent over the life of the project. And if a sliding
scale could be applied so that communities most in need would be eligible
for the full 50 percent interest rate subsidy, while communities with a
smaller need or less needy would get somewhat smaller subsidies.
Municipalities and other local governments would continue to take
responsibility for developing the projects and for providing most of the
financing for the projects. To be eligible for this support, in other
words, the local community would have to raise the bulk of the financing.
Federal support should make it easier for state and local governments to
do the right thing because we would be helping to cut the cost of the
financing of the project. This partnership typifies the shared
responsibility among the state, federal and local governments.
A portion of the credit subsidies would be allocated and administered by
the states among their local communities. The states would have to have
plans to ensure that funding is allocated by the relevant state
authorities according to need and also according to evidence that the
interest rate subsidy is being used to support environmental improvement
projects including those aimed at creating jobs, restoring environmental
quality and providing an attractive and functionally useful setting for
urban revitalization. This support for incremental “green infrastructure”
investment should also result in communities taking actions that otherwise
would not have occurred.
The 100 largest cities, in partnership with appropriate stakeholder
interests, governments and organizations, would apply directly to the
Environmental Protection Agency for their credit subsidy. We believe that
this approach will ensure that these large cities, particularly with many
environmentally impaired neighborhoods, will receive adequate attention
and appropriate treatment in the process of allocating the funds.
The funds will be distributed among participating states and
municipalities on a population-based formula.
Green infrastructure projects will require a certain amount of time to
design, coordinate with other local and federal and state assistance
efforts, and carry-out. It is important for this program run for a
minimum of ten years so projects can be properly planned and developed
before bonds are issued. Ten years of funding leveraged with other
environmental resources should significantly improve currently
deteriorated green infrastructure.
These bonds would encourage actions which recognize the relationship
between land conservation and development. Anticipated green
infrastructure projects in urban neighborhoods is a way for creating
environmental amenities which encourage long-term economic investment.
This assistance could be used for a wide range of projects including --
conservation and restoration of large contiguous parcels of open space and
corridors (for storm water drainage, storage and treatment; air quality
improvement; wildlife habitat); creation of bicycle and pedestrian
pathways; energy efficiency retrofits; brownfields cleanup and
redevelopment; landscaping (of open spaces within development parcels and
public areas); cleanup and revitalization of, and access to, land at our
waters edge; preventing pollution and reducing environmental risk (in
homes, communities, and work places); green and transit-oriented
development, and the purchase of a fleet of clean-air vehicles.
The Green Infrastructure Bond Program will be coordinated with existing
environmental programs such as: Clean Water Action Plan, Sustainable
Development Challenge Grants, American Heritage Rivers Program, Project XL
Communities, Small Watershed Grants, Brownfields Initiative, TEA-2,
Community Empowerment as well as others. The goal is use the bond to
leverage these and other federal and non-federal programs and provide
funding resources for ideas and programs that cannot be funded through
existing mechanisms. The goal is to provide flexible support for local
initiative.
The benefits of these investments include the creation of new jobs, an
increase in local tax revenues, and a generally more vibrant local
economy. In a report on the potential economic benefits of redeveloping
brownfields, the United States Conference of Mayors reports that cities
have estimated that $200 - $500 million in new tax revenues and 236,000
new jobs could result if they could return their brownfields to productive
use. Brownfields redevelopment: funds could be made available to local
jurisdictions to allow faster cleanup of contaminated sites earmarked for
redevelopment. A brownfields promotion fund could generally be made
available for a variety of activities that local authorities would take in
seeking to redirect growth to these valuable sites.
There are numerous programs which could benefit local communities that
could be financed through this proposal. All of them would have a positive
impact on the issues of livability that the Vice President has emphasized
recently. For example, in Florida lawmakers have used this approach and
funded the acquisition of close to 1 million acres of land through sale of
bonds under the State Preservation 2000 Program. Other green
infrastructure projects would support local initiatives aimed at smart
growth, such as projects to clean up brownfields, encourage in-fill
development, restore pedestrian pathways, or to increase development
around transit.
Additional green infrastructure activities, aimed at urban revitalization
and improving the quality of life for city dwellers, could include:.
Harbor and waterfront cleanup/rehabilitation. Funds could be used for
water pollution control projects as well as municipal projects to open up
decayed or dangerous waterfront properties for recreational, commercial,
and/or residential use.
For areas with old or unsafe landfills, funds could be used to close or
modernize these facilities, especially where they are located in urban
areas.
Promotion of recycling centers and programs. This could be for cities or
counties that want to explore the revenue generating and job creation
possibilities of the recycling industry. Other possibilities include
programs to encourage businesses with large facilities to start their own
recycling efforts.
Various initiatives to combat the urban heat island effect. A short list
of simple things that cities and counties can do to counter localized
temperature effects includes: surfacing roads in lighter colored material,
painting roofs light colors, using more energy efficient street lighting,
tree planting, etc. These efforts can have substantial benefits in terms
of global warming, improving health of local citizens (reduced asthma,
heat stroke, etc.), reducing cooling bills in the summer, cutting back on
the formation of smog (which is exacerbated in hotter weather), etc.
Planning for and purchasing land for urban forests and agriculture;
corridors to enhance storm water management; air and aesthetic quality
improvements; wildlife and pedestrian movement; water’s edge access; and “
civic spaces”.
- Greenbonds word - Grnbnd.wp
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