By Jake Assael
Our coastlines are the first defense against encroaching seas and severe storm damage. Sea level rise and, in some areas, land subsidence, are increasing the vulnerability of coastal communities. Coastal restoration projects are vital in preventing the worst impacts of weak shorelines. Adding dunes, sand, wetlands, or a living shoreline can save coastal towns millions in storm damage as well as saving lives. These types of investments would protect the 45% of the nation’s GDP that is generated in coastal counties and the $344 billion in tax revenue that is collected from coastal citizens. Current federal government spending is inadequate to meet the growing resilience needs of our coastal regions, with funding actually on the decline, putting at risk the 39% of the population that lives in coastal counties. The National Ocean Atmospheric Administration (NOAA) projects an increase of 8% by 2020.
The FY ’16 federal budget allocated a mere $130 million to shoreline protection, with $104 million of that amount marked for sand placement construction. This is a fraction of what it is needed to maintain America’s thousands of miles of coastline. The Army Corps of Engineers needs over $80 million a year to meet its existing coastal project commitments in New Jersey alone. Despite the fact that states pay 35% to 50% of the cost, it’s clear that the federal government doesn’t have enough money to protect the people and critical infrastructure along the coast. This has put the onus on localities to fund coastal resiliency projects themselves, or search for alternative spending. Cities such as San Francisco, Miami, and New York have spent millions of their own money in coastal adaptation and resilience efforts in order to protect the billions in economic revenue and infrastructure. But the robust wealth and resources at hand in major cities is not representative of the plight of the hundreds of coastal communities that do not have the significant tax base needed to protect their low lying infrastructure, ecosystems and businesses.
Green Bonds could provide states and municipalities with a critical funding resource for vital environmental projects that provide resilience. Green Bonds are fixed income securities— a debt instrument issued by a government, corporation, or other entity to finance and expand their operations— except that the proceeds are earmarked for projects with clearly mandated environmental benefits. While existing initiatives have typically benefitted renewable energy, green infrastructure, clean water, waste management, and eco-friendly transportation, there are many coastal resilience uses that would also be appropriate for Green Bond financing. In 2015 Green Bonds had an issuance of $41.8 billion, enticing market drivers such as JP Morgan, Bank of America, TIAA-CERF, Blackrock, and Deutsche Asset and Wealth Management, Ford, 3M Company, Zurich Insurance Group, and Microsoft to invest, while seeing international organizations like the World Bank Group and International Finance Corporation (IFC) issue over $3.5 billion since 2010.
Similar to Municipal Bonds, Municipal Green Bonds are exempt from federal income tax, giving investors an opportunity to earn tax-exempt income. They are subject to more stringent disclosure requirements regarding use of proceeds and expected impact during specific time horizons. The bonds can be backed by general obligation— “full faith and credit” of the issuer”— or by general revenue, which are not backed by the governments taxing power, but the revenues of a specific project(s). They also provide a vehicle to inform residents about the community’s green capital projects.
Although government-backed bonds have hit near 20-year lows, Municipal Green Bonds provide smaller governments an opportunity to broaden their investor pool, while funding key environmental projects. As climate awareness becomes more prevalent, and green investing returns more on investment, state and localities alike have been issuing green bonds as an alternative to taxes or federal aid. Although most existing Municipal Green Bond programs are not specifically targeted for shoreline restoration, this funding mechanism is clearly an appropriate alternative for some coastal resilience projects.
The Commonwealth of Massachusetts, which issued $100 million in Municipal Green Bonds in 2013, has now issued as much as $4.3 billion in 2015, with projects funding storm water treatment, land acquisition, and renewable energy projects throughout the state. One project, the ‘Notre Dame Training School Acquisition,’ purchased 70 acres of high priority coastal habitats within the Great Marsh Area of Critical Environmental Concern (ACEC) target area. It included coastal wetlands, which help mitigate storm surges and protect coastal infrastructure.
The City of Spokane, Washington, also issued Municipal Green Bonds to pay for a series of projects that are designed to improve the health of the Spokane River and to protect the aquifer that provides Spokane residents their drinking water. The money has already been used to construct an additional level of treatment at the City’s Riverside Park Water Reclamation Facility, build underground concrete storage tanks to help manage overflows from combined sanitary and stormwater sewers, and construct stormwater management facilities in legacy industrial areas to keep pollution out of the Spokane River.
The City of Venice, Florida had issued a $15.4 million green municipal bond, with the proceeds funding wastewater projects. Projects include those improving drinking water, cleaning the local watersheds, and advancements in sustainable waste management and energy efficiency.
Other examples include Tacoma, Washington, which issued $22 million, Vienna, Virginia, which issued nearly $7 million, and St. Paul, Minnesota which issued $9 million for environmentally sustainable projects.
Since the federal government is not able to provide the necessary funding to provide the minimal level of flood risk mitigation, coastal areas could benefit from alternative sources of funding, such as Municipal Green Bonds, to fill the spending gap and protect our vibrant coastal economies and communities.
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