New NRDC Report: Financing Stormwater Retrofits in Philadelphia and Beyond

Philadelphia’s approach offers commercial parcel owners an opportunity to sharply reduce their stormwater fees in exchange for onsite management of rainfall. Report estimates prospective $375M market for third-party investment in stormwater retrofits.

Need to replace some storm sewer pipe? Sell some bonds. But what if you need to encourage property owners to send less water to the storm drain in the first place? Unlike traditional infrastructure expenditures that follow a relatively straightforward financial path, distributed “green” infrastructure investments–particularly those on private property–beg for innovation in both engineering and finance.

The Philadelphia Water Department (PWD) has found an answer. The Natural Resources Defense Council just published a report highlighting Philadelphia’s success in encouraging the use of green infrastructure solutions to address stormwater runoff pollution.

According to the report, Philadelphia is one of 400 places which assess stormwater fees based per parcel, factoring in an impervious surface quantification. NRDC cites Philadelphia as a leader among these based on the strength of the incentive to manage the first inch of rainfall onsite. Non-residential parcels that do so, can nearly eliminate the fee in its entirety.

Philadelphia is in the midst of a phased transition from water meter-based calculations to a parcel-based calculations.While the meter-based approach could reflect the amount of wastewater generated, it did not account for the additional load on the sewer system based on stormwater runoff. Nor did the meter-based system account for customers with small water meters, but large parcels of land. On July 1, 2013, the transition will be complete, and the stormwater fee will be entirely parcel-based. Philadelphia has a combined sewer system. Reducing runoff not only helps minimize non-source pollution, it also helps prevent combined sewer overflows.

The parcel-based system assesses fees based on both gross area and impervious surface area. For gross area, the fee is about 53 cents/500 sq. ft. However for impervious surface area, the rate increases nearly eight-fold, to about $4.17/ 500 sq. ft. However the parcel owner can apply for a credit if they can demonstrate the ability to retain or manage the first inch of rain on the parcel, using tools such as green roofs, pervious pavement surfaces, constructed wetlands, rainwater harvesting and subsurface infiltration.

For many parcels, particularly large ones with high percentages of impervious surface area, the incentive to earn the credit is very clear. But how do you pay for pay for the retrofitting to qualify?  Even if substantially reduced stormwater fees will mitigate capital costs in a few short years, it’s not easily financed. The report suggests that rather than asset-based financing, alternative finance options such as those used in energy efficiency retrofits could work.

Learn more about Philadelphia’s Green City, Clean Water program: