Financing an EcoDistrict Organization Through Project Development and Monitoring June 2011, Version 1.1

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Copyright Copyright © 2011 Portland Sustainability Institute. All rights reserved.

Acknowledgements The EcoDictricts Toolkits were developed by the Portland Sustainability Institute (PoSI) in partnership with practitioners from the EcoDistricts Technical Advisory Committee (TAC) in 2010-2011. Its publication would not have been possible without the dedication of these many volunteers. PoSI staff led the development, writing and research. TAC members reviewed draft toolkits and, in some cases, provided content. In addition, a targeted group of topic area experts provided a peer review. PoSI would like to thank the following individuals and organizations for their contributions and dedication to this process:

Finance Working Group Michael (Kipp) Baratoff (Co-Chair), Gerding Edlen Sustainable Solutions John Warner (Co-Chair), Portland Development Commission Joe Barra, Portland General Electric Aaron Berg, Blue Tree Strategies Irene Bowers, Portland Development Commission Brad Lawless, Northwest Natural Lang Marsh, Oregon Solutions

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 2 Contents

Introduction to EcoDistrict Finance...... 5

1. Financing District Organization, Assessment and Monitoring ...... 8 Creating and Funding a District Governance Structure for Ongoing EcoDistrict Operation ...... 8 Financing EcoDistrict Assessment...... 9 Integrated and/or In Depth Feasibility...... 10

2. Financing for Feasibility Studies and Small-Scale Projects ...... 12 I. Special-Assessed Districts...... 13 Business Improvement Districts...... 13 Local Improvement Districts ...... 13 Property Assessed Clean Energy (PACE) Districts ...... 14 II. Non-Tax-Assessed Districts...... 15 Parking Benefit Districts...... 15 Voluntary TMA Contributions ...... 15 TIF / Urban Renewal Areas...... 16 System Development Charges ...... 16 Franchise Fees ...... 17 III. Potential Future Feasibility and Small Project Financing Models...... 17 Climate Benefit Districts...... 17 Emerging Strategies ...... 18

3. Financing District Utilities and Other Large-Scale Projects ...... 20 Introduction to Project Finance ...... 20 A. District Energy ...... 23 Overview ...... 23 Barriers...... 23 Financing Approach...... 24 Precedent Projects ...... 25 B. Building Energy Efficiency...... 26 Overview ...... 26 Barriers...... 28 Financing Approach...... 28 Precedent Projects ...... 30 C. District Water: Wastewater and Stormwater Treatment Systems ...... 31

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 3 Overview ...... 31 Financing Options...... 32 Precedent Projects ...... 33 D. Mobility...... 34 Overview ...... 34 Financing Approach...... 35 Precedent Projects ...... 36 E. Materials Management: Waste to Energy ...... 36 Overview ...... 36 Barriers...... 37 Financing Approach...... 38 Precedent Projects ...... 40 F. Materials Management: Composting...... 40 Overview ...... 40 Barriers...... 40 Financing Approach...... 41 Precedent Projects ...... 41 G. Habitat and Natural Infrastructure ...... 42 Financing Ecosystem Services in an EcoDistrict...... 42

Conclusion...... 45

Appendix A: Toolkit Methodology...... 46

Appendix B: Potential Funding Sources for Predevelopment Activities...... 47

Appendix C: Foundation & Grant Funding Opportunities.49

Appendix D: Integrated Feasibility Studies...... 51

Appendix E: District Energy Precedent Projects...... 52

Notes ...... 55

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 4 Introduction to EcoDistrict Finance EcoDistricts bring together investments in the areas of green buildings, smart infrastructure and behavior. Underlying all assumptions about EcoDistricts is the premise that these projects will be able to attract adequate financing. Finding capital will not be easy for a number of reasons, including the an EcoDistrict’s complexity, time horizons and risk. Many EcoDistrict projects, particularly infrastructure projects, will involve multiyear investments. Some infrastructure will likely need to be installed in advance of need, increasing risks and, therefore, the returns required by some types of investors. Projects will typically provide a mix of private and public benefits, and financing will require separate mechanisms to support these different benefits. Private benefits will have to be aligned with existing market prices and potential, whereas public benefits will likely be funded by grants and other means. The “Financing an EcoDistrict” Toolkit provides an overview of strategies for funding EcoDistrict projects through various stages of development. The goals are to: 1) catalogue existing public and private funding streams that may be available to EcoDistricts, including district- scale financing strategies that aggregate dollars across multiple property owners for shared investments that benefit the district;i 2) explore the creation of potential new funding mechanisms; and 3) outline strategies for blending various types of market-rate and below- market-rate funding sources to finance EcoDistricts projects. Creating an EcoDistrict includes five major steps: 1. District Organization 2. District Assessment 3. Project Feasibility 4. Project Development 5. District Monitoring

This toolkit addresses all five steps through three types of financing: 1. Financing District Organization, Assessment and Monitoring discusses sources and types of funding to finance these phases of EcoDistricts activities including engagement, district governance, and assessment. Monitoring is included in the operational activities of an EcoDistrict governance structure. 2. Financing Feasibility and Small-Scale Project Development addresses various tax-assessed and non-tax-assessed mechanisms that can fund a range of modest-sized project types (i.e. projects of $1M or less). 3. Financing District Utilities and Other Large-Scale Project Development offers various ways of financing infrastructure at the district scale. This section covers a range of ways to fund

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 5 district energy, district water, large-scale renewable energy and energy efficiency programs. This approach assumes that a range of projects could be managed and financed in aggregate by a single master developer, even in an existing neighborhood, using either a district-scale financing strategy such as Local Improvement District bonds or using one or more standard project financing strategies such as tax equity financing for renewable energy or tax increment financing (TIF) financing for roadway improvements. This approach was informed by the notion that while each EcoDistrict may have holistic goals, implementation will likely require integrated management of a collection of individually financed projects operating together to meet those goals. While the toolkit provides an overview of various financing strategies, it is not a step-by-step “how to” guide. EcoDistrict implementation involves many financing strategies that: occur in stages; use multiple forms of capital; are influenced by the programming, design and goals of a particular district; and reflect the natural, social and financial capital currently available in the district. In short, each district’s overall financing strategy will be unique and will involve various capital sources. Success will require collaboration between public and private sectors to share resources and to appropriately allocate risks and benefits. Districts will require multiple forms of public and, likely, philanthropic capital (such as cost-sharing, grants, tax incentives, subsidies and below-market-rate loans), as much as they will require private forms of capital (tax equity, debt, venture capital, etc.). The chart below offers a framework that maps the potential types of capital according to the phase of EcoDistrict implementation.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 6 District Feasibility and District Utilities Organization, Small-Scale and Large-Scale Assessment, and Projects Projects Capital Type Monitoring

Cost-Sharing / Partnerships X X X

Below-Market-Rate Loans X X

Debt / Bonds X X

Grants X X X

Impact / Service Fees X X X

Private Equity X

Revolving Loans X X

Subsidies X X

Tax Assessments X X X

Tax Incentives X

Tax Increment Financing X X X

Third Party Ownership X X X

Voluntary Contributions X X X

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 7 1. Financing District Organization, Assessment and Monitoring This section includes three major aspects of EcoDistrict operation. Organization includes engaging stakeholders and creating a governance structure. Assessment includes a rigorous technical assessment to inform project priorities. Monitoring is essential to ongoing EcoDistrict operation to ensure that projects are meeting performance goals. These activities can be financed through a variety of sources.

Creating and Funding a District Governance Structure for Lloyd District Ongoing EcoDistrict Operation Engagement Costs during the early stages of stakeholder engagement and the The first stages of the formation of a governance structure may include hiring professional Lloyd District facilitation services, engagement process consultants, lawyers and other stakeholder technical experts, as well as paying minor expenses such as food and engagement process space for community meetings, office supplies and computing expenses. This process is described in detail in “EcoDistricts required about a year Engagement to Governance Toolkit.” of managing and facilitating a working Pro bono professional services should be pursued, because the group made up of EcoDistricts concept is unique enough to attract free help and because representatives from professional services firms might view pro bono participation as an investment leading to potential paid future opportunities. Similarly, the district’s major neighborhood small businesses may offer to support the public property owners. The engagement process with donations of refreshments and meeting estimated $50,000 space. In most cities there are many existing organizations that work in budget for this the sustainability arena, such as non-governmental organizations 1 process came from (NGOs), public agencies, business associations, etc. that may provide various sources resources and support to initial EcoDistrict formation. It is important to including the Lloyd leverage resources wherever possible. Transportation In the near term, when the idea of paying for district-level professional Management governance is not yet widely accepted, government and foundation Association, the City of funds are common sources for early efforts to support stakeholder Portland, Portland engagement; in fact, these sources helped establish Portland’s first Development EcoDistrict. Commission, Metro In the future, as the value of district-level governance becomes and Oregon Solutions. increasingly clear, we believe that these activities should be funded though one of several possible forms of self-assessment levied on entities within the district. Business Improvement Districts and Resource Consumption Surcharges (i.e. utility surcharges, parking meter surcharges) could both be levied for this purpose.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 8 Financing EcoDistrict Assessment Once an EcoDistrict has an established governance structure with the capacity to guide projects going forward, it is essential to complete a comprehensive feasibility analysis using the EcoDistrict Assessment Method (the Assessment Method is based on the EcoDistrict South Waterfront Performance Areas and described in detail in the “EcoDistrict Feasibility Performance and Assessment Toolkit”). This will generate a list of the most promising projects. The assessment process includes priorities In Portland’s South that have been identified through stakeholder engagement and Waterfront District, considers district performance, assets, projected growth and two firms, OTAK and community interest to prioritize projects with the greatest combination Compass Resources of impact and potential to attract financing. Significant cost savings can Management, agreed be achieved by doing a single higher-level assessment to evaluate to share information various project types at once, rather than focusing solely on one type of while conducting project. studies of transit and utility infrastructure, projected density and Potential Funding Sources for District Organization, potential for a district Assessment and Monitoring energy system. By The following kinds of city and state funding programs can be used to working together, they pay for predevelopment studies in Portland and Oregon. They provide determined whether up to $50,000 for preliminary assessments and screens to determine if there would be deeper feasibility is warranted. Applicant eligibility varies widely and opportunities to district-level projects may not seem to fit the initial applicant mold, but reduce the costs of many of these programs have untapped funds for innovation and have infrastructure through expressed interest in funding EcoDistrict–scale activities. joint implementation, Revolving Loan Funds e.g. installing district EcoDistricts would benefit from an integrated green infrastructure grant energy pipes or fund for feasibility and low-interest gap financing as a revolving loan. conduit when a street is being redeveloped Revolving loan funds may be used to pursue EcoDistrict, for light rail transit, to predevelopment financing or even capital project costs. They are suitable for projects that yield a return on investment, because the reduce overall cost resulting project revenue stream (e.g., utility savings or reduced and traffic disruption. operating expenses) pays back the loan and makes funding available for subsequent projects. Harvard University’s $12 million Green Campus Loan Fund is a good example of this strategy in an institutional setting (http://green.harvard.edu/loan-fund). Appendix B in this document has details of the following programs: • Green Municipal Fund Federation of Canadian Municipalities • Grants and Loans Toronto’s Atmospheric Fund • Community Renewable Energy Feasibility Fund Oregon Department of Energy • Renewable Energy Feasibility Fund Administered by the Infrastructure Finance Authority EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 9 • Development Opportunity Services (DOS) Program Administered by the Portland Development Commission • Commercial Property Redevelopment Loan Program Administered by the Portland Development Commission • Feasibility Study Funding for Renewable Energy Projects Energy Trust of Oregon • Energy-Efficiency Audits Energy Trust of Oregon Foundation and Grant Funding Though not as dependable as established financing programs with predetermined processes and timelines, foundation support and grants can also provide predevelopment funding. The availability of dedicated fundraising staff and grant-writing capacity may limit the extent to which these opportunities can be utilized, depending on the size and administrative budget of the EcoDistrict. Examples of foundations and trusts with an interest in urban sustainability include (detailed in Appendix C in this document): • Meyer Memorial Trust • Bullitt Foundation • Summit Foundation • Kresge Foundation • Home Depot Foundation • Lazar Foundation • Collins Foundation • Lemelson Foundation

Integrated and/or In Depth Feasibility There is great value in investing in an integrated sustainability study that evaluates opportunities in multiple environmental impact areas and looks for synergies between those areas. While the initial cost is greater than that of an individual energy or water study, for example, taking an integrated approach is more cost- and time-effective than completing a series of studies across multiple impact areas and then trying to determine the points of overlap. Developers and municipalities do not typically conduct integrated feasibility studies, and as a result, opportunities are lost. However, a few past examples of integrated studies provide examples of cost and scope. An integrated study of multiple environmental systems, such as energy, water and waste, can cost between $100,000 and $350,000. Single-system feasibility studies, for example, on district energy, may cost between $100,000 and $150,000, but can run as high as $350,000 for a more complex analysis.ii Programs intended to fund feasibility studies typically will not offer these higher levels of financing, so additional funding sources must be identified. Pursuing partnerships with utilities, campus-based institutions, energy service companies (ESCOs) and private firms can be a good approach

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 10 for financing EcoDistrict feasibility studies. For example, institutions have a strong incentive to fund feasibility studies for district utility systems, such as district energy, which generates ongoing revenues, when there is an opportunity to secure future paid work on, or even outright ownership of, the resulting utility. ESCOs offer a potential deeper feasibility funding option, in addition to the funding of actual project infrastructure costs. An ESCO will perform the appropriate upfront studies and analysis, and will implement, monitor and maintain physical improvements as a means of generating return on investment through long-term energy savings. Establishing district energy-generation systems that use alternative fuels, or converting existing campus or district energy systems to renewable fuels, also may help utilities or universities meet renewable energy or energy efficiency commitments, including mandates such as state renewable portfolio standards and voluntary commitments. Certain utilities that stand to benefit from infrastructure cost savings (by not having to develop more centralized capacity) may also have a vested interest in funding a deep-dive feasibility study. Potential future contract revenue also offers private project development firms a strong incentive to invest in feasibility studies. For example, an RFP that offers a design-and-build opportunity to the winning proposal gives developers a greater incentive to participate than one where the post-feasibility work will be opened up to a bidding process. As mentioned previously, the cutting-edge nature of the EcoDistrict concept will also attract increased attention from private entities. Engaging the private sector and offering at least some public support may be the best way to drive rapid innovation. A few example comprehensive feasibility studies include (details in Appendix D in this document): • Lloyd Crossing • PCC Sylvania Net-Zero Energy Study • Seattle University Resource Study

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 11 2. Financing for Feasibility Studies and Small-Scale Projects Once initial EcoDistrict conversations and goals are underway, and stakeholders are organized to start making decisions, the community may consider district-wide financing strategies that aggregate funds across multiple property owners to benefit the district as a whole. These funds may be used to further organize stakeholders, create a new legal entity, pay staff, complete assessments and feasibility studies and ultimately even pay for projects. The value of an integrated district financing mechanism is that it provides both a shared source of funding to organize stakeholders and a starting point for collective decision- making. It also positions the district to leverage additional resources. At the most practical level, the district-wide funds support integrated assessments and broad feasibility that determine the projects with the greatest impact as well as areas of overlap with other projects. In most cases, where EcoDistrict financing strategies, particularly in regard to energy and water systems, will yield a return on investment, traditional financing mechanisms can be utilized (though multiple-entity ownership can complicate the process). However, some projects cannot be or have not yet been monetized, although they bring important quality of life improvements (for example, increased natural habitat, cleaner air or attractive public spaces) that benefit all property owners. In such cases, district-level financing becomes extremely important. Strategies for district financing are varied and can include the following: • Special-assessed districts, such as local improvement districts (LIDs) and business improvement districts (BIDs), also known as Economic Improvement Districts (EIDs), where additional taxes are levied against owners; • Non-taxed-assessed districts, such as parking benefit districts (PBDs), where parking revenue is used to fund public projects; voluntary contributions; and urban renewal area (URA) funds; and • Future models, such as climate benefit districts (CBDs) and emerging approaches that address community equity. The right mechanism(s) will be highly dependent upon existing land use, physical infrastructure and governance structures; resident/business owner/government commitment; and many other factors. The remainder of this section gives examples of these strategies; the list is not comprehensive but does provide options that should satisfy most types of district-level characteristics.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 12 I. Special-Assessed Districts

Business Improvement Districts Lloyd District BID A business improvement district (BID) is a district-scale financing In 2001, Lloyd property mechanism that obtains private sector funding through assessments on owners established a commercial property. The assessments are paid by property owners/managers rather than businesses, to avoid the issue of district BID to generate funds revenue lost through tenant turnover, and are collected through the to invest in public tax collection mechanism. Typically set up by private nonprofit transportation, public entities, to qualify as a BID, 67 percent of all property value managed safety and economic within the district boundary must vote for its establishment. development projects Government entities cannot be mandated to participate in a BID. In the and programs. The case of the Lloyd Transportation Management Association (TMA), BID has a nine-member public entities voluntarily contribute in good faith. board of directors and assesses over 100 properties located in BIDs are common throughout the United States and are typically used for programmatic funding, with less of a focus on infrastructure. the district. Through However, City of Portland code provides flexibility so that funding for the BID and public- infrastructure may be possible if clearly stated at the time the BID is sector funding voted upon and established, which opens the door for EcoDistrict-scale matches, the TMA projects. BIDs are, however, unlikely to serve as a standalone employs staff that infrastructure-financing strategy. Assessments cannot be levied on provides transit, residential properties, but are only applicable for commercial- and bicycling, walking, industrial-zoned properties. Urban renewal area or local improvement ride-share and district designations have no bearing on whether a BID can be formed. advocacy programs and services to Lloyd Local Improvement Districts employers and employees. In Oregon, cities and counties have the authority to finance local improvements (in the public right of way) through special assessments on benefited properties. A group of petitioners can also lobby the government to initiate a local improvement district (LID). An LID is defined as a “geographic area in which real property is assessed to defray all or part of the costs of a public improvement. The distinctive feature of a special assessment is that its costs are apportioned according to the estimated benefit that will accrue to each property.” These benefits are established by the three principles of direct benefit, obligation to others and equal sharing. The apportionment method should be rationally, measurably, consistently applied to all similarly- situated properties within the district and reflective of a nexus between the public improvements and the benefitted properties. Traditionally, LIDs are used to fund local public infrastructure, such as storm and sanitary sewers, streets, curbs, sidewalks, water lines, recreational facilities, street lighting, etc. Unlike BIDs, they can be used to fund improvements in residential zones. The EcoDistrict’s location, jurisdictional flexibility in regard to LID improvements and the local political support will dictate what types of projects can be included in

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 13 this financing strategy. It is important to keep in mind that LIDs typically work best as one of many elements of a project-financing package. LIDs sometimes only pay for 10-15% of a project’s cost, but this local contribution can be instrumental in leveraging other public or private funding sources. As is the case with BIDs, LID payment obligations are linked to the property.

Property Assessed Clean Energy (PACE) Districts In areas with PACE legislation in place (a recommended EcoDistrict policy tool) municipal financing districts or finance companies issue bonds to investors and then loan the proceeds to consumers and businesses to fund energy retrofits, both in the commercial and residential sectors. The loans are repaid over the assigned term (typically 15 or 20 years) via an annual assessment on owners’ property tax bills. One of the most notable characteristics of a PACE program is that the loan is attached to the property rather than the owners; therefore, the loan transfers with change of ownership. PACE bonds offer the dual benefit of providing security to the issuing municipality, while giving private property owners access to the low-interest municipal bond market. PACE programs assist homeowners and businesses to pay the upfront costs of green initiatives such as weatherization or solar panel Berkeley First PACE installations. The incremental assessment on a property owner’s Program property tax bill is based upon the project cost, less any applicable tax Berkeley First, a credits or other incentives, and the municipal financing rate on the Berkeley, CA, program bonds. PACE financing allows participating property owners to begin that funds solar system saving on energy costs while paying for the improvements. This usually installations, is the first means that owners’ energy savings are equal to or greater than their to utilize PACE property tax increase. financing, and its At the time of this report’s publication, the legality of PACE financing is success amid a dismal a matter of debate, because the resulting “super lien,” as a property tax bond market has liability, typically results in a compromised security position for quickly spawned mortgage lenders, including Fannie Mae and Freddie Mac. Furthermore, similar programs in because property tax liens are tax deductible, the US Treasury Department has expressed concern about the adverse fiscal impact of nearly 20 states. PACE financing. http://www.ci.berkeley .ca.us/ContentDisplay. PACE districts function similarly to BIDs and LIDs, with a couple of aspx?id=26580 major differences: participation is voluntary and funding is specifically targeted toward renewable energy installations and/or energy- efficiency improvements. The PACE model can also be applied to other areas of environmental improvement such as stormwater management or even integrated multipurpose investments.iii A history of the PACE concept can be found here: http://www.renewfund.com/node/110

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 14 II. Non-Tax-Assessed Districts

Parking Benefit Districts The concept of a parking benefit district (PBD) is fairly simple: A portion of parking meter revenues — charged at rates calibrated to result in 85% occupancy — are used to fund neighborhood- or district- scale improvements. One PBD advocate, Donald Shoup, states that, “Cities can change the politics of parking if they earmark curb-parking revenue to pay for public goods in the neighborhoods that generate it. iv” These “public goods” might include changes to the pedestrian environment and/or streetscape, such as sidewalk installations, tree planting, bicycle infrastructure (i.e. lanes and parking) and storefront improvements, all of which should promote local economic development. Shoup indicates that people are willing to pay for parking if it becomes easier to access — especially if it also brings quality of life improvements to their neighborhood. The parking benefit district model is relevant for EcoDistricts, and it has been successfully implemented in Portland’s Lloyd District, as well as in cities throughout the country, including Old Town Pasadena and San Diego, CA. A recent effort to establish a PBD in Portland’s Homestead neighborhood succeeded. The city’s existing Parking Meter District Policy specifically recommends that new parking meter districts reserve a portion of meter revenues for local investment. The policy states: Revenues remaining after capital and operating costs are covered may be allocated to support transportation services within the meter district and citywide. …As a general rule, the majority of net revenues should go to supporting transportation and parking services and programs within the meter district.v Because land uses, zoning and parking availability may vary significantly among potential EcoDistricts, the amount of parking meter revenue generated is likely to vary and to fluctuate depending on the level of commercial activity. Although PBDs appear to be a high-potential revenue source for EcoDistrict investment, it is likely they would represent only one component in an overall EcoDistrict financing strategy because of the relatively small net revenue produced.

Voluntary TMA Contributions While the Lloyd Transportation Management Association utilizes BID and PBD financing, most TMAs in the United States are funded with voluntary membership dues supplemented by grants. Unfortunately, there are many pitfalls in relying on voluntary contributions or memberships. In addition to an unpredictable cash flow during prosperous economic times, donations will almost certainly decline during economic downturns, leaving an EcoDistrict vulnerable if it is funded solely by voluntary contributions and grants.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 15 Furthermore, EcoDistricts funded by donations will suffer from the “free rider problem,”vi as voluntary contributions by key district members can benefit other members who are not obligated to pay for them. For example, if voluntary contributions are used to fund streetscape improvements like additional tree canopy or other pedestrian amenities, a contributor’s neighbor can appreciate the same improved sidewalk environment without being legally mandated to help share the cost. Consequently, it is unlikely that a voluntary model would be a sustainable financing strategy for anything beyond a district’s startup period.

TIF / Urban Renewal Areas Tax increment financing (TIF) uses future gains in taxes to finance current improvements, which theoretically will create the conditions leading to those future gains. When a public project such as road improvement or a brownfield cleanup is carried out, the value of surrounding real estate often increases, often leading to more investment in nearby buildings. This increased property value typically generates increased tax revenues, or “tax increments.” TIF dedicates tax increments within a certain defined district to finance debt issued to pay for the project. TIF is designed to channel funding toward improvements in distressed or underdeveloped areas, where development might not otherwise occur, and to create funding for public projects that may otherwise be unaffordable to the local community. In Portland, urban renewal areas (URAs) can use TIF funds to improve infrastructure (streets, parks and public facilities), housing, economic development and neighborhood revitalization. For example, TIF can finance public improvements in rights of way by developing green streets, streetscapes, improving connectivity for multi-modal transportation and transit such as streetcar and MAX. Urban renewal funding can also be used to finance property acquisition for greenspaces, tree planting and energy retrofits. TIF can also fund district and building scale project feasibility studies (e.g. district energy, district wastewater, redevelopment, bicycle infrastructure, real estate feasibility). In addition, the Portland Development Commission (PDC) has a number of direct private property financing programs (loans and grants) that currently target single property owners, such as storefront and green grants for sustainability improvements.

System Development Charges System development charges (SDCs), also known as impact fees, are implemented by a local government on new/proposed development or land-use changes to help pay for the costs that the new development may impose on public services, including expanded off-site capital improvements such as roads, schools or sewer systems. These fees are usually implemented to help reduce the economic burden on local jurisdictions that are trying to deal with population growth.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 16 Portland is authorized to impose SDCs and the resulting funds are currently utilized by the Bureaus of Environmental Services (sewer and stormwater), Parks and Recreation (open space and parks), Water and Transportation. In addition, the City collects SDCs on behalf of Portland Public Schools and David Douglas Schools to pay for capital improvements for school facilities. The property owner/developer pays SDCs, which are often one-time, upfront payments at the time a permit is issued for a development project. However, payment terms can vary, and a lien is typically placed on the property until the SDC is paid in full. Portland offers special assessment loans to finance SDCs in the same manner as loans for LID special assessments. While the City of Portland’s current legal definition of SDCs does not support financing across multiple projects in a district, conceptually, SDC payments could be used for public or private district-scale infrastructure projects rather than for public, centralized systems only. This would depend largely on the flexibility of the municipality’s SDC policy and the willingness of the City Council to explore financing infrastructure that is over and above what is already budgeted for SDC funds. Portland currently provides incentive for developers to pursue open space dedication, off-grid electricity generation or on-site water treatment by waiving or reducing SDCs.

Franchise Fees Franchise fees are collected on behalf of the city government by utilities as a percentage of current utility users’ bills. The revenue from franchise fees is then transferred back to the city after collection. It would be feasible to fund SMA operations and small projects through a modest increase in franchise fees. The additional revenue from the increased fees could be designated for an EcoDistrict fund. Utilities are often comfortable with franchise fee increases as these are distinct line item in consumers’ bills that is clearly attributed to the city government, so the utility does not risk customer backlash.

III. Potential Future Feasibility and Small Project Financing Models

Climate Benefit Districts Climate benefit districts (CBDs) offer a hybrid approach combining traditional tax-assessed financing mechanisms with elements of service/benefit district functionality. According to Mithun, Inc., a climate benefit district is a quasi-municipal corporation or an independent taxing authority, as defined per the Washington State constitution. A CBD will have all of the necessary governmental powers for carrying out a neighborhood sustainability plan, as created by the city-designated Community Sustainability Agency.vii Currently, a draft CBD bill in Washington is seeking sponsors for adoption in the fall 2010 state legislative session:viii

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 17 CBDs use traditional financing mechanisms but gear them toward sustainability initiatives. Some of the mechanisms that may be available to Washington State’s CBDs include: • Utility surcharges • Parking, sales, employer excise or motor vehicle usage taxes • Voter-approved property tax increases • Special assessments using a BID-type model • LID financing • Issuance of general obligation or revenue bonds • City General Fund budget • Transportation or parking benefit districts • Climate benefit service charges

The climate benefit service charge is more of a service district model, as residents pay for received benefits. The draft bill states, “A climate benefit services charge must be reasonably based on the measurable benefits to property accruing due to climate benefit projects, receipt of climate benefit services or the achievement of climate benefit targets.ix” Under a CBD, the above-listed mechanisms generally will be subject to the same limitations and rules that govern their current usage. Similar to LIDs, CBDs can be formed through a public petition process or at the discretion of the city government. Despite the fact that CBDs are created through local government, CBDs are responsible for their own debt and financial endeavors. The city or state cannot be held responsible for satisfying unmet CBD financial obligations. The CBD, as envisioned in the current Washington State draft bill, has several other unique features including a strong focus on community equity. CBDs can be used to target investment toward lower-income areas, while also providing tax and special assessment exemptions for many of its revenue-generating mechanisms. The draft bill also proposes a conservation loan program that will assist individual homeowners with affordable financing for energy-efficiency improvements. While still at the draft stage, the CBD legislation offers a great potential blueprint for achieving EcoDistrict-type goals using available governance, policy and financing tools. Instead of creating new financing mechanisms to fit the EcoDistrict mold, creating a new paradigm that capitalizes on the strengths of multiple existing mechanisms is an innovative and perhaps superior alternative. CBDs may also be well-positioned to attract a portion of any revenues generated from future carbon taxes, carbon allowance auctions or a portion of revenues generated by other environmental commodities markets.

Emerging Strategies While many of the previously mentioned funding mechanisms and district-level strategies are primarily focused on infrastructure issues EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 18 like energy, water and waste reduction, other financing models address community equity. Examples of existing or proposed initiatives include the following: Local Commercial REIT for Renters Mercy Corps Northwest is working on a new real estate investment trust (REIT) structure that would allow renters to invest in commercial real estate in their neighborhood. Renters would make a modest monthly investment into a REIT. Over time, the REIT would purchase nearby commercial properties and once the property began to generate income, the REIT’s investors would receive a pro rata share, based on the percentage of the total equity they contributed. This concept is still under development. Local Investing Opportunities Network (LION) This Port Townsend, WA, program uses an innovative application process that allows individuals to invest in local businesses in exchange for agreed-upon equity shares without violating securities laws. The multiplier effect benefits the local economy, as local profits tend to be reinvested within the community.x This type of financing strategy could potentially be adapted to fund EcoDistrict infrastructure and services. Community IPO The community initial public offering (IPO) concept gives lower-income residents the opportunity to invest in and maintain ownership of their own communities. The Jacobs Family Foundation in San Diego, CA, started one example of this approach with the Market Creek IPO (http://www.jacobsfamilyfoundation.org/news/na/news_articles.htm?n ewsvar=/jacobs/jacobscenter/jacobsnetwork/news/na/11-13-06.htm). Over 420 community investors bought shares of a blighted property redevelopment project. As this retail development increases in value and grows, the profits are essentially reinvested in the community, as the earnings remain with the local shareholders. The programs listed above all offer residents opportunities and incentives to invest in their local communities. Residents taking ownership of their neighborhood is instrumental in achieving vital communities, and these programs are good examples of the range of possible district-level financing strategies. While these emerging strategies have not yet been used to support EcoDistrict initiatives, they reflect some of the effort and energy directed toward meeting the financing needs of neighborhoods and districts. Washington State’s proposed CBDs are perhaps the best example of this effort to date, as they aggregate the individual strengths of many legal and financial development goals.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 19 3. Financing District Utilities and Other Large-Scale Projects

Introduction to Project Finance Project finance is the long-term financing of building, infrastructure and demand-management projects based on the projected cash flows of the project rather than on the balance sheets/borrowing ability of the project sponsors or developers. A project financing structure usually involves a number of equity investors, as well as one or more banks that provide loans to the project. The loans are often nonrecourse loans that are secured only by the project assets and are paid off entirely from the project’s cash flow, rather than from the general assets or creditworthiness of the project sponsors. Lenders are given a lien on all of these assets, and also have step-in rights — the right to assume control of a project if the project developer has trouble complying with the loan terms. In a private finance and ownership model, generally, a special-purpose entity is created for each project, thereby shielding other assets owned by a project sponsor from the detrimental effects of a project failure. The special-purpose entity has no assets other than the project. Capital contribution commitments by the sponsor/developer of the project company are usually needed to ensure that the project is financially sound. In a municipal ownership model, which does typically involve recourse, it is taxpayers who essentially take the liability. Infrastructure project finance is usually more complicated than other project financing methods. In recent years, project financing principles have been applied to public infrastructure under public–private partnerships and this is probably how district scale utilities will be financed in the United States. Risk identification and allocation is a key component of project finance. A project may be subject to a number of technical, environmental, economic and political risks. In fact, banks and project sponsors may conclude that the risks inherent in project development and operation are unacceptable or not financeable. For this reason, infrastructure projects are generally completed by specialist companies that contractually allocate risk in various ways to allow financing to take place. The financing of large projects is often syndicated, or distributed among multiple banks, so as to distribute the risk associated with the project while ensuring profits for each party involved. A riskier or more expensive project may require limited-recourse financing secured by a guarantee from the project sponsors. A large, complex project finance structure may include corporate finance, securitization, options, insurance provisions or other types of collateral enhancement to mitigate the deal’s overall risk.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 20 The projects and financing described below represent certain types of projects anticipated as part of EcoDistrict development, but it is by no means exhaustive. Most of the following examples have less focus on demand-management and human-behavior programs, as these project types are not as well understood from a financing standpoint. However, as energy-efficiency finance, carbon trading and other emerging emissions markets become more established, and as ecosystem services can be more easily monetized, demand-management financing will become more standardized. Context for District-Scale Utility Services Because several of the projects described in this document provide utility services at the district scale, it is important to understand the value of this service as an economy of scale. The argument in favor of district-scale utilities is complex and case-specific. Shifting from centralized or completely decentralized (i.e. building-scale) utilities to the “middle ground” — district- or neighborhood-scale — does not always make economic sense. For example, cooling a single family home with an on-site air conditioner is typically cost effective, as is, in most instances, treating municipal wastewater at a large central plant. On the other hand, many individual project case-studies have shown that the two extremes — building-scale and municipal-scale solutions — are not always optimal, and the provision of certain utility services at the district or neighborhood scale often makes sense. It is very difficult to generalize about when district-scale utilities are optimal, other than to point out that 1) as population densities and energy and water usage intensities increase, the business case for district utilities tends to improve; 2) as existing centralized infrastructure approaches its maximum capacity, decentralized systems can delay or avoid the need to expand central systems; and 3) district-scale solutions can — for example by combining sewage conveyance and thermal energy systems — allow for integration and resource optimization utilities.xi A few specific examples illustrate various scales at which district solutions can work: • Electricity-only plants typically show significant economies of scale. However, when decentralized, technologies like co- generation and combined heat and power become more viable and can improve the overall economic and environmental case. Decentralized plants can provide a variety of services like thermal energy, electricity generation and local back-up when the larger grid goes down (which is particularly important in certain institutional settings, like hospitals). • Sewage treatment plants also still typically show economies of scale. On the other hand, smaller, localized plants sometimes add value in ways that a narrow side-by-side cost comparison wouldn’t capture. Heat recovery and reuse from a large sewage plant is possible but usually limited because these plants tend to be remote so there typically isn’t enough nearby demand to maximize the value of the recaptured waste heat. Furthermore, smaller, decentralized sewage treatment plants may be able to “give back” to the local water budget via local recharge, or allow EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 21 for reuse to reduce the need for additional potable water inputs. The use of effluent from a local sewage plant for irrigation and/or cooling towers, for example, can reduce the need for new potable water supply. • Finally, local facilities can be used to avoid or defer the need for costly energy, water and wastewater conveyance and other infrastructure. For example, Portland used local treatment plants in the West Hills for years to avoid building long distance conveyance infrastructure. As growth and density increased, these areas were integrated in the larger system. However, Portland’s central system will ultimately max out, and as the City’s centralized infrastructure approaches maximum capacity, there will likely be instances where it makes more sense to handle new demand with small, decentralized solutions (e.g. bioswales to handle stormwater; district-scale treatment plants for incremental capacity) rather than upgrading the entire centralized system. This same phenomenon is apparent in energy generation and distribution: as existing generation, transmission and distribution infrastructure approaches full capacity, the appeal of distributed energy, demand-response solutions and energy efficiency all increases.

District-scale heating and cooling solutions leverage economies of scale as larger plants tend to have lower unit costs than smaller plants, particularly when ancillary components are also considered (utility hook-ups, building space, controls, meters, etc.). In addition, district energy plants take advantage of load diversity, allowing a lower total plant capacity to serve loads than would be required if equipment was installed in stand-alone mechanical rooms. Load diversity also allows better utilization of central equipment (less partial loading and cycling of equipment), which can enhance operating efficiency and equipment life. District energy equipment is also typically professionally managed and maintained. Economies of scale can be invested in better (more efficient, higher quality) equipment with a longer useful life, potentially resulting in reduced capital and maintenance costs. And finally, many more renewable heating and cooling solutions are available (and more cost-effective) at slightly larger scales than buildings, and there are typically limited fuel source alternatives at individual buildings (e.g. limited space for geoexchange, no sewer heat recovery options, too small for co-generation, etc.). Given this potential value, district-scale utility services are worth exploring, especially in areas of major new development or redevelopment, in areas of high energy and water usage intensity, at times when existing utilities are approaching their maximum capacity, and at the periphery of a system where expensive expansion/extension may be required to serve a new development. There is an optimal scale for most infrastructure investments, but decisions must be made in context and district scale solutions sometimes — when considered carefully, objectively and in a way that considers a full-range of costs and benefits — make a lot of sense.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 22

A. District Energy

Overview A district energy system can be thought of as a cluster of buildings buying energy resources (one or more of heating, cooling and electric power) in bulk. A district energy project may tap thermal resources (e.g. sewage heat or biomass) that are not feasible at the building scale. It may also offer the flexibility to switch fuels in response to market prices and/or to increase capacity.

The first step in creating a district energy system is to define the target customer base, projected future growth and current/projected thermal (and sometimes electrical) energy load. This is essential to matching potential participants (end loads) with projected thermal (and sometimes electric) generation. Customer density is a key driver in the Pacific Northwest due to low energy costs, highlighting the need for a thorough market assessment. The best projects will be located in geographic areas with high projected energy consumption, a relatively tight geographic area, a lot of planned new construction or redevelopment projects, and high avoided energy costs or low-cost central energy opportunities (e.g. a major waste heat resource). A collection of buildings with a mix of operating characteristics (i.e. a blend of commercial, retail and residential) is ideal for a district energy system, because they tend to have more evenly distributed demand throughout the day.

In the last ten years, with the availability of smaller, higher-efficiency point source equipment, buildings are becoming more energy-efficient, while capital investment costs have been dropping. A distributed district energy system reduces the scale of a large-pipe primary system and provides for improved reliability. Small, interconnected loops deal with differential loads and redistribute energy at the margin. District energy systems are more easily modified for fuel switching, either to mitigate potential fuel price spikes or to allow for the use of biofuels. Biofuel technology is well-established but often carries considerable price risk, because it can be relatively difficult to lock in long-term supply agreements and hedge prices, especially when compared to regularly traded energy commodities like coal and natural gas.

Barriers There are several logistical and financial barriers in pursuing district energy systems. Gaining access to customers for interconnection can be difficult, because permission is typically needed to enter the right of way (i.e. to lay pipes under streets), and involves closing streets for construction and working around existing infrastructure. This can make

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 23 the cost of distribution infrastructure extremely high. In addition, many district energy costs are front-loaded; in fact, pre-construction civil engineering makes up approximately 50% of the cost of a district energy system’s infrastructure cost.xii

Project scoping requires a two-phased feasibility analysis. The first phase is a relatively simple, inexpensive and high-level study focusing on the anticipated demand in the target geography, as well as the expected barriers to be encountered in the right of way. The second phase is more specific to the project and is needed to establish the business case for the district energy system. If the business case cannot be proven, then one must assess the social and environmental benefits that cannot be monetized to determine whether funding the economic gap can be justified.

Financing Approach District energy typically provides a steady, modest utility-like payback. Projects involving a single developer/owner (e.g. a university or hospital) are easiest, but there are many possible ownership, development and management structures. Ownership options include the following:

• Third-party • Municipal • Single-user (hospital, university, large business) • Cooperative The energy-generation and distribution systems can be owned by separate entities. In fact, generation assets are often privately developed and owned, while distribution networks, because they intrude into the public right of way, are often owned by public entities (cities, counties or universities).

Split ownership and operations can also be effective, with the infrastructure owned by a financial entity, while operations and management is outsourced to a firm with the requisite expertise. Generally, the system holds the same risk regardless of public or private ownership. Private owners expect to be compensated for risk, while municipalities may forgo that compensation. In the case of third-party ownership, long-term financing contract periods are typically 20 years and mimic lease agreements for commercial real estate. There is a two- part rate structure based upon a) capacity: fixed, indexed for inflation, tied to capital costs, and b) consumption: use/demand, tied to operating and maintenance costs, with fuel being the primary expense.

Financial structures vary with ownership type. Investor-developed systems use a combination of investor equity and bank debt or internal financing provided by a parent company. Municipally developed systems typically rely on a combination of bonds and grants. Energy sale contracts with future customers have to be strong enough to provide comfort to the source of financing, as these contracts serve as a portion of the creditors’ collateral. The capital equipment serves as EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 24 additional security, as lenders get first lien on the equipment. These systems have far more value in use than in liquidation, so lenders will typically require “step-in rights,” in the event of the developer’s default.xiii

Sharing capital cost with money being spent concurrently on other infrastructure projects (e.g. sewer line replacements) can be very important, as it can significantly reduce construction costs.

Leasing rather than purchasing capital equipment may also be attractive, especially if financing gaps cannot otherwise be filled.

Developing mechanisms to demonstrate future revenue is essential in securing project financing. Loads, underwritable (i.e. presubscribed) sale contracts, regulator-approved tariffs, local government incentives, presale of renewable energy certificates (RECs) and other demonstrable future revenue streams all help secure financing. Another potential revenue source can come from a long-term power purchase agreement (PPA) with a utility, which may be able to purchase power from the district system that is less costly than its current sources of power. Similarly, if a district thermal energy system reduces demand for peak-period electricity (e.g. by offsetting demand for electric heat) and this demand reduction can be verified, these “negawatts” can be of great value to utilities as they can then avoid capital and fuel costs from not having to provide expensive, centralized, peak-period distribution.

Leasing conduit space that was created during system construction to communications companies can also provide a stable revenue source. Environmental commodities, such as carbon and renewable energy credits, may also become significant funding streams in the future. As is true for all utilities, weather impacts will likely affect the stability of cash flow.

The widespread emergence of smart metering, which prices energy differently based on time of use and overall energy demand, could also impact the cash flow of a district energy system. There will likely need to be evolving rate structures to create positive incentives for building owners and occupants to save energy without undermining the district energy system’s cash flow.

New district energy systems may require local government intervention or even regulation to help overcome adjacent landowners’ resistance to participation, which can result in load challenges. These potential challenges can be overcome through regulatory rate setting or indirectly through infrastructure planning, problem solving and/or granting exclusive franchise service territory.

Precedent Projects District energy systems are common in the United States on hospital, university and large employment campuses, where single ownership easily allows entities to pursue the efficiencies that these systems provide. There are, however, many other successful applications for

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 25 district energy systems that involve multiple customers (see Appendix F of this document for further details on the following projects):

• Sysav Energy Plant, Malmö, Sweden • Copenhagen District Energy, Copenhagen, Denmark • District Energy St. Paul, St. Paul, Minneapolis • Seattle Steam, Seattle, Washington • The Brewery Blocks, Portland, Oregon • The Beaverton Round, Beaverton, Oregon • London ESCO, London, UK • Southampton District Energy Scheme, Southampton, UK

B. Building Energy Efficiency

Overview The built environment represents a significant opportunity to reduce waste and optimize resource use. Consider the following facts: • More than half of all power generated in the U.S. goes unused, lost in the course of energy generation, transmission and/or distribution • Buildings consume 72% of the electricity in the United States • The operation of buildings accounts for approximately 38% of xiv CO2 emissions Much of our energy infrastructure and systems are outdated and inherently inefficient. Our largest coal plants are typically less than 50% efficient (i.e. more than 50% of the energy in each unit of coal is lost “up the smokestack” as heat).xv Similarly, our national power grid relies on decades-old technology, cannot efficiently adjust to changing energy demands and is built to supply more power than is actually needed, with the excess energy going to waste. Hundreds of millions of square feet of residential, mixed-use, commercial and industrial real estate operates very inefficiently. According to the McKinsey Consulting report “Unlocking Energy Efficiency in the U.S. Economyxvi”: The research shows that the U.S. economy has the potential to reduce annual non-transportation energy consumption by roughly 23 percent by 2020, eliminating more than $1.2 trillion in waste — well beyond the $520 billion upfront investment (not including program costs) that would be required. The reduction in energy use would also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually — the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 26 The widespread and rapid implementation of energy-efficiency efforts is essential to addressing climate change and energy shortages and many energy efficiency upgrades can be done at negative cost. However, energy efficiency programs often require initial capital expenditures, which are inaccessible or unappealing to many property owners. Cities and neighborhoods, comprising public and private buildings occupied by owners and renters, all have very different stakeholders, accountability measurements and methods of evaluating investment success. There is no one-stop-shop for creating energy efficiency in buildings. Every property type and building itself is unique in terms of the following factors: • Energy signature • Occupancy and use • Tenants’ needs • Property owners’ and managers’ obligations to achieve profitability Energy-efficiency technical and financing solutions vary widely, but they can often be categorized and applied by property type and tenancy. Developing energy efficiency projects typically involves six activities: 1. Preliminary Assessment: The preliminary assessment includes a site review of the facility and a review of utility bills, drawings and other pertinent building information, followed by development of rough cost and savings budget calculations. 2. Investment Grade Audit/Directed Engineering Study: An investment grade audit, often not applicable in the single-family residential market, studies the measures identified in the preliminary assessment to move a project into design. Existing baseline operating conditions are established in order to calculate potential savings and a construction estimate, a performance assurance plan is drafted and financing mechanisms are identified. At the end of this stage, the project developer presents a study and proposal for design and implementation. 3. Design: This phase — which is not always required for residential projects — results in a detailed project design. Distinct project and facility performance benchmarks and verification metrics are integrated into the design process to ensure a particular project’s performance. 4. Construction: During this phase the contractor has responsibility for all construction activity. In the commercial market, subcontractors and equipment may be procured using a competitive selection and bidding process. 5. Commissioning: For new and existing buildings, the commissioning or retro-commissioning process provides a means for investigating, analyzing and optimizing the performance of building systems. This process starts with planning and goal setting with the client. It is not applicable to the single-family residential market.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 27 6. Measurement & Verification: Measurement and verification ensure that building systems are operating optimally and anticipated energy savings are achieved. This process allows for easy identification of underperforming systems, so that problems can be addressed before they undermine the project’s anticipated return on investment. Throughout the process, a “total cost of ownership” approach is taken. This approach evaluates the financial, environmental and human impacts of project design decisions by estimating their first costs, the building’s ongoing operational budget and the owner’s long-term capital expenditure forecast.

Barriers “Unlocking Energy Efficiency in the U.S. Economy,” the report noted above, details the most common barriers facing both private and public buildings and suggests the following solutions for overcoming those barriers: 1. Agency Issues: In leased buildings, financial incentives for the owner to invest in energy efficiency are uncertain, because the owner will likely not capture the energy savings. Owners may benefit from efficiency investments, if lower operating costs increase the rate of tenant renewals and/or command a rental premium. 2. Elevated "Hurdle" Rates: The average payback period expected by commercial customers is 3.6 years. This expectation creates a "hurdle" for retrofit projects attempting to achieve high levels of energy efficiency, since these projects typically have longer payback periods, and the simple payback method doesn’t really capture the nature of energy efficiency investments. 3. Capital Constraints: Capital constraints exist for both residential and commercial energy users. For the energy end-user, raising and allocating capital for efficiency projects is often confounded by a desire not to increase debt, concern about the opportunity cost of this capital against alternative uses and a reluctance to outsource energy solutions to companies that may charge financial premiums. Additionally, capital providers are sometimes reluctant to lend capital to projects due to suboptimal credit and difficulty establishing senior priority on acceptable collateral for loans. 4. Lack of Awareness or Information: Many facility managers and residential homeowners are unaware of energy efficiency potential because of the belief that the building or home is already energy efficient. Furthermore, they often possess limited knowledge of energy efficiency measures and ways to deploy them within their facilities and houses, including the critical role that proper design and installation play in capturing savings.

Financing Approach Capital constraints are regularly cited as the leading barrier to energy efficiency upgrades. Since energy retrofits usually provide a return on EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 28 investment through reductions in utility bills, they ultimately pay for themselves over the long run. However, depending on the project cost of a measure and the amount of energy saved, simple paybacks can range from three to 20 years, far longer than many property owners will own the property, and sometimes resulting in minimal or even no return, depending on the cost of capital. As a result, funding mechanisms that offer low interest rates and long-term loans may be essential for energy efficiency projects to be realized. In addition to long-term, low-interest loans, other financing mechanisms include: • Energy Service Performance Contracting: An ESPC is a partnership between an energy services company (ESCO) and its customers to finance and implement cost-saving energy- efficiency improvements. The ESCO pays the upfront cost of purchasing and installing new equipment and the customer compensates the ESCO over the life of the contract from the project cost savings.

• Revolving Loan Funds: These are usually established through a bond measure and the money is used to make loans for energy efficiency projects. Funds from loan repayments are recycled back into the fund and reissued as new loans.

• Third-Party Ownership Models: Allow private or public ownership entities to lease space to a third-party energy developer, which installs a renewable energy (typically solar) system on the owner’s property. The property owner can thus obtain on-site renewable energy through a contract with the third-party energy provider without incurring the capital expense of the energy system. The third party benefits from a variety of tax incentives and can sell the energy either to the property owner or to a utility company.

• Energy Service Charge: The ESC was conceived in the late 1980s when traditional incentives (e.g. rebates) worked well to promote energy efficiency, but paid for only a portion of the cost of energy efficiency measures. Many large commercial and industrial customers appeared reluctant to invest their own capital to cover the balance. At the time, utilities were exploring ways to earn a return on energy efficiency. Utility capital was more “patient,” accepting payback periods of 5-10 years if investment risk could be minimized. In 1990, a new statute was placed on the books in Oregon (757.247 ORS) that allowed utilities to invest in customer energy efficiency improvements and recover the investment over time via an ESC. The ESC is connected to the meter, recorded with the county and survives changes in ownership. Properly structured, it does not appear on a customer’s balance sheet.

• Tax Breaks: There are many local, state and federal incentives, tax deductions and tax credits that encourage innovation and investment in clean energy. Several incentives and tax breaks EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 29 can often be applied to a single building, energy generation investment or energy efficiency measure. For example, at the federal government level, the Energy Policy Act of 2005 (EPACT) allows a commercial building owner, tenant, designer or installer to claim a tax deduction of up to $1.80 per square foot of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a baseline building compliant with ASHRAE Standard 90.1-2001. Meanwhile, the Oregon Department of Energy and Energy Trust of Oregon provide incentives for energy efficiency projects.xvii In many instances, the federal EPACT and state-level incentives can be combined.

• Property Assessed Clean Energy Financing: PACE programs, described earlier, can help home and business owners finance various green initiatives, such as comprehensive weatherization/energy efficiency retrofits or rooftop solar panels, and repay the cost via a fixed increase in property taxes over about a 20-year period. This allows property owners to achieve a net savings on their energy bills rather than paying a large lump sum upfront and possibly, if they sell their home, never recouping their investment.

Precedent Projects Berkeley First This Berkeley, CA program for funding solar system installations is the first project to utilize PACE financing and its success amid a dismal bond market has quickly spawned similar programs in nearly 20 states throughout the country. http://www.ci.berkeley.ca.us/ContentDisplay.aspx?id=26580 Clean Energy Works Oregon (CEWO) CEWO is a recently launched statewide energy efficiency program that is helping qualified homeowners finance and install energy efficiency upgrades and repay these loans via “on utility bill” billing. CEWO offers homeowners low-cost financing for energy efficiency home improvements like new insulation or the installation of a high efficiency furnace or water heater. To help decide which upgrades and financing options make sense, participants receive the assistance of a qualified Energy Advocate throughout the process. Homes in the Clean Energy Works Oregon program must be owner-occupied. http://www.cleanenergyworksportland.org/index.php

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 30 C. District Water: Wastewater and Stormwater Treatment Systems

Overview Distributed water utilities include district wastewater and stormwater systems that provide services locally to a neighborhood or district instead of via a centralized citywide or regional system. The benefits of pursuing a distributed approach include potential cost savings, enhanced environmental performance, systems efficiency, resiliency and adaptability, and reduced burden on centralized infrastructure. District wastewater treatment technologies include membrane bioreactors and moving-bed biofilm reactors, a membrane-based technology for treating sewage, treatment wetlands and natural systems (such as Living Machinesxviii). Both systems produce a treated water output that can be used for non-potable uses like toilet flushing and irrigation, depending on regulations in the local jurisdiction. Both technologies also have the capacity to treat stormwater, though they must be purposefully designed to do so. District stormwater technologies include integrated bioswales and rain gardens that cleanse stormwater and either infiltrate it into the local groundwater table, pass it through an outfall to a body of water or return it to the stormwater system. In some cases rainwater is also collected, treated and reused for the non-potable uses described above. A feasibility study will explore the costs, revenue streams and viable technologies, as well as the risk and willingness of the potential owner(s). As a general rule of thumb, answering yes to all of the following questions would suggest a compelling case for pursuing an initial feasibility study: 1. Is demand great enough to support a new, shared treatment facility? 2. Is there sufficient space to build the facility? 3. Is there political will to see such a system installed and operating within a district? 4. Is there public support or readiness for this type of project? The first step in considering a district water strategy is to look broadly for synergies between stormwater, wastewater and potable water for a combined system that would help build the business case for the project. For example, bioreactors yield water that can be repeatedly reused for non-potable uses. To build the economic case, it is critical to understand current usage patterns across a district, as well as the cost of municipally provided water resources. In Portland, this information can readily be obtained through utility bills, but access to data depends on the jurisdiction. Ownership is a key factor in this process. Will the system be publicly or privately owned? A public entity typically has a different financial appetite, a lower hurdle rate and a longer time frame than a private developer, who has higher borrowing costs and may want or need to EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 31 sell the system within a few years. If the system will be shared by others, even if it is privately owned, it is essential to gain access to the public right of way to lay the necessary water collection and/or distribution infrastructure. A shared district system using the public right of way will require a franchise agreement with the local jurisdiction, requiring significant involvement from a number of public agencies. For district wastewater systems, agencies will require some management oversight to ensure public health and welfare, regardless of who owns or maintains the system. Early coordination with water utilities (public or private) may lead to a potential investment role for them or possible shared use of existing infrastructure.

Financing Options A main challenge for developers of district wastewater, greywater and stormwater systems is securing upfront financing. The best way to reduce the ultimate project cost is often through proactive water conservation, because reducing water demand through conservation and reuse is far more cost-effective than investing in increased capacity for expensive treatment methods. To cover capital and first costs, project developers may rely on special tax assessments or, if they’re located within an urban renewal area, on tax increment financing. Cost reductions may be realized by developers of district-scale systems through the avoidance of system development charges. There may also be opportunities to attract investment beyond SDC rebates from the centralized utility if investment in a decentralized system avoids or delays the need to expand the utility’s centralized system. If privately owned, the system would be capitalizing returns on investment. Each project scope will depend on what kind of capital is desirable by an interested investor. District wastewater, greywater and stormwater systems are still rare, and tend to be discrete projects, so at this point there is no standard financing approach. If a district wastewater, greywater or stormwater system is publicly funded, tax revenue and bonds are the best sources of financing. The system can become a revenue generator for the city. Because public agencies take a longer-term perspective on infrastructure project benefits, the required return on investment can be substantially lower than what is required with privately funded projects. Types of capital financing used in publicly owned projects might include cost sharing, grants, incentives, subsidies and loans. For district wastewater, greywater or stormwater systems, the primary repayment source is a fee for service. This cash flow is extremely predictable, as flushing toilets, drinking water, washing clothes and taking showers are essential needs. The contracting mechanism is similar to any utility in which a customer pays based on metered flow of water or waste. Net metering on a reuse loop will also help to reduce rates for utility customers. It is important to note that meters carry an installation and maintenance cost. In dry climates there is an emerging market for treated water from a district wastewater system for EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 32 irrigation and other nonpotable uses. If the regulatory hurdles regarding the use of biosolids (treated human waste) as agricultural fertilizer are overcome, such materials may one day increase in value in the U.S.; in fact, “night soil” is already quite valuable in certain parts of China. An emerging financing approach considers the cost differential for water management. If locally provided water treatment is cheaper than municipally provided water treatment, there is revenue potential in the difference or an increment of that difference. A property owner’s investment may be reduced if the system is provided onsite rather than if the investment is made through a utility, depending on the cost of water and who is using it. Multiple property owners who each pay a fee for use may also own a system. However, as the owners, the service fees return to them as personal investment. Very few municipalities currently offer strong incentives for decentralized wastewater treatment or reductions in potable water demand. Instead, they offer reduced systems conveyance charges in exchange for onsite treatment of wastewater and onsite stormwater infiltration. Stormwater incentives are typically classified in three areas: rate reductions as noted above, rebates or coupons. Rate reductions are offered for developments or parcels that implement flow-reducing strategies like disconnecting downspouts or onsite infiltration. Rebates cover strategies like green roofs that are reported to a utility, where customers get may get back 50 percent of the cost of the system. Portland’s ecoroof incentive program offers up to $5 per square foot for qualified projects. Coupons typically cover a significant portion of the upfront costs of, for example, the purchase of tree coverage that mitigates stormwater runoff. The collateral for a loan to fund a decentralized waste, storm or greywater system would normally be the plant and equipment. If such a system were to be managed by a municipal water utility, for example, the agency would take on an asset management role, which is an emerging approach to managing district utility services. The bond market considers the income streams of a public utility, but the assets are not used to underwrite financing deals. The key questions that arise from these project types are whether the city can buy down risk through loan guarantees and from what funds they would do it. Operations and maintenance costs of wastewater treatment or stormwater management systems are typically covered through user fees, sales of nutrient streams (i.e. system outputs like methane) or excess treatment capacity that could provide service beyond the immediate district. User fees are measured through a meter, like current municipal water systems, so it is a familiar process to users.

Precedent Projects Lloyd Crossing Sustainability Report Looks at integrated water systems to achieve predevelopment conditions.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 33 http://www.pdc.us/pubs/inv_detail.asp?id=332&ty=17 Portland’s Gray to Green Initiative City’s approach to expand green infrastructure to manage stormwater runoff instead of typical below-ground conveyance. Utilizes surface green streets that restore native habitat. http://www.portlandonline.com/bes/index.cfm?c=47203 Dockside Green, Victoria, Canada All sewage is treated on site, with residual water recharging the natural waterway that flows through the site. http://docksidegreen.com/sustainability/eco-friendly/onsite-reclaimed- water-treatment.html OHSU Center for Health and Healing City of Portland, OR precedent for building-scale wastewater treatment through membrane bioreactor. www.nrdc.org/buildinggreen/casestudies/ohsu.pdf Kellogg Creek Center for Water Resources Example of challenges with ownership and intersection of these elements in the City of Milwaukie. http://www.watersmartwaterfront.org/downloads/kelloggcreekSM.pdf

D. Mobility

Overview Transportation demand management (TDM) strategies are focused on reducing vehicular miles traveled, particularly in the form of single occupancy vehicles. A preferred alternative to developing increased travel infrastructure capacity, TDM also provides social and environmental benefits in the form of avoided air and water pollution and improved community livability and public health. Restricted access (High Occupancy Vehicle or High Occupancy Tolls) lanes, tolls, traffic cordons and paid parking are among the most impactful TDM strategies, in that they raise the cost of driving and simultaneously provide a revenue source to fund transportation alternatives. The broad range of TDM measures includes the following: • Creating transportation management associations (TMAs), which leverage public and private funds to increase the use of ridesharing and other commuting options that reduce traffic congestion and improve air quality • Including or improving pedestrian-oriented design elements, such as short pedestrian crossings, wide sidewalks and street trees

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 34 • “Unbundling” parking from residential and office space rents, and requiring users of parking to pay these costs directly rather than sharing them indirectly with nondrivers through generally higher rents and tax subsidies • Including and improving public transportation infrastructure, such as subway entrances, and bus stops and routes • Subsidizing transit costs, bike facilities, etc., for employees or residents • Encouraging employers to promote flex-time work schedules to reduce congestion at peak hours • Congestion pricing tolls during peak hours • Time, distance and place (TDP) road pricing, where road users are charged based on when, where and how much they drive. Some transportation experts believe TDP pricing is an integral part of the next generation in transportation demand- management Transportation management associations provide a good governance structure for developing, funding and implementing transportation demand management (TDM) projects on a district scale. While government leadership through policy initiatives and funding can help start a TMA, government funding and program support is typically not sustainable in the long term. Without strong private sector leadership that works cooperatively with the public sector, district-scale mobility projects will likely be impossible. Typically, TMAs focus on programs and services and don’t fund infrastructure projects. Because transportation rights of way are nearly always publicly owned, the need for public-private cooperation is extremely important in regard to EcoDistricts. While direct investment in transit systems is likely beyond the EcoDistrict’s scope, the aforementioned Lloyd TMA successfully brought three new city bus lines to its area by surpassing annual sales targets for employee transit passes. The TMA also lobbied successfully to keep a portion of locally levied city parking meter revenue to fund its operations.

Financing Approach Various financing methods provide a consistent annual revenue stream for TMAs’ transportation demand management activities, including voluntary TMA contributions, BID assessments, head taxes based upon single-occupancy vehicles or parking use, and the sharing of municipal parking meter revenue. Most TMAs are funded through membership dues, although the Lloyd TMA utilizes BID assessments linked to property value and square footage. These BID assessments are legally mandated, providing additional stability in the longer term. The Portland-area regional government, Metro, also supports TMAs with Regional Travel Options Grants funded via the federal Congestion Mitigation and Air Quality (CMAQ) program. CMAQ grants were essential as initial financing for the Lloyd TMA, until BID financing was established.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 35 Precedent Projects There are many examples in the Pacific Northwest of successful TDM programs. The Redmond TMA in King County, WA (http://www.grtma.org/index.asp) utilizes a public-private agreement that applies a $25 per employee head tax to cover operating expenses and TDM programs. South of Seattle, the Duwamish TMA (http://www.duwamishtma.org/) employs a standard TMA governance structure, though it also receives some local public funding and state funding through the Washington Department of Transportation. In a municipally led initiative, the City of Seattle charges a head tax on single occupancy vehicles. San Francisco and many other major cities use parking taxes as a revenue generator to support TDM programs. There are many available funding sources for TDM projects and EcoDistricts may be able to identify new sources via public-private partnerships. Portland State University and Oregon Health Science University The transportation and parking services departments at PSU and OHSU, both in Portland, OR, coordinate and promote transportation options for students, employees and visitors. Revenues come primarily from university-owned parking facilities, which fund transportation option incentive programs including discounted transit passes, bicycle parking, shuttle service and discounts for commuters who carpool. Swan Island TMA Portland’s Swan Island TMA is a collaborative effort by area employers and regional agencies to expand the transportation options for commuters who work on Swan Island. The Swan Island TMA, a project of the Swan Island Business Association, is committed to bringing better transit service, increased pedestrian and bicycle access, and expanded rideshare opportunities to Swan Island.

E. Materials Management: Waste to Energy

Overview Waste to energy (WTE) is a general term for technologies that generate energy from various kinds of waste. WTE includes thermal and nonthermal technologies such as incineration of (typically nonrecyclable) waste, gasification and anaerobic digestion into biogas. The first step in considering a district-scale WTE project is to examine the context of the area with respect to: (a) the availability and cost of potential fuel supplies, and (b) the market for the resulting thermal and/or electrical energy. With respect to the sell-side market, analyzing the load balance (i.e. customer base and range of building uses) is also extremely important. Based on this information and the EcoDistrict’s overall characteristics, including policy, institutional and cultural roadblocks (e.g. NIMBYism), one can determine whether a WTE system might be viable.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 36 There are a few different technologies to consider when assessing WTE. Incineration, or direct combustion of refuse, is perhaps the most mature and least expensive WTE technology, though it requires large volumes of waste to be cost-effective. Many people argue that it has (or is perceived to have) the most damaging environmental impact of the available WTE options. On the other hand, it has become quite commonplace in northern European countries, which use very clean- burning facilities to incinerate those elements of the municipal solid waste (MSW) stream that can’t be recycled. These WTE plants can generate either electricity or thermal energy, or both, via a combined heat and power technology. Note that power plants that burn refuse to create energy generate much more usable energy per ton of solid waste than landfills that capture methane for energy generation. Waste-to-energy plants produce 590 kWh of electricity per ton of garbage versus 65 kWh per ton via landfill gas capture.xix Despite higher generation from burning refuse, policy and public perception issues pose barriers to direct combustion. Anaerobic digestion, commonly used by landfills, allows mixed MSW to decompose in the absence of air, generating biogas that can be captured and sold, or combusted in a turbine to generate electric power. Anaerobic digesters are also used to manage organic waste streams with high moisture content, including municipal food waste, human waste and livestock manure. Anaerobic digestion of relatively clean organic waste offers a range of environmental benefits, including clean, renewable biogas and/or electric power, reduced odor, carbon and nitrogen oxide (NOx) emissions, plus creating compost, a valuable and productive byproduct. Gasification of refuse offers a cleaner-burning energy source, though at a higher cost. Typically, gasification is applied to higher quality solid wastes, creating a synthetic gas by applying heat and pressure to the waste. This process burns similarly in cleanliness to natural gas.xx

Barriers Due to the high capital and construction costs of WTE facilities, existing “sunk” utility infrastructure may be an implementation barrier. In dense urban settings where land is expensive, it can be difficult to justify building a power plant from scratch when existing plants provide considerable competition. On the other hand, at a time when Portland General Electric is decommissioning its Boardman coal plant, a well- placed WTE cogeneration facility (e.g. close to an existing MSW recycling/transfer station) could make sense. In terms of ease of permitting, rural or greenfield developments provide a better opportunity for WTE generation, though not having a thermal energy load nearby can undermine the economic advantages of a combined heat and power plant. WTE facilities generally need a lot of space and — especially if the waste being processed is MSW — they can smell, which presents problems in urban areas.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 37 Public perception of WTE is another serious limitation of this technology. While innovations have advanced considerably in terms of air quality impacts, it is still debatable whether WTE creates more problems than it solves. Some opponents also feel that WTE detracts from recycling programs and may hinder efforts to reduce materials consumption. Some European countries, particularly Denmark and Germany, have passed successful policies that maximize resource recovery, thereby protecting recycling industries, and incinerate remaining waste in the WTE facilities. In the U.S., states are split over the designation of direct combustion as a renewable resource. As of 2009, Oregon did not recognize WTE as a renewable technology and the national Renewable Portfolio Standards and REC trading markets generally do not award credits for WTE.

Financing Approach Waste-to-energy facilities use the typical ownership and financing models for energy generation facilities in the United States. Most current WTE facilities are owned by private or publicly traded utilities, while others are municipally financed. For example, the Spokane Waste to Energy plant, built in 1991 for $110 million, was financed in part by a $60 million Washington Department of Ecology grant, plus City of Spokane general obligation bonds. Depending on location, size and other factors, the capital costs of building a WTE facility range from $110,000 to $140,000 per daily ton of capacity. Therefore, a plant that processes 1,000 tons of MSW per day may cost between $110 and $140 million. A WTE plant processing typical MSW will generate a net of 500-600 kWh per ton for distribution by the local utility. At a sale price of four cents per kWh, the plant’s revenues per ton of MSW would be $20-$30. Other revenue streams include tipping fees from trash haulers and revenues from the sale of recovered metals. The costs of a WTE plant are primarily capital costs. However, in addition to the debt service, there are labor costs: a 1,000-ton per day plant would employ about 60 people. Other costs include services, materials and supplies, and ash disposal.xxi In terms of EcoDistrict possibilities, synergies with wastewater treatment plants present a good opportunity for anaerobic digestion facilities to gain traction, particularly through partnerships with municipalities. Digesters can use a wide range of wet biomass (e.g. food waste, distillery/brewery grains, animal waste, etc.) as fuel. If contained to minimize odor and rodent problems, these facilities can be compatible within urban areas. Managing commodity risks on both the buy (i.e. fuel) and sell (i.e. power and/or steam, and by products) sides is especially important for WTE technologies. Securing reliable long-term contracts for the fuel supply, byproduct sales and energy consumers who will buy the power are critical elements of financing the project. These contracts comprise a portion of the security (i.e. collateral) for the chosen project’s financiers. EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 38 While the environmental and economic impacts of shipping a fuel supply serve as a barrier to WTE, avoided trash hauling costs serve as a revenue stream in direct combustion or gasification projects. For example, a WTE facility can charge its own tipping fee to accept municipal refuse as a fuel supply. To highlight the enormity of this potential revenue stream, according to an April 2010 article in the New York Times, New York City spent $307 million in 2009 to export more than 4 million tons of waste.xxii The compost byproduct of anaerobic digestion, both in liquid and solid form, also provides an ongoing revenue source. The Energy Trust of Oregon offers programs to help fund biopower electricity generation projects. Its Project Development Assistance program (http://energytrust.org/business/incentives/other- businesses/existing-building/biopower/Biopower/) will joint-fund consultant costs from predevelopment feasibility through the construction phase for up to $40,000. Oregon state law also allows for the Energy Trust to fund above-market premiums on renewable energy projects, including biomass-to-energy installations. The above-market rate is calculated by accounting for all project expenses and revenues (including incentives and tax breaks) and comparing the result with the rate for producing this power using standard methods. There is no financial cap on the amount that can be covered, but Oregon mandates that projects cannot exceed 20 MW, typically enough energy for 20,000 households. This program provides EcoDistricts with an attractive possibility for filling financing gaps. The Oregon State Business Energy Tax Credit is another financing stream that can provide 50% credit for WTE installations. Woody Biomass to Energy According to the Oregon Biomass Coordinating Group, barriers to biomass energy development “include the lack of certainty in biomass outputs and the high cost of gathering and transporting biomass to energy conversion facilities.” xxiii The biomass fuel supply must be located near to where the energy is needed, which presents challenges for large-scale biomass-fueled district energy in urban areas. A price premium will likely be required due to the necessary purchasing and shipment of woody biomass, the most politically viable waste-to-energy fuel option (versus, for example, MSW given continued public disapproval of MSW-burning WTE plants). A pilot-stage woody biomass plant developed by Innovative Energy, Inc. (http://www.innovativeenergyinc.com/), in suburban St. Louis, MO, offers an interesting model. The 10 MW biomass gasification plant uses tree trimmings from the local utility’s street tree maintenance contractor as fuel and claims both clean and relatively quiet operation. No details are available online, but if the project proves successful, this type of facility might be well-suited for cities in the biomass-rich Pacific Northwest.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 39 Precedent Projects Copenhagen’s 2008 Waste Plan The city set a goal of landfilling only 3% of its solid waste, in part through waste-to-energy strategies. In 2004, this publicly funded program incinerated 39% of all landfill waste, providing enough electricity and heat for 70,000 households. http://www.c40cities.org/bestpractices/waste/copenhagen_landfill.jsp U.S. Environmental Protection Agency Chapter 8 of the EPA’s Decision Makers' Guide to Solid Waste Management (2003) offers a step-by-step guide that helps communities determine whether to adopt a waste-to-energy system. Though geared toward larger-scale facilities, the document provides some good insight for EcoDistricts. http://www.epa.gov/wastes/nonhaz/municipal/dmg2/chapter8.pdf Covanta Energy Most WTE facilities in the United States are private ventures, and Covanta, an international owner and operator of WTE and other power generation projects, operates nearly half of the U.S. total. Covanta has operated a direct combustion facility in Brooks, OR, just north of Salem, since 1987. Note that this is not a cogeneration facility. It produces only electricity. http://www.covantaholding.com/site/marion/covanta-marion.html Harvest Power – British Columbia, Canada Harvest Power is planning the first commercial-scale facility in North America to generate both renewable energy and high quality compost through high solids anaerobic digestion. http://www.harvestpower.com/facilities/

F. Materials Management: Composting

Overview According to the U.S. Environmental Protection Agency, yard trimmings and food residuals represent 26% of the U.S. municipal solid waste stream.xxiv This organic waste material could be composted and reused as a soil amendment or as a medium for growing plants. Composting can boost agricultural yields and reduce the need for chemical fertilizers, and it keeps waste out of landfills. On-site composting facilities also reduce the transportation impacts from hauling waste.

Barriers The high infrastructure costs of composting facilities are a barrier to district-scale programs, as economies of scale can be more easily

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 40 achieved with centralized facilities. For example, Recology’s Bay Area facility, which opened in 2003, cost $38 million.xxv While centralized facilities may make more sense from a capital project perspective, the cost and environmental impacts of compost transportation shouldn’t be overlooked. Enclosed-container composting may be a good option if land resources are not too constrained, though it may present a challenge for urban neighborhoods. Pursuing partnerships with already established waste haulers and/or local government may offer a more realistic opportunity for EcoDistricts to manage waste toward a net-zero goal.

Financing Approach Understanding a city’s financial models for residential and commercial waste and recycling is an important first step in assessing potential EcoDistrict composting programs. The residential program in Portland, OR utilizes a franchise model, in which haulers pay a fee to cover city program costs and a built-in operating margin. There are currently 21 hauling companies with rights to serve specified residential zones. Residents pay the hauling bill, while haulers keep any revenue from the sale of recycled materials. There is no franchise model for commercial hauling; instead, it is an open, competitive market. The Portland commercial waste haulers operate under no geographic restrictions with the city assessing a fee to cover recycling and composting program costs. In general, composting programs can be either privately or publicly operated, and can use various financing mechanisms. Cities or public entities typically charge a fee for service, while private firms charge a tipping fee, even if it is based on small on-site, in-vessel systems. Increasingly, the composting sector is being driven by private enterprise, often by the entrepreneurial arm of large waste generators within a district. For example, this entity might purchase infrastructure and charge a service fee to the cluster of district food waste generators. Large private firms already in the waste management business are also prime candidates for initiating composting services. For example, Recology owns and manages several enclosed, in-vessel composters, or digesters, in the heavier food waste basins, as part of its collection and consolidation system. There are various loans and grants available for composting programs at the state and federal levels, though these are often easier to win as a health or educational institution.xxvi The increasingly profitable compost retail market provides another good incentive for establishing composting programs, though this benefit may be less economically viable for smaller geographic areas like EcoDistricts.

Precedent Projects There are numerous composting program precedents that provide good background for pursuing EcoDistrict initiatives. Anaerobic digesters offer potential for neighborhood/district-scale applications, EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 41 especially in combination with commercial composting programs. As previously mentioned, anaerobic digesters provide the synergistic benefit of compost and energy production. While infrastructure costs are high for such operations, they offer a more cost-effective energy source than centralized power. Several Oregon dairies use this technology to produce electricity from cow manure. Kennedy Jenks, a Northwest regional engineering firm, is currently studying the scalability of anaerobic digestion. City of Portland Food Waste Composting Pilot Portland’s 2,000-home pilot program to capture residential food waste along with yard debris began in May 2010. Details are still being determined, including rate structure, a new suite of service options and a possible flat collection fee for recycling and compost, with a pay-as- you-throw model for landfill waste. Regular landfill collection is also changing from weekly to bi-weekly, with weekly pickup still available at twice the price. Lessons at the Portland city level will provide guidance for EcoDistricts. http://www.portlandonline.com/bps/index.cfm?c=52380 Smaller-scale solutions Examples of smaller-scale enclosed composting solutions that may be viable for EcoDistricts include the following: • Earth Tubs — A commercial-duty composting vessel that is ideal for food composting at schools, universities, restaurants, hospitals and supermarkets. http://www.compostingtechnology.com/invesselsystems/eartht ub/ • Yelm, WA-based Worm Harvesters sells stainless steel worm harvesters that are manufactured in Canada and designed to process large volumes of food waste, generating high quality vermicompost (and worms) at scale. Large-scale vermicomposting operations have at least three revenue streams: tipping fees and worm and compost sales. http://wormharvesters.com • Bruce Fulford’s compost-heated greenhouse concept holds promise for smaller-scale urban agriculture projects.xxvii

G. Habitat and Natural Infrastructure

Financing Ecosystem Services in an EcoDistrict Ecosystem Services are the processes by which the environment produces resources that we often take for granted such as clean water, timber, habitat for fisheries, and pollination of native and agricultural plants. In recent years there have been efforts to create markets in ecosystem services, in order to establish a clear financial value for these services

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 42 within the market economy and to provide clear incentives to protect the habitats and systems that provide them. In theory, such markets could be tapped to help finance projects within an EcoDistrict. For example, if an EcoDistrict project investment (e.g. installation of large-scale bioswales) were projected to result in dramatic reductions of stormwater-related environmental impacts, another project expected to generate a lot of new stormwater runoff in the same watershed (e.g. a highway-widening project) could decide (or be required) to finance the EcoDistrict’s new bioswales. Markets for this sort of “impact trading” already exist to minimize the cost of reducing carbon dioxide emissions and to reduce and/or mitigate wetland destruction, and many people are working to expand these market- based trading mechanisms to, for example, create incentives to preserve endangered species habitat. Projects that provide ecosystem services can conceivably be developed within EcoDistricts and such projects may someday be financeable through ecosystem services markets. And if these markets were to become sufficiently robust, a future EcoDistrict’s governance body could decide to invest in projects that generate funding from the sale of these services. For the time being, however, this is almost certainly an unrealistic strategy for financing projects within EcoDistricts. Ecosystem services markets, though appealing in theory, are very difficult to establish. In-stream water rights, wetlands and even biodiversity credits are sometimes traded, but except for the carbon markets, all of these markets are still in their infancy. Large-scale trading schemes like the compliance markets for carbon emissions require complex project validation procedures, careful quantification and verification protocols to accurately measure a project’s mitigation value, and strict adherence to arcane accounting measures. The technical complexities inherent in these markets make them, at best, a difficult source of financing to tap — at least for the time being. Another challenge is that of scale. Given the limited land area and relatively urbanized nature of most EcoDistricts, they are difficult and expensive places to develop ecosystems services projects. For example, consider the relative cost of planting a million trees in an urban area versus on rural land. Not only is rural land cheaper, but planting the trees would likely require far less time and effort. Market- based mechanisms, by design, focus investors’ attention on the most cost-effective/highest ROI opportunities first. So even if there were suddenly a surge of investors looking for opportunities in carbon and stormwater mitigation, endangered species habitat preservation and various other ecosystem services projects, the smart ones would probably pursue a range of low-cost opportunities in rural settings for a long time before they’d consider any project opportunities within EcoDistricts. In summary, it is unlikely that environmental impact mitigation projects within EcoDistricts will generate a lot of revenue via the sale of ecosystem services anytime soon. However, it is important to point out that markets are not the only way to pay for ecosystem services. In the

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 43 near term, at least, perhaps the best ways to fund this kind of work will be through: • Volunteerism (e.g. neighborhood tree planting), • Voluntary markets (i.e. convincing people or companies to voluntarily pay for the project as a way to compensate for their environmental impact) • Government or private grants • Government-subsidized, low-interest loan programs that are explicitly created to fund these kinds of projects

Portland’s regional governmental authority, Metro, offers numerous grant opportunities for funding habitat and community improvement projects within its jurisdiction: Nature in Neighborhoods Capital Grants The Nature in Neighborhoods program has awarded $3.3 million to date for capital projects that “re-green” or “re-nature” urban neighborhoods. The program is focused on preserving water quality and fish and wildlife habitat, but also funds neighborhood park improvements and other public infrastructure. http://www.oregonmetro.gov/index.cfm/go/by.web/id=18203 Nature in Neighborhoods Restoration & Enhancement Grants This program funds projects up to $25,000 that are designed to connect citizens to their watershed through hands-on restoration activities and environmental education. http://www.oregonmetro.gov/index.cfm/go/by.web/id=24982 Community Enhancement Grants These grants are designed to improve communities in North and Northwest Portland, Forest Grove and Oregon City by increasing employment and economic opportunities, but also focusing on overall neighborhood livability and preservation of wildlife and marine and recreational areas for public enjoyment. http://www.oregonmetro.gov/index.cfm/go/by.web/id=536 Multnomah Soil and Water Conservation District Grants that fund conservation assistance programs help people reduce soil erosion, enhance water supplies, improve water quality and reduce damages caused by floods and other natural disasters. http://www.emswcd.org/grants-cost-share

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 44 Conclusion This overview of financing strategies is far from comprehensive, but it indicates the range of available financing options for proposed EcoDistrict developments. This document outlines financing strategies for EcoDistricts as a new scale for doing business, as well as for specific types of projects within an EcoDistrict. It is important to note that EcoDistricts as a whole — because they are unusual entities typically comprised of multiple property owners — offer unusual financing challenges. Ultimately, the simplest financing structure for an EcoDistrict may be a single contract, for example, a Master Development Agreement between an established EcoDistrict governing entity (a Sustainability Management Association, as proposed by PoSI) and a developer with experience in complex, district-scale projects. While this approach is promising, it is unlikely to gain traction in the near term, before EcoDistricts have established track records, are better understood and have access to significant and reliable financing mechanisms. Until then, the Portland Sustainability Institute intends to test various financing strategies outlined in this document and develop new models for doing business, as appropriate. Some projects within EcoDistricts — especially projects like district energy, composting, large-scale energy efficiency and renewable energy projects, which can generate clearly defined income streams — can already be funded today. Such projects should be able to attract private or public financing via traditional financing mechanisms including private equity, bank loans, municipal bonds, ESCOs and equipment leases. Smaller-scale EcoDistrict projects may be able to tap into newer financing models, such as parking benefit districts, on-bill financing and property assessed clean energy financing.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 45 Appendix A: Toolkit Methodology Primary research was conducted through dozens of stakeholder interviews from the public, private and civic sectors to assess current and future best practices. In addition, significant secondary research focused on historical practices and financing methodologies. The overall research effort focused on a wide array of issues including: • Identifying current financial models • The financing process • Revenue sources for each project type • Applicable types of capital • Predictability of cash flow • Contracting mechanisms • Ownership & management of assets • Collateral • Operations and maintenance

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 46 Appendix B: Potential Funding Sources for Predevelopment Activities

Example Precedents • Harvard University’s $12 million Green Campus Loan Fund http://green.harvard.edu/loan-fund • Green Municipal Fund Federation of Canadian Municipalities http://www.sustainablecommunities.fcm.ca/gmf/ • Grants and Loans Toronto’s Atmospheric Fund http://www.toronto.ca/taf/

Portland and Oregon Sources Community Renewable Energy Feasibility Fund Oregon Department of Energy The Community Renewable Energy Feasibility Fund (CREFF) is a grant program administered by the Oregon Department of Energy (ODOE) that funds feasibility studies for renewable energy, heat and fuel projects in Oregon with a $50k maximum award. Any entity is eligible to apply, but project applications must be site-specific and utilize established technologies. If the project is constructed and generates revenue, the project proponent must repay the cost of the grant. These monies will then be re-granted for future feasibility studies, making CREFF a revolving fund. Once complete, a CREFF-funded study is owned by ODOE. http://www.oregon.gov/ENERGY/RENEW/CREFF.shtml Renewable Energy Feasibility Fund Administered by the Infrastructure Finance Authority (IFA) Oregon’s Renewable Energy Feasibility Fund (REFF) is a grant and loan program within the Special Public Works Fund (SPWF) that offers a $50k maximum award. It is designed to help public agencies finance renewable energy feasibility studies with the goal of reducing Oregon's dependence on fossil-based energy sources. A municipality or other public entity must own the resulting project, though no grant repayment is required like under the CREFF program. Loan funding is also available on a less competitive basis. http://www.orinfrastructure.org/dev/www/IFA/Learn-About- Infrastructure-Programs/Interested-in-a-Special-Project/Renewable- energy-feasibility/ Development Opportunity Services (DOS) Program Administered by the Portland Development Commission EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 47 The purpose of the Development Opportunity Services (DOS) Program is to assist property owners with seed money and to provide real estate development expertise and technical assistance. The program is geared toward individual property owners pursuing new development or redevelopment of a property in areas zoned for mixed-use or high- density housing. The $12k maximum award per owner limits this program’s EcoDistrict potential, unless award bundling can be negotiated. http://www.pdc.us/dev_serv/dos.asp Commercial Property Redevelopment Loan Program Administered by the Portland Development Commission The Commercial Property Redevelopment Loan Program is intended to supplement equity contributions and traditional bank financing and to make a project feasible by filling financing gaps. Loan types available through tax increment financing on URA real estate projects, include predevelopment, construction and permanent financing. The maximum award is $100k per applicant, or $200k if the property is municipally owned. Projects must be commercial or mixed-use development that are located within a URA that has available program funding. http://www.pdc.us/dev_serv/development-assistance/commercial- property-redevelopment-loan-program.asp Feasibility Study Funding for Renewable Energy Projects Energy Trust of Oregon The Energy Trust of Oregon offers development assistance for renewable energy projects in Oregon that are 20 megawatts or less in capacity. Funding under this grant program is available for a variety of purposes, including grant writing, feasibility studies, or technical assistance with design, permitting, or utility interconnection. The goal is to achieve a net reduction in conventional power. Eligible applicants will be PGE or Pacific Power customers that are pursuing renewable electricity projects that remain on the utility grid. Energy Trust will fund up to 50% of the feasibility study, generally not to exceed $30k, though up to $40k is available for exceptional cases. http://energytrust.org/ Energy-Efficiency Audits Energy Trust of Oregon (http://energytrust.org/) The Energy Trust runs a variety of energy efficiency and auditing programs separated in three different sectors: Residential, Commercial Business and Public/Non-Profit. Within the commercial and public sectors, “On-site assistance” is available for qualifying projects to help develop and implement an energy management system, while “Early design assistance” is available for qualifying new construction and major renovation projects.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 48 Appendix C: Foundation & Grant Funding Opportunities Meyer Memorial Trust Portland-based foundation interested in delivery of social benefits to region. www.mmt.org Bullitt Foundation Seattle-based foundation with interest in regional Northwest initiatives that relate to sustainable development. bullitt.org/ Summit Foundation Washington D.C.-based foundation committed to the well being of people and the natural environment. www.summitfund.org Kresge Foundation Michigan-based foundation that awards grants nationally in the areas of Community Development, Environment, Human Services, among others. www.kresge.org Home Depot Foundation Committed to healthy, affordable housing and related sustainable development practices. www.homedepotfoundation.org Lazar Foundation The Lazar Foundation is dedicated to funding innovative and strategic projects that protect the environment in the Pacific Northwest: Alaska, Idaho, Oregon, and Washington. www.lazarfoundation.org Collins Foundation The Collins Foundation exists to improve, enrich, and give greater expression to the religious, educational, cultural, and scientific endeavors in the state of Oregon and to assist in improving the quality of life in the state. www.collinsfoundation.org

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 49 Lemelson Foundation Established by American inventor Jerome Lemelson, the Foundation supports inventors, invention and innovation at every stage. This helps ensure that great ideas and great inventors will continue to serve the U.S. and the world. www.lemelson.org

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 50 Appendix D: Integrated Feasibility Studies Lloyd Crossing This study was funded by the Portland Development Commission at $250,000, with a $50,000 match by the Lloyd Business Improvement District. The Lloyd Crossing study became a national model as the first integrated sustainability master plan of its kind that addressed water, energy and habitat. www.pdc.us/pubs/inv_detail.asp?id=332&ty=17 PCC Sylvania Net-Zero Energy Study Portland Community College funded this $250,000 study through a bond, led by Gerding Edlen Sustainable Solutions, which explores a strategy for its Sylvania Campus to achieve net zero energy, water, and waste. Seattle University This comprehensive resource impact study cost $250,000 for a university campus that included establishing a framework for assessment, assessing baseline conditions, and looking at a range of potential strategies.

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 51 Appendix E: District Energy Precedent Projects St. Paul District Energy Launched as a demonstration project in 1983, District Energy was Saint Paul's response to the energy crises of the mid- and late-1970s. The venture was a public/private partnership among the City of Saint Paul, State of Minnesota, U.S. Department of Energy and the downtown business community. The system was designed to be as energy efficient as possible, be fuel flexible, and result in stable rates for its customers, all of which has been accomplished.

In 1993, ten years after the successful startup of the district heating system, District Energy began offering district cooling service to downtown building owners. And ten years later, in 2003, District Energy became a "green" energy service provider following construction of an affiliated combined heat and power (CHP) plant that is fueled by a renewable resource—clean, urban wood waste. Using renewable energy, the CHP plant simultaneously produces about 65 megawatts of thermal energy for District Energy and 25 megawatts of electricity for Xcel Energy. Its primary fuel source is wood from municipal tree trimming operations, and it is the largest wood-fired CHP plant serving a district energy system in the nation. www.districtenergy.com/about/story.html

Seattle Steam Founded in 1893, Seattle Steam is a privately-owned utility that provides district heat to approximately 200 buildings in Seattle's Central Business District and First Hill neighborhoods. The company produces thermal energy from five boilers located in two plants in downtown Seattle. In the fall of 2009, Seattle Steam began generating thermal energy primarily from a sustainable, non-fossil fuel source: biomass (also known as waste wood).

Seattle Steam provides a cost-effective, reliable and environmentally- friendly heat source for use in heating buildings, generating hot water, humidity control and sterilization. The energy is distributed by Seattle Steam through 18 miles of pipe under approximately one-square mile of downtown Seattle to many of the city's office buildings, hospitals, hotels and college campuses.

In 2004, Seattle Steam renewed its 50-year franchise agreement with the City. In the fall of 2009, Seattle Steam converted to renewable energy and began burning clean urban waste wood as its primary source of fuel. This reduced the carbon footprint of Seattle Steam and its customers by 50 percent and provides a large boost to the region's sustainability goal. www.seattlesteam.com/

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 52 The Brewery Blocks This development in Portland’s Pearl District is home to Portland District Cooling System, which was developed by Portland General Electric and is currently owned by Veolia. The plant, with 4,000 tons of installed chilled water capacity, houses two centrifugal chillers along with a state-of-the art automation system that operates the chillers and controls system devices. It supplies five blocks covering some historic as well as new buildings in the Pearl District including the Henry Condominiums, the 12 West Building and the Armory Building, home of Portland Center Stage. Veolia Energy owns and operates the largest portfolio of heating, cooling and cogeneration networks in North America. Portland District Cooling marks their entrance into the Pacific Northwest, and according to Stewart A. Wood, President and CEO of Veolia Energy North America, “Veolia Energy’s business activities are designed to reduce carbon footprints, so operating in a sustainable city of Portland’s stature is a perfect fit for us. We are also pleased that the plant was designed with future expansion in mind, so we are well positioned to grow with our customer base.” www.breweryblocks.com/

The Beaverton Round The Beaverton Round is a mixed-use office, retail and residential condo development located at a MAX stop in Beaverton. It employs a successful district energy system that delivers energy efficient heating and cooling to the multiple buildings. In addition to heating and cooling services, the plant also provides domestic hot water to both residential and retail spaces and equipment cooling for dedicated computer and server rooms or similar, critical cooling needs. http://www.beavertonround.com/default.htm

London ESCO The London ESCO was created as a joint venture company in 2006 to finance, design, build, and operate decentralized energy systems in London. Equity ownership was originally shared between the London Climate Change Agency (19%) and EDF Energy (81%). The London Climate Change Agency was a municipal company integrated into the London Development Agency in 2009. EDF Energy is one of the largest gas and electricity suppliers in the UK. EDF Energy provided the London ESCO with expanded investment capacity and experience in district energy projects and green energy development.

Through its relationship with EDF Energy, the London ESCO had access to partner organizations at every step of a project, from inception to implementation. In 2006, the ESCO had 170 MW of CHP capacity, 8 MW of proposed wind farms, and 11 projects underway, many in conjunction with EDF Energy and the LDA. London ESCO projects utilize trigeneration and cogeneration, solar and wind energy, and fuel

EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 53 cell technologies. Financing shortfalls in 2009 slowed development of London ESCO projects. http://www.edfenergy.com/sustainabilit/our-sustainability- challenge/climate-change/london-esco.shtml Southampton District Energy Scheme The Southampton District Energy Scheme (SDES) was created as a result of the City Council of Southampton, UK's commitment to sustainable development and decentralized energy generation, and has developed into a community heating and cooling network. SDES projects are designed and operated by Cofely, the energy efficiency and environmental solutions branch of diversified energy company GDF Suez, in partnership with the Southampton City Council. Cofely has 110 district energy projects currently operating in Europe. SDES has been in operation for 20 years and utilizes tri-generation and CHP technologies, supplemented by geothermal power and conventional boilers to provide district heating, cooling, and electricity.

After UK DOE-constructed geothermal wells were abandoned in Southampton, the City of Southampton formed a partnership with energy services company Utilicom to manage and further develop the district energy system. The Southampton Geothermal Heating Company Ltd (SGHC), was created through a Joint Co-operation Agreement in 1986, and was wholly-owned by Utilicom. SGHC, and thus Utilicom, was responsible for the financing, design, construction, and operation of projects in the SDES. GDF Suez acquired Utilicom from IDEX in 2010 and rebranded the district energy services branch as Cofely, which now operates the SDES.

Generation and distribution capacity were expanded over time, and the customer base has spread from City Council buildings alone to more than 40 public and private entities in addition to hundreds of residents, with annual sales over 2 million GBP. Customers have the advantages of cheaper and more stable heating, cooling and hot water and other environmental benefits.

The Joint Co-operation Agreement between Utilicom and the Southampton City Council clearly defined the roles and responsibilities of the two partners. Excess electricity produced by SDES is sold to the utility National Grid. Upside revenue beyond Utilicom’s (now Cofely) hurdle rate is shared between Utilicom and the City Council. http://www.southampton.gov.uk/s%2Denvironment/energy/Geotherma l/

The International District Energy Association (IDEA) IDEA is a key resource for information on district energy systems and best practices examples. www.districtenergy.org

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i Strategies include well-established mechanisms like local improvement districts, business improvement districts, parking benefit districts, and emerging strategies such as PACE (property assessed clean energy) financing, Washington State’s proposed Climate Benefit Districts, and London’s and Singapore’s central city traffic cordons: http://www.edf.org/documents/6114_LondonTraffic_FactSheet.pdf ii Berry, Trent. Phone Interview. 20 April 2010. iii For more information, refer to: http://www.epa.gov/efinpage/publications/VoluntaryEnviroImprovementBonds Reports.pdf. iv Donald Shoup, Donald, in “The High Cost of Free Parking, Los Angeles, CA: American Planning Association, ”2005 [need date, type of document, way to access…] v The City of Portland Parking Meter Policy can be viewed at http://www.portlandonline.com/auditor/index.cfm?a=93671&c=38633#policy vi http://plato.stanford.edu/entries/free-rider/ vii 9-23 Climate Benefit District Draft Legislation, Discussion Version, p.7 viii www.mithun.com ix 9-23 Climate Benefit District Draft Legislation, Discussion Version, p.17 x Good magazine, Spring 2010, p. 56 xi The Southeast Falls Creek Neighborhood Energy Facility is a recent example of this. xii Osdoba, Tom. Phone Interview. 20 April 2010. xiii If a financier has “step-in rights” and a developer becomes insolvent halfway through a project and breaches the building contract and the professional appointments, the financier may step in and effectively become the developer, pay any sums due to the building contractor and the professional consultants, and complete (and subsequently own) the project. xiv http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1718 xv Baratoff, Kipp. Personal Interview. 14 May 2010. xvi http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/us _energy_efficiency_full_report.pdf xvii An excellent online source for all state and federal energy efficiency and renewable energy incentives is available at the Database of State Incentives and Rebates for Renewable Energy: www.dsireusa.org. xviii The term “Living Machine” is a system brand for a sub-type of natural systems owned by Worrell. More information at: http://www.livingmachines.com/. xixhttp://www.nytimes.com/2010/04/13/science/earth/13trash.html?pagewant ed=1&hp&adxnnl=1&adxnnlx=1273600834-fJQKDG1%20DoIrPzrYPXvNxw EcoDistricts Toolkit Financing an EcoDistrict, June 2011, Version 1.1 55 xx Roth, Thad. Phone Interview. 18 May 2010. xxi http://www.seas.columbia.edu/earth/wtert/faq.html xxiihttp://www.nytimes.com/2010/04/13/science/earth/13trash.html?pagewant ed=1&hp&adxnnl=1&adxnnlx=1273600834-fJQKDG1%20DoIrPzrYPXvNxw xxiii www.oregon.gov/ENERGY/RENEW/Biomass/OBCG.shtml xxiv http://www.epa.gov/wastes/conserve/rrr/composting/index.htm xxv http://apolloalliance.org/new-apollo-program/recology-pursues-zero- waste-in-bay-area/ xxvi Macy, Jack. Phone Interview. 18 May 2010. xxvii http://attra.ncat.org/attra-pub/PDF/compostheatedgh.pdf

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