Green Infrastructure Implementation Funding - Private Sector Costs Proposed as Offsets Paid by Benefiting Municipalities

How to fund green infrastructure and low impact
development stormwater management measures on
private property .... no easy answers. 
The report Economic Instruments to Facilitate Stormwater Management on Private Property is an interesting read, looking at how green infrastructure (GI) could be implemented and funded on private property to advance stormwater management goals. There is a link to the report.

The White Paper / study report explores the costs and benefits of green infrastructure, or low impact development (LID) measures, and looks at the barriers to implementation on private property - and there are many. These Barriers to the Implementation of LID Technologies include:

1. High up-front costs
2. Uncertain ongoing maintenance requriements
3. Low return on investment
4. Limited benefits accrue directly to property owners, yet they incur the high costs
5. High transaction costs

The report illustrates the types of costs and benefits under #4 in the following graphic:

Imbalance in public and private costs and benefits for green infrastructure / low impact development implementation.
The graphic illustrates that private costs are high, but the majority potential benefits are public.  Also, the private benefits are very low, like the potential reduction in stormwater management fees available to compensate for the GI or LID measures.

How high are the costs for implementing GI or LIDsfor improved stormwater management? Another interesting graphic shows annualized costs considering capital costs distributed over a 25 year service life (e.g., like annual depreciation of the asset) and annual operation and maintenance (O&M) cost.

LID capital and operation and maintenance costs greatly exceed the potential annual credit for stormwater fees. 
The report's impervious percentage of 20% seems too low
compared to typical urban development patterns in Ontario.
Typical residential percentages are double the report's
assumed value. Typical non-residential percentages can
even be higher (i.e., lots covered almost entirely by impermeable
roof top and parking lot surfaces.
The annual cost of LID measures averages about $5,000 per year considering a 'lot size' drainage area of 5000 square metres, or $10,000 per hectare. The cost estimates consider an area with 1000 square metres of impermeable area, meaning an impervious area percentage of 20% (i.e., very, very low for many urban areas ... meaning these average costs should be higher - see example impervious area coverage at right - while this is residential development, non-residential development has followed similar trends).

Given the disparity in costs and benefits, an obvious barrier to implementation of GI and LID on private property, what is proposed to incentivize implementation? Make someone else pay of course! Who pays? The Public Sector. They call this "OFFSETS" and explain it as follows:

"Offsets are payments offered to proponents of LID infrastructure in compensation
for costs incurred when significant benefits accrue to other parties. A principle of
equity or fairness underlies this type of compensation based on the argument that
costs should be borne proportionately by those who benefit from the green
investment.

Public sector contributions in the form of offsets are justified to achieve a balanced
approach to cost sharing that reflects how all costs and benefits are incurred. Doing
this requires identification and quantification of benefits.."

So ultimately, the idea is that the public pays regardless of whether GI or LID is implemented on public land or on private land. What could these costs be in Ontario and what are the impacts to Ontario taxpayers?
Ontario has over 850,000 hectares of urban land use that
does not have enhanced stormwater management control, and
could be eligible for green infrastructure (LID) retrofits.

Ontario's SOLRIS land use mapping indicates 852,000 hectares of urban land use as of the year 2000. Previously we've estimated the capital cost considering a unit cost of $390,000 per hectare based on Ontario tender costs - see image ar right. All this urban land would in all likelihood have no water quality treatment and be eligible for stormwater managment enhancements. How do we know? Table 1 in the Economic Instruments to Facilitate Stormwater Management on Private Property report indicates that despite the use of quality controls, "Use of enhanced controls is negligible." (see table below).

If we retrofit the untreated area with GI / LID, the annualized cost would be simply $10,000 per hectare x 852,000 hectares = $8.5 billion per year ... forever.

Assuming this cost is allocated to municipalities who benefit from the green infrastructure, and these municipalities distribute the cost to Ontario households, we can estimate the annual household cost. The 2016 census indicates that there are 5,169,170 private households in Ontario meaning a cost of $1650 per household per year. Given household after-tax income of $65,285, the green infrastructure cost would represent about 2.5% of this income.

The Ontario stormwater infrastructure deficit has been estimated at $6.8 billion. If green infrastructure / low impact development lifecycle costs are not funded annually by taxpayers, and debt is used to fund the infrastructure investment, like a green bond, this deficit would double in a single year, and increase by the more than the existing deficit each and every year.

Allocating GI / LID costs seems like a shell game.
Allocating GI / LID costs seems like a shell game, shifting private property costs to the public sector, shifting public sector costs to
the downstream municipalities that accrue potential benefits. In the end there is only one source of funding however.... all of us. Elaborate credit systems, offset schemes, Drainage Act assessments, and fancy 'green bonds' are ways of spreading out the high up-front cost of LIDs. But ultimately, we all pay.

It will be interesting to see the next stages of the study authors' work and how the White Paper could be applied. The report states for example "The White Paper also provides background for a pilot study to be undertaken in the Southdown area of Mississauga. This study will examine the potential of aggregating private commercial property under the Drainage Act to secure installation of communal LID technologies and realize cost-efficiencies." The exploration of the Drainage Act was part of another study under the banner "Aggregated Communal Approaches to Green Infrastructure Implementation". The Drainage Act allows costs to be distributed to landowners across catchments in which improvements are made - the challenge is that landowners against whom costs are assessed have to buy in to the cost-sharing plan and can appeal.









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