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New and Emerging Capital Providers for Infrastructure Funding New and Emerging Capital Providers for Infrastructure Funding Project #4617 New and Emerging Capital Providers for Infrastructure Funding ©2016 Water Research Foundation. ALL RIGHTS RESERVED About the Water Research Foundation The Water Research Foundation (WRF) is a member-supported, international, 501(c)3 nonprofit organization that sponsors research that enables water utilities, public health agencies, and other professionals to provide safe and affordable drinking water to consumers. WRF’s mission is to advance the science of water to improve the quality of life. To achieve this mission, WRF sponsors studies on all aspects of drinking water, including resources, treatment, and distribution. Nearly 1,000 water utilities, consulting firms, and manufacturers in North America and abroad contribute subscription payments to support WRF’s work. Additional funding comes from collaborative partnerships with other national and international organizations and the U.S. federal government, allowing for resources to be leveraged, expertise to be shared, and broad-based knowledge to be developed and disseminated. From its headquarters in Denver, Colorado, WRF’s staff directs and supports the efforts of more than 800 volunteers who serve on the board of directors and various committees. These volunteers represent many facets of the water industry, and contribute their expertise to select and monitor research studies that benefit the entire drinking water community. Research results are disseminated through a number of channels, including reports, the Website, Webcasts, workshops, and periodicals. WRF serves as a cooperative program providing subscribers the opportunity to pool their resources and build upon each other’s expertise. By applying WRF research findings, subscribers can save substantial costs and stay on the leading edge of drinking water science and technology. Since its inception, WRF has supplied the water community with more than $460 million in applied research value. More information about WRF and how to become a subscriber is available at www.WaterRF.org. ©2016 Water Research Foundation. ALL RIGHTS RESERVED New and Emerging Capital Providers for Infrastructure Funding Prepared by: John Mastracchio, CFA Arcadis, U.S., Inc., 855 Route 146, Suite 2010, Clifton Park, NY 12065 Eric S. Petersen Hawkins Delafield & Wood, LLP, 28 Liberty Street, New York, NY 10005 and Tom Huestis Public Resources Advisory Group, 117 Gayley Street, Suite 200, Media, PA 19063 Sponsored by: Water Research Foundation 6666 West Quincy Avenue, Denver, CO 80235 Published by: ©2016 Water Research Foundation. ALL RIGHTS RESERVED DISCLAIMER This study was funded by the Water Research Foundation (WRF). WRF assumes no responsibility for the content of the research study reported in this publication or for the opinions or statements of fact expressed in the report. The mention of trade names for commercial products does not represent or imply the approval or endorsement of WRF. This report is presented solely for informational purposes. Copyright © 2016 by Water Research Foundation ALL RIGHTS RESERVED. No part of this publication may be copied, reproduced or otherwise utilized without permission. ISBN 978-1-60573-277-0 Printed in the U.S.A. ©2016 Water Research Foundation. ALL RIGHTS RESERVED CONTENTS LIST OF TABLES ........................................................................................................................ vii LIST OF FIGURES ....................................................................................................................... ix FOREWORD ................................................................................................................................. xi ACKNOWLEDGMENTS ........................................................................................................... xiii EXECUTIVE SUMMARY .......................................................................................................... xv CHAPTER 1: INTRODUCTION ................................................................................................... 1 Purpose and Objectives ....................................................................................................... 1 Scope of the Research ......................................................................................................... 1 Existing Body of Knowledge .............................................................................................. 1 Report Organization ............................................................................................................ 2 CHAPTER 2: METHODOLOGY .................................................................................................. 3 Overview ............................................................................................................................. 3 Project Approach ................................................................................................................ 3 Literature Review.................................................................................................... 3 Interviews and Supplemental Research .................................................................. 3 Workshop ................................................................................................................ 4 Tool Development .................................................................................................. 5 CHAPTER 3: FINDINGS............................................................................................................... 7 Introduction ......................................................................................................................... 7 Background ......................................................................................................................... 7 Partnerships ....................................................................................................................... 10 Public – Private Partnerships ................................................................................ 10 Public-Public Partnerships .................................................................................... 22 Direct Lending and Asset Backed Securities .................................................................... 23 Direct Lending through Private Placements ......................................................... 23 Securitization ........................................................................................................ 26 Socially Responsible Investing ......................................................................................... 29 Green Bonds.......................................................................................................... 29 Social and Environmental Impact Bonds .............................................................. 36 Crowdfunding ................................................................................................................... 42 Mini or Micro Bonds ............................................................................................ 42 Crowdfunding Platforms ....................................................................................... 44 Other Non-Traditional Municipal Financing Options ...................................................... 44 Long-Duration Bonds ........................................................................................... 44 Catastrophe and Resilience Bonds ........................................................................ 46 Federal and State Government Sponsored Funding .......................................................... 48 Water Infrastructure Finance and Innovation Act ................................................ 49 v ©2016 Water Research Foundation. ALL RIGHTS RESERVED Qualified Public Infrastructure Bonds .................................................................. 50 Guarantees through the SRF Program .................................................................. 51 Self-Financing ................................................................................................................... 52 Tax Increment Financing ...................................................................................... 53 Internal Funding .................................................................................................... 56 Integrated Financing ......................................................................................................... 57 Description ............................................................................................................ 57 Prevalence in the U.S. Municipal Market ............................................................. 57 Advantagtes and Limitations ................................................................................ 58 Example ................................................................................................................ 59 Supporting Agencies and Organizations ........................................................................... 60 EPA Water Infrastructure and Resiliency Finance Center ................................... 60 Project Financing Intermediaries .......................................................................... 60 Preparing for Financing .................................................................................................... 62 CHAPTER 4: CAPITAL FINANCING TOOLS .........................................................................
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