DC Water’s Clean Rivers Project to control storm water runoff, improve water quality
The District of Columbia Water and Sewer Authority (DC Water) issued the nation's first Environmental Impact Bond (EIB) to fund the initial green infrastructure project in its DC Clean Rivers Project, a $2.6 billion program to control storm water runoff and improve the district's water quality. This deal offers a new type of financial instrument to fund environmental capital projects.
The $25 million, tax-exempt EIB was sold in a private placement to the Goldman Sachs Urban Investment Group and Calvert Foundation. The proceeds of the bond will be used to construct green infrastructure practices designed to mimic natural processes to absorb and slow surges of storm water during periods of heavy rainfall, reducing the incidence and volume of combined sewer overflows (CSOs) that pollute the district's waterways.
The EIB allows DC Water to attract investment in green infrastructure through a financing technique whereby the costs of installing the green infrastructure are paid for by DC Water, but the performance risk of the green infrastructure in managing storm water runoff is shared among 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. By financing this project through the EIB, DC Water seeks to create a model funding mechanism that other municipalities can leverage to advance the use of green infrastructure to address storm water management in their communities.
"This environmental impact bond represents the first time that DC Water has explicitly tied financial payments to environmental outcomes, in this case reducing storm water runoff to improve the district's waterways,” said Mark Kim, DC Water chief financial officer.
DC Water CEO and General Manager George S. Hawkins added: "This unique bond offering is the result of DC Water's relentless commitment to innovate and pursue every available avenue to provide the best service at the best price to our customers and to the greater community we serve."