Baltimore City Tests the (Storm)waters With Environmental Impact Bonds

Bay Journal article (2018-03-28) reported that Baltimore City plans to issue up to $6.2 million in environmental impact bonds for “green infrastructure” stormwater projects. The bond deal was created with the assistance of the Chesapeake Bay Foundation. The article noted that the bond issuance is expected to help pay for green stormwater projects, such as vegetated swales, rain gardens, and reducing impervious surfaces, in more than three dozen neighborhoods. The article stated that Quantified Ventures will help the City manage the issuance. The City considered the issuance after DC Water, the District of Columbia’s water and sewer authority, conducted a $25 million bond issuance in 2016.

Interest in environmental impact bonds is growing throughout the United States. As with conventional bonds, the bond issuer makes regular interest payments to the bond investor and pays the investor the full face amount of the bond at the bond’s maturity date. However, the interest payments for environmental impact bond are contingent on the success of the project that the bond is funding. If the project meets expectations, the investor receives the baseline interest rate specified for the bond. If the project performs more poorly, the interest payments are reduced or eliminated. If the project exceeds the expected performance, the investor receives an additional premium over the baseline interest rate.


From the article:

“Baltimore can and, we predict, will be a model for innovation in pollution reduction,” declared Bay Foundation President Will Baker at a news conference announcing the deal in West Baltimore by the site of one of the planned projects. “It’s a partnership with nature to save dollars and reduce pollution.” …

Rudy Chow, the city’s public works director, said officials were looking to diversify the city’s borrowing as it attempts to curtail polluted runoff at the source. Baltimore is required by federal and state regulators to reduce and treat polluted runoff from more than 4,000 acres of pavement and buildings across the city by 2019. …

“We really think that we’re starting a movement here in the watershed and across the country,’’ said Carolyn duPont, director of Quantified Ventures. “We believe that environmental impact bonds will be a key part of public finance in the future. Budgets are always squeezed for cities, and there’s also an ever-growing group of impact investors who are really excited to put their money and capital to work into projects like these that have both a financial return as well as environmental and social benefits.”

Useful Links

Chesapeake Bay Foundation Website

Quantifed Ventures Website

Prior Conduit Street Coverage of Environmental Impact Bonds