Financing an EcoDistrict Organization Through Project Development and Monitoring June 2011, Version 1.1 www.pdxinstitute.org/ecodistricts 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