Leveraging the opportunity of #OpportunityZones

recently headed up the coast to Los Angeles to spend the day with mayors from across the country, real estate developers, bankers and community leaders. Accelerator for America had brought this diverse group of people together to discuss something at the top of everyone’s minds. The topic? Opportunity Zones.

Opportunity Zones were created by the Tax Cuts and Jobs Act of 2017. They create a tax incentive to push more dollars into the communities that need investment most. The basics of how it works: someone has capital gains, by reinvesting those gains into a pre-approved Opportunity Fund that someone will receive a temporary tax deferral and other tax benefits. These Opportunity Funds are required to invest 90% of its money in pre-approved census tracts — most of which are in rural or lower-income urban communities.

Proponents have estimated that this could be a $6 trillion dollar opportunity for cities to leverage. As a result, communities could see real estate investors rehab old buildings to create tech incubators and more VC money for local startups. Those more hesitant to jump on-board warn that this recent policy isn’t much different than previous attempts to encourage economic development with tax incentives which failed to generate substantial economic growth.

If there’s one thing our diverse group agreed on, it’s this…

Cities need to act now and get positioned to leverage the $6T investment Opportunity Zones promise.

Otherwise it’s uncertain that these investments can be channeled towards the projects communities need the most, as those project often have uncertain returns associated with them.

Mayor Eric Garcetti (Los Angeles), Mayor David Holt (Oklahoma City), Mayor Greg Fischer (Lousiville) getting ready to share their thoughts on Mayor of South Bend, Pete Buttegig’s draft investment prospectus. Love when cities learn from other cities!

Some initial thoughts about how cities can start acting now to take advantage of Opportunity Zones are below.

  • Early bird gets the worm. 8,700 specific census tracts have been defined as Opportunity Zones across the country, but implementation isn’t certain (the Treasury Department is still figuring out lots of deets!) But even with lots of uncertainty, 20+ funds have already launched, and there are more in the works. Cities that prepare now will be best positioned to receive funds, and do so in a way that is focused on their priorities, rather than the investors.

 

  • Match the hatch. Money has never been the (only) problem when it comes to investing in communities. Private sector dollars flow to projects that are well designed, quantified, and valued — in terms that investors understand! This means that to get money in the door for a specific project, public entities have to first identify projects that either create revenue or generate savings that can be attributed to a specific entity. Not to mention define capital stacks, ratios, and IRR. Just like you can’t turn a blueprint directly into a mortgage document, you can’t turn an economic development strategy directly into a set of bankable projects….but you may be able to turn it into an investment prospectus. Accelerator for America, in collaboration with smarties like Bruce Katz and Jeremy Nowak,* are helping cities do just that. By defining, in an investor friendly way, an existing set of goals and a pipeline of projects that could be possible if there were private dollars available, cities can help ensure that investments are made in ways that actually make their most vulnerable neighborhoods safer, smarter or more sustainable. (h/t to my dad for raising me on catchy fly-fishing lingo that is also very useful for business!)

 

  • Define success first. Some have raised concerns that this could be just another way for money to flow towards investments with stable financial returns — like franchise fast food restaurants (see EB5) — instead of local grocery stores or cool projects like school LED light replacement that doubles as STEM education that could truly help transform distressed neighborhoods. Whether doing an all out investment prospectus or just getting organized, cities should start thinking now about what success looks like and putting mechanisms in place to track whether Opportunity Zone investments are helping. There are plenty of tools that cities can use to track how a neighborhood’s jobless rates, per capita income, or crime rates are changing over time. (Checkout how High Point, NC is tracking neighborhood scale improvements as they work to alleviate blighted properties or how Nashua, NH is tracking how livability factors like obesity rates and access to healthy foods are impacted by community investments.)

 

  • People should drive projects. Successful Opportunity Zone investments will align with city priorities and deliver on neighborhood needs. $6T is an excellent carrot and cities should use it as another reason to support meaningful engagement with their residents. Ideally, all Opportunity Zone projects stem from asking residents: what are the most significant problems in your day to day life? what can make your community better? There are tons of tools cities can use to make that process easier. (Checkout how Kansas City used a citizen survey to pass a $800M bond. Or how Purceville, VA used a polling platform to prioritize block-by-block investments.) These tools, used at scale, can be a great way to not only inform an investment prospectus but create a pipeline of projects that drive value to residents.

Finally, one caution from this eternal optimist…

The rise of the rest of the unicorns?

There’s a lot of discussion about how Opportunity Zones could be the thing that finally moves venture capital money from its current comfortable home on the coasts. Don’t get me wrong, as a co-founder of a startup based in San Diego, I strongly believe that good ideas are everywhere and VC money should be more evenly spread across the country. But it’s important to remember that most startups that get venture funding have high margins(some operate at 90% margin!). To get there it often means companies have low capex (meaning they don’t build many things) and low opex (meaning they don’t hire many people).

Venture-backed startups are not the most likely to create jobs for low-income residents in vulnerable communities, and they are not the most likely to stay in those communities after they get quickly acquired to payback their investors.

The biggest job creators in communities tend to be existing business in those communities. When it comes to Opportunity Zones, those are the types of corporate investments that should be prioritized.

To realize the value that many believe Opportunity Zones can create, investments need to go into the businesses, real estate projects, and community services that drive value for the most vulnerable residents. Investment dollars will find projects that make financial sense, its on city leaders to make sure those projects make community sense too.

Want to read more on Opportunity Zones? Checkout these recent pieces in Route FiftyWall Street Journal and all this great stuff written by Bruce Katz and Jeremy Nowak.

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*Shortly after I drafted this piece, Jeremy Nowak passed away. His absence is felt by our entire community. My heart goes out to his family, friends and colleagues. Read more about his incredible life of service here.

#WaterYouWaitingFor: City of Orlando, FL

We’re working with ELGL to profile the Final Four #WaterYouWaitingFor projects – the winners collected their trophies, goody bags, and ELGL memberships at #ELGL18 but we wanted each project to also get some time to shine. First up…Orlando, Florida!

Explain your award-winning #WaterYouWaitingFor project in 100 words or less.  

The implementation of the Lake Level Monitoring program will enable City staff to monitor the lakes in real-time, making adjustments before storm events to help mitigate flooding of critical infrastructure and residential communities.

This project will allow the City to capture the historical knowledge of the lake management expertise that currently resides in the hearts and minds of our long term staff. We will be able to track, measure and methodically adjust water levels to meet the ever changing weather patterns that are occurring in central Florida.

This project will eventually tie into the National Weather Model for forecasting lake levels based on 2-3 day weather forecasting.

Describe Orlando to someone who has never visited Florida/the region before. 

Very fun, diversified and environmentally conscience City. We have so much more than Theme Parks.  For most of Orlando’s history we’ve been the place everyone wants to visit.

Today, Orlando is also the place where everyone wants to live and do business. List after list has Orlando as one of the fastest growing cities in America. We’re transitioning from our role as the young upstart to being a more mature, global City.

We are doing that by keeping our community safe, generating high quality jobs, and becoming one of the most sustainable cities in America.

Where did this project idea come from? 

Innovation is the mother of necessity.  As climate changes continue to occur, we needed a better way to predict and ultimately manage those changes.

Through technology we can monitor the weather patterns and adjust our lake levels to address intense rain events, hurricane effects and drought conditions.

Share some of the project highlights. 

This project had its beginnings in the early 1990’s when then Stormwater Bureau chief had a vision of an Orlando Unit Hydrograph. The city started with gauge boards that the survey crews would shoot the water elevations every quarter.

We then transitioned to telemetry starting in 2004 utilizing pressure transducers to calculate the water surface elevation from the pressure differential.  There were approximately 67 stations deployed in the City lake system.

In 2015 we began transitioning to cellular because of data losses when using radio frequency.  Our ultimate systems will include pressure transducers, data-loggers and electronic rain gauges.

Share some of the project challenges. 

Time.  It takes a lot of time to plan and implement the data collection network.  It also takes a lot of time to research the options for the individual stations, electric requirements, environmental factors (tree canopy blocking sun on solar panel), easements for equipment when no City land available, etc.

City of Orlando, Florida – Streets & Stormwater Division Manager

What has been the community response to this project? 

We have a fairly active environmental community that is very supportive of any and every thing that we can do to improve the water quality and recreational enjoyment of our water bodies.

If someone is reading about this project and wants to replicate it in their community, what would your top two pieces of project advice be? 

Determine who will be the core Team members and make sure they have the technical expertise to monitor/maintain the equipment and QA/QC the data.  These are 2 critical areas that need a lot of consideration.

FINAL FOUR: Water You Waiting For Projects

A whopping 1,100 water infrastructure fans voted for their favorite #WaterYouWaitingFor local government water project, all featured and shared on The Atlas. These top four projects are already winners. They’ll receive:

Honors at the ELGL18 conference in Golden, CO May 18th.

Profiles (via interviews, pictures, articles) by ELGL and The Atlas.

Free All-In membership to ELGL.

The overall winner will also receive a brag-worthy trophy, and a box of creativity goodies.

 

We’ll announce the overall winner at #ELGL18 at the 10:20 a.m. session “The Shape of Water” on Friday, May 18. Here are the top four projects (in random order):

Using Data & Creativity to Reduce Flooding

Orlando, FL

At a Glance: The City of Orlando plans to upgrade Lake Monitoring stations as part of this project. These stations will communicate rain intensity.duration data to the cloud via wireless connectivity. This information will be used to create an Orlando Unit Hydrograph curve to model storm events within the Orlando watershed.

 

Enhanced Flood Risk Reduction Through Bistate, Multiagency Partnership 

Kansas City, MO

At a Glance: Kansas City, Missouri, the Unified Government of Wyandotte County/Kansas City, Kansas and the U.S. Army Corps of Engineers collaborate on complex flooding problem-solving and managed funding, administration and real estate in order to reduce heavy rain stormwater impact on local businesses and residences.

 

Building a Smarter Sewer System to Reduce Overflows in Greater Cincinnati 

Cincinnati, OH

At a Glance: To keep sewage mixed with stormwater out of waterways during rain events, Metropolitan Sewer District built a smarter sewer system that costs less than any other solution. Using sensors and computers, we can now monitor and redirect stormwater flows from full interceptor sewers to areas with available capacity.

 

Upgraded wastewater treatment to a level acceptable to reuse on crops

Hermiston, OR

At a Glance: The city needed to upgrade its effluent to discharge into the Umatilla River. After extensive study and research, the best solution was determined to be treating the water to the level that it could be applied to regular crops. So now the city discharges to the West Extension Irrigation District canal during irrigation season.

 

About #WaterYouWaitingFor:

The Atlas partnered with ELGL to promote the free and open exchange of ideas where local governments can learn from one another to be most successful. When local leaders share their success stories, everybody wins! This is especially true on expensive and complex public works projects, so the goal of this competition was to collect and share details about the best water projects in the nation.

ELGL selected 18 amazing water projects for you to learn more about on ELGL.org and The Atlas. The local government community voted and selected the above four projects for national recognition.

Water You Waiting For Finalists & Voting

The Atlas, like ELGL, is passionate about the free and open exchange of ideas where local governments can learn from one another to be most successful. When local leaders share their success stories, everybody wins. This is especially true on expensive and complex public works projects. We are so glad to be partnering with ELGL to collect and share details about the best water projects in the nation.

 

Below are the 18 amazing water projects nominated and selected for you to learn more about, now you get to pick your favorite! The winner will be selected by popular vote, so get the word out! You can vote for your favorite project here: http://elgl.org/2018/04/24/water-you-waiting-for-voting/.

 

Voting for the Top 4 projects is now open through midnight Wednesday, May 2nd. Here’s what’s on the line:

  • Honors at the ELGL18conference in Golden, CO May 18th.
  • Profiles (via interviews, pictures, articles) by ELGL and The Atlas.
  • A year’s free membership to ELGL, a trophy, and a box of goodies.

 

Terminal Island Advanced Water Purification

Los Angeles, CA

At a Glance: Construction of an Advanced Water Treatment Facility (AWPF) at Terminal Island Water Reclamation Plant (TIWRP) to provide safe recycled water for potable reuse for the surrounding area. The planning of this project started in 1985 and the construction was broken in two phases.

 

Upcycled Trash Booms for Trash Cleanup in the Tijuana River Valley 

San Diego, CA

At a Glance: A binational project that repurposes trash collected in Mexico to create booms that capture trash flowing into San Diego County.

 

 

Water Conservation Home Makeover at Chollas Creek 

San Diego County, CA

At a Glance: This pilot project provides water conservation ‘home makeovers’ to 50 low income homes in Encanto, a disadvantaged community in San Diego County. The project includes retrofits and personalized landscaping, as well as outreach including quarterly reports on water savings metrics and school programming.

 

 

Mission Avenue Complete Street 

Oceanside, CA

At a Glance: Mission Avenue Streetscape is a “complete green street” in Oceanside, San Diego County. This project implemented a ‘road diet’ to support local businesses, make the area more enjoyable, and include storm water BMPs.

 

 

Closed Loop Water Infrastructure at the San Diego International Airport 

San Diego, CA

At a Glance: The San Diego County Regional Airport Authority, the agency that manages the day-to-day operations of San Diego International Airport (SAN), is pursuing an integrated approach to managing water quality, water use, and flood resilience.

 

 

Canyonside Recycled Water Pump Station Emergency Repairs for Flood Damage 

San Diego, CA

At a Glance: City crews worked long hours to install temporary pumps and generators; the pumps were operated manually 24 hr/day, shifts scheduled around the clock to keep pumps running and site secure. The City returned the Pump Station to full operating condition and kept costs to a minimum with the use of in-house staff.

 

 

Lloyd Estates Drainage Improvements 

Oakland Park, FL

At a Glance: Retrofits to existing stormwater control structures and have constructed new exfiltration trenches, catch basins & manholes, and roadside swales to deal with repeat flood losses. Retrofits seamlessly integrate both green (grass swales) and grey (pumps, trenches) components.

 

 

Citizen Science for King Tide Flooding 

Broward County, FL

At a Glance: Low-lying coastal areas of Broward County can be impacted by flooding from high tide events. To help document locations and severity of flooding, Broward County launched a citizen science effort that encouraged citizens to submit geotagged pictures of flooding via their smartphones.

 

 

Using Data & Creativity to Reduce Flooding

Orlando, FL

At a Glance: The City of Orlando plans to upgrade Lake Monitoring stations as part of this project. These stations will communicate rain intensity.duration data to the cloud via wireless connectivity. This information will be used to create an Orlando Unit Hydrograph curve to model storm events within the Orlando watershed.

 

 

Justifying Green Stormwater Design for St Paul 

St. Paul, MN

At a Glance: City of St. Paul had the opportunity to redevelop a vacant 135-acre Ford Motor Co. campus that included a riverfront area abutting Hidden Falls Regional Park. However the current site lacked stormwater management transportation options to support its use by the community. Because of its prominent location, Mayor Chris Coleman urged the city staff to study and replicate the best practices for a “21st century community.” Development plans have been informed by community input and enhanced by triple bottom line cost analysis.

 

 

Enhanced Flood Risk Reduction Through Bistate, Multiagency Partnership 

Kansas City, MO

At a Glance: Kansas City, Missouri, the Unified Government of Wyandotte County/Kansas City, Kansas and the U.S. Army Corps of Engineers collaborate on complex flooding problem-solving and managed funding, administration and real estate in order to reduce heavy rain stormwater impact on local businesses and residences.

 

 

Southwest Resiliency Park to Mitigate Stormwater Flooding 

Hoboken, NJ

At a Glance: After experiencing significant flooding during Hurricane Sandy, the Southwest Resiliency Park is the first in a series of investments the city is making to increase green space and reduce flooding vulnerability for communities.

 

 

Using Green Infrastructure To Green Camden City and Reduce Combined Sewage Flooding and Overflows 

Camden, NJ

At a Glance: Constructed 4 riverfront parks and 60 rain gardens in Camden City to provide green amenities for the residents, reduce combined sewage flooding and overflows, and also create green maintenance jobs.

 

 

Building a Smarter Sewer System to Reduce Overflows in Greater Cincinnati 

Cincinnati, OH

At a Glance: To keep sewage mixed with stormwater out of waterways during rain events, Metropolitan Sewer District built a smarter sewer system that costs less than any other solution. Using sensors and computers, we can now monitor and redirect stormwater flows from full interceptor sewers to areas with available capacity.

 

 

Upgraded wastewater treatment to a level acceptable to reuse on crops

Hermiston, OR

At a Glance: The city needed to upgrade its effluent to discharge into the Umatilla River. After extensive study and research, the best solution was determined to be treating the water to the level that it could be applied to regular crops. So now the city discharges to the West Extension Irrigation District canal during irrigation season.

 

 

Reducing CSOs with CMAC Technology 

Philadelphia, PA

At a Glance: Philadelphia Water Department installed continuous monitoring and adaptive control (CMAC) technology in stormwater retention basin to control runoff in real-time and reduce flooding.

 

 

Hacking the Storm: Crowdsourcing, Civic Hacking, and Innovation in Harvey’s Wake

Houston, TX

At a Glance: In the midst of Hurricane Harvey, City of Houston officials and the local tech community responded rapidly using data, tech, and crowdsourcing to hack disaster response efforts. These new approaches leverage the power of the crowd to revolutionize disaster rescue, relief, and recovery operations.

 

 

Lower Footprint Biofiltration to Increase Efficiency in Right of Way Stormwater Capture

Houston, TX

At a Glance: Part of a broader redevelopment effort, Bagby Street – a ten-block corridor in a dense, urban neighborhood of Houston – was redesigned to improve mobility for vehicles and pedestrians, and add aesthetic appeal to the road. Improvements led to Bagby Street being named one of Texas’ first certified Greenroads.

 

Retain Your Rain 

Norfolk, VA

At a Glance: Retain your rain seeks to engage residents in a city-wide systemic approach to stormwater management by encouraging the use of small-scale green infrastructure on their properties. This reduces the amount of water that goes into the stormwater system which can cause floods in our streets and neighborhoods.

 

Sustainability & Public Works

Note: This is the transcript of an interview with Albert Carbon (Public Works Director – Oakland Park, FL) and Ellory Monks (Co Founder – The Atlas Marketplace) that took place on June 26, 2017. The interview was hosted by APWA’s Center 4 Sustainability and originally posted on their blog. The interview has been edited for clarity and conciseness.

Ellory: Hi there, everyone. My name is Ellory and I’m so glad to be talking with you all today. Before we get to the meatier part of our conversation, I want to quickly introduce myself and give you a little context about why I’m talking to you today. So my partners and I have been working 1-1 with dozens of cities over the last 5 or so years—primarily with the support of the Rockefeller Foundation—to design, finance and implement resilient infrastructure projects. Several years ago, we had a conversation with the Public Works Director in one of our coastal partner cities about a plan to install flexible flood barriers. And that conversation really changed how we approached our work with cities. He asked us:

  • what cities have installed flexible flood barriers like this?
  • how much did it cost?
  • how’d they finance it?
  • what have the outcomes been?
  • how’d the city write the RFP?
  • what companies were involved?
  • can you put me in touch with the city officials that have done this already?

 

This public works director told us that he couldn’t even begin to think about bringing the project to his mayor and city council before knowing the answers to these questions. His questions crystalized something that we already knew instinctively: that city officials prefer to learn from their peers. Because at the end of the day, only other public works directors can understand the hopes, dreams and frustrations of other public works directors. That’s one reason why organizations like APWA are so incredibly important, and why we’re so happy to be included in the C4S Sustainability Toolkit.

Over the years, we had many, many other similar conversations with different city officials. So we decided to launch The Atlas, an online social network and marketplace for city officials looking to upgrade their infrastructure to be stronger, smarter and more sustainable. Our goal is to create a safe, hassle-free space for city, county, and utility staff to learn from one another about successfully built and installed infrastructure projects from around the world.  Our end game is to help local government leaders replicate innovative infrastructure projects – and the benefits they generate – in their own communities.

We launched The Atlas just about 9 months ago. We’re now partnered with over 40 local governments, including several public works directors and their staff. Albert & Oakland Park was one of our first partner cities.

At The Atlas, I’m in charge of facilitating city-to-city learning, and that’s why Albert and I are talking to you today. I want to highlight some of the great progress Albert and his staff have made in Oakland Park recently to tackle their flood issues. Specifically, I want to talk with him about how he’s engaged with the planning folks at the city, county, water management district, etc., because it’s an issue that a ton of public works departments face when pursuing sustainability or resilience projects. So with that, I’d like to introduce you to Albert! He’s really one of the most forward-thinking public works directors I know. Albert, can you please share a little bit about yourself, Oakland Park and some of the infrastructure challenges you’re facing?

Albert: Sure. I’ve been with Oakland Park for a little over a year and before that I was the Public Works Director of Fort Lauderdale, FL for nearly a decade. I met Ellory about nine months ago at the Smart Cities Conference in Washington, D.C. They had just launched The Atlas two weeks before we met!

Oakland Park is a small city (population ~40,000) in Broward County in southeast Florida. Oakland Park is a coastal city, but we don’t have any beachfront property, so we’re unique that way. Oakland Park basically sits in a bowl and is surrounded by higher elevations. This means that we are constantly struggling with drainage issues and chronic flooding. We really are feeling the effects of climate change and sea level rise now.

Separate of flooding, we’re also looking into smart cities technologies to improve other city services. When it comes to smart cities, we’re really focused on improving data collection and analysis.

Ellory: What initially drew me to Albert and to Oakland Park is that they’ve made real progress towards addressing their flood issues, even though they’re a small/medium-sized city without a huge tax base. And they’ve made that progress in a way that’s incorporated a lot of nature-based solutions and green infrastructure, most recently with the new pump station at Lloyd Estates. Albert, can you talk about the process and time it took for you to get from “We have a flooding problem” to “these are some of the investments we can make to start to address the problem.” Continue reading “Sustainability & Public Works”

Cities Can’t Prejudge Winner in Green v. Grey Infrastructure Battle

When one of our co-founders was in college, she noticed there was always a disconnect between the “civil” and “environmental” parts of her Civil/Environmental Engineering degree. Sometimes it even seemed like the nerds and the hippies were locked in a quiet (but epic!) struggle over the future of the world’s cities. These tensions were an understandable reflection of a persistent trend in the infrastructure community that continues to pit grey (traditional) and green (nature-based) approaches against each other in a quasi-moral battle.

One of the ironies of the green versus grey infrastructure battle is that they are not mutually exclusive approaches; many times the best design solution is a combination of grey and green infrastructure working together. Grey and green infrastructure are on the same team, and that team’s goal is to take action on any number of difficult problems coastal cities are grappling with: hurricane risk, saltwater intrusion, coastal erosion, tidal flooding, sea level rise. Arguing about green versus grey infrastructure makes taking action on these problems harder than it already is.

In the spirit of taking action and focusing on outcomes, here are a few interesting examples of successfully built green and grey coastal protection projects and the innovations that make them stand out.

Green (Nature-Based) Coastal Protection Projects

It is paramount for all nature-based coastal protection projects to plan for, and execute long-term evaluation and monitoring to determine the project’s performance, such as resulting reduction of wave height. This is essential to ensure that more traditional engineers accept these softer solutions as viable. The support of more traditional engineers is key to the replicability and scalability of these nature-based solutions.

Louisiana’s Coastal Restoration: As a part of a comprehensive plan to reduce coastal risks, the Louisiana Coastal Protection and Restoration Authority has undertaken nearly 150 restoration and protection projects, both green and grey. Of interest is the associated applied research to measure and model the performance of nature-based infrastructure projects on Louisiana’s coast.

Staten Island Bluebelt (New York): A successful watershed-level approach to green infrastructure to address intertwined problems of coastal risks, flooding and poor water quality. The Bluebelt enjoys a high level of community support because of continued engagement, increases in home prices and cost savings.

Prime Hook National Wildlife Refuge Restoration (Dover, DE): Integration of storm surge risk reduction and endangered species habitat restoration after Hurricane Sandy. Particularly interesting is this write-up from the US Fish and Wildlife Service that includes process updates from December 2012 through December 2016 (when construction finished) that provide great insight into how the project actually moved forward.

Grey (Structural) Coastal Protection Projects

There are cases when no amount of green infrastructure will solve extreme, chronic coastal flooding. In those cases, it’s a good thing traditional grey solutions are becoming smarter, more flexible, and more sustainable. We should applaud that progress and seek to replicate it, when appropriate. These are some examples we’ve been thinking about recently:

San Andrés Breakwater (Port of Málaga, Spain): An innovation in breakwater design and materials saved significant time and money in this project. The RFP was written in a way that enabled the innovation in design and materials, which is why the project won Spain’s National Innovation Award for Public Procurement of Innovative Solutions in 2011.

MOSE project (Venice, Italy): Managers of this project can use real time data to open and close a series of tide gates based on changing tide conditions, making its operation more flexible than a typical tide gate project. Researchers have been simulating the flexible operation of these tide gates since 2011 to prepare for eventual construction completion and operation, expected in 2018.

West Riser Tide Gate (Meadowlands, NJ): The tide gates include a series of solar-powered sensors that allow managers to monitor performance during storms. The data is posted in real-time so citizens can receive text and email alerts when there’s immediate flood danger. This connectivity is reflective of a broader trend towards open, and usable, data in infrastructure and other essential city services.

The coastal cities that are taking action are generally doing so because they are experiencing real, tangible impacts of coastal flooding today, and they are aware that those problems are going to get worse in the future. In these cities, floods are costing businesses now; they’re increasing insurance prices now; they’re affecting home prices now. These cities don’t have the luxury of discriminating between green and grey solutions. They need the solution that is best for their community. Rightfully so, these cities are focused on outcomes: How many homes will this solution protect, and from what size storms? How much will it cost?

The cities and states that pursued the projects listed above have taken tangible action to mitigate coastal risks. Why have they moved forward, when so many others are failing? Capturing their success factors is important in helping other cities replicate these coastal innovations, both green and grey, in their own communities. Here are some of the factors that may have allowed these projects to move forward:

  1. Solved an urgent problem (while keeping an eye on the future)
  2. Prescribed desired outcomes, not specific technology intervention(s)
  3. Empowered a project champion
  4. Engaged broadly with their communities, with both the public and private sectors

 

In a lot of cases, the factors listed above are proxies for political will. For example, when a project solves a pressing problem that matters to citizens, elected officials are likely to enthusiastically support the project. And when there’s political will, projects tend to move forward when they otherwise would not.

We’ve listed a few success factors, but this is certainly not a comprehensive list. There are  many important factors that move coastal protection projects forward from initial design to construction and operation. Are there any coastal protection projects you’ve come across recently that inspire you?

This content was originally posted on Meeting of the Minds: http://meetingoftheminds.org/blog.

Why procurement matters & What cities can do about it

It’s Infrastructure Week, and everyone is saying that it’s #timetobuild. We agree! The next 5-10 years offer a once-in-a-generation opportunity for hundreds of US cities to upgrade to the smarter, cleaner and greener systems their citizens want and expect. To buy these different things, cities need to be able to buy things differently. So, let’s talk about procurement! Below are some of the creative ways cities can improve procurement processes to achieve better outcomes for their communities.

Image credit: Scottie Public Affairs

Working with cities can be hard. In part, it’s because cities are, rightly, risk averse, and have no opportunity to swing and miss. This is compounded by the fact that many of the most innovative urban solutions come from engineering, infrastructure, and social technology startups that don’t have the capacity or resources to identify and connect with the cities that need their solutions the most. Even when a city knows what they want and how to ask for it, public procurement processes are often biased against new, cross-cutting solutions.

To buy different things, cities need to be able to buy things differently.

Every day, cities fail to leapfrog to modern, smart, sustainable, and resilient infrastructure, while innovative urban solutions simultaneously struggle to scale. This is a problem we need to (and can) solve by prioritizing procurement innovation. To make procurement work well, we need three things:

  1. Knowledgeable and demanding buyers (cities, counties, utilities),
  2. Capable sellers (engineering and technology firms), and
  3. An efficient system that connects the two.

City leaders can’t achieve all three on their own, but below are some examples of how cities can jumpstart procurement to achieve better results for their citizens:

Ask for Help: Challenges and Requests for Information (RFI) work best when cities define challenging, cross-sector problems to solve, without prescribing solutions. Challenges and RFIs signal that the city issuing them is an engaged and committed public partner, and this motivates innovative suppliers to deliver integrated solutions tailored to city needs. These types of open calls or contests can significantly expand the range of bids, and because they have lower barriers to entry are particularly attractive for small and medium enterprises (SMEs) and startups. Cities should consider copying Boston’s wicked cool RFI asking citizens and startups to come up with solutions (ps. note the focus on shifting away from pilot projects and toward full-scale, deployable initiatives!), or Philadelphia’s FastFWD, a new kind of local business accelerator designed to create a pathway for new players to bid on city work.

Be Transparent: As the City of Austin’s Ted Lehr recently said, “pitches [to cities] for…emerging technologies are often lost in translation.” Solving that problem falls primarily on solution provider’s marketing and business development professionals, but there are some things cities can do to help. The most important thing cities can do to help is transparency. Open data, open planning sessions, open bidding conferences – all can help startups and other companies better understand how, when, and where cities can and want to connect with companies about solutions.

Make Things Simple: Public procurement rules were designed to protect taxpayer dollars from getting spent unwisely. But when rules and regulations are regularly causing delays and keeping cities from innovating, then they need to be revisited. One step is to ensure that pre-qualifying requirements are achievable by early stage or small businesses. For example, when bidding for public sector contracts companies in São Paulo only need to display their tax compliance at the time of bidding to pre-qualify for the contract. US cities, often constrained by state and federal rules, should look to São Paulo and other international peers for models they can use within their respective boxes while petitioning states for more flexibility.

Get the Word Out: There has been a positive trend in cities towards eProcurement, which ensures all procurement opportunities are visible online through a single portal. This has been great for buying regularly used products and services –like printers and plumbers– but existing eProcurement systems are not well designed for buying big infrastructure solutions. That is because procuring systems (not widgets) is extremely complicated, and building systems right requires the right partner(s). You wouldn’t shop for your house through Costco, right? To leverage the efficiency of eProcurement for infrastructure, city departments should engage their procurement officials – along with engineering and infrastructure technology companies – sooner rather than later. Whenever possible, cities should also advertise upcoming RFPs well in advance of when they are issued, which ensures the best bids. Taking both of these steps helped Australia realize 20% savings on individual project costs.

Level the Playing Field: Changing proposal or bid evaluation can help ensure that all firms start on equal footing, regardless of whether they are big, small, new, or old. For example, Total Cost of Ownership – a strategy employed by the private sector for years – enables cities to prioritize sustainable and long-term cost savings strategies over short-term benefits and the lowest price. Along the same lines, cities should consider following Kansas City’s lead and establish a Sustainable Procurement Ordinance that leverages the planning and design tool Envision, and applies equally to both products and services.

And of course, we think all cities should join the Atlas, because our goal is to inspire cities about how they can creatively solve their most pressing infrastructure challenges, and to provide the actionable information needed to pursue those solutions. For example, we’re working to capture the specific language a city used in its procurement documents to get an innovative project built (e.g. what does an RFP look like for a stormwater harvesting and direct use project? Or for an advanced energy storage microgrid?).

Working with cities is hard, but it doesn’t have to be. And to ensure that cities can upgrade to the systems communities want and demand, it can’t be any longer. That is why procurement matters.

Cities aka Laboratories of Innovation

When Mayor Roberts from Charlotte, North Carolina said today, “let cities be cities…the laboratories of innovation!” we almost jumped out of our seats cheering. Cities are creatively addressing our nation’s most important problems: inequality, mobility, climate change. This is especially impressive when you consider that cities don’t have much—if any—room to fail, and experts agree that ability to experiment is a key driver of innovation. Can you imagine a mayor explaining to her constituents that a day-long disruption of an important city service, say a mass-transit line, was because the city was experimenting with a new technology to streamline payment and collect ridership data? Of course not. That’s because all day and every day, cities provide essential services like clean water, efficient transportation, and emergency services, and citizens are rightfully outraged when there’s a disruption or degradation of one of these city services that impacts their daily lives.

For many cities, it’s a challenge to balance the need to consistently deliver essential services with fostering a culture of experimentation, improvement and innovation.

Today, as a part of Infrastructure Week, Bloomberg Live brought together mayors from six cities in the United States that are truly leading the way towards making our cities smarter, stronger and more sustainable. In each of their cities, they’ve figured out ways to foster cultures of innovation, despite not having much room for failure. Their wide-ranging conversation included a discussion of innovation and the role of experimentation in their cities. Here are some of the thoughts we found particularly insightful:

Mayor Muriel Bowser (Washington, D.C.) stressed that citizens—especially millennials—want to live in cities that are constantly improving and changing for the better.

Mayor Jon Mitchell (New Bedford, MA) explained that they are creating an “ethos of innovation.” He explained that as a historically industrial city, it is especially important to be seen as a test bed for new ideas and technologies.

Mayor Andrew Ginther (Columbus, OH) pointed to the importance of partnering with local universities and discussed their successful partnership with Ohio State University on neighborhood revitalization efforts.

Mayor Jennifer Roberts (Charlotte, NC) had the group laughing when she jokingly suggested calling everything a “pilot.” In all seriousness though, she explained the importance of using pilot projects to help avoid the fear of rapid change, and of making sure not to leave low-income neighborhoods out if they want to participate.

Mayor Michael Hancock (Denver, CO) discussed the importance of smart cities data and how that data can be used to understand project impacts and communicate those impacts to communities.

Mayor Megan Barry (Nashville, TN) flipped an old saying on its head when she said she’s fostering a culture of “Yes in My Backyard.” She stressed how important it is to get to yes – whether that’s for mixed income neighborhoods or diverse schools.

These mayors lead cities that are shining examples of the power technology has to address some of the toughest, most complicated problems out there, and we can’t wait to learn more from them about specific ways cities can encourage innovation as Infrastructure Week continues.

For those of you who work for or with cities: do you think cities need the ability to experiment in order to creatively solve problems? How can we make sure that cities are learning from the cities that are the first (or second, third) to experiment with a particular solution? In our minds, streamlining city-to-city learning is key to scaling and replicating the best, most innovative solutions.

 

Innovative Financing & The Myth of the Shovel-Ready Project

Content originally written for and posted on Meeting of the Minds.

With every new Administration in Washington there are always sweeping promises about improving the nation’s infrastructure. Since the last recession, these promises have become inextricably linked with talk about mobilizing private finance.

In 2009, after the immediate impacts of the recession abated, it was clear that cities, dependent on tax income, were going to be cash strapped for years to come. Which means while our infrastructure was getting worse, the money to fix it or upgrade it was getting harder and harder to find. This jumpstarted a national conversation—led by pension funds, environmental and social responsibility divisions at big banks, and impact investors—about how private capital could fill the public financing gap through instruments like P3s, Green Bonds, Social Impact Bonds. While there have been a handful of one-off examples and exciting new models, nearly a decade of talk about financing has not translated into substantially larger or speedier private investments in infrastructure.

Why? Because the mantra “if you build it, they will come” unfortunately doesn’t translate to infrastructure. More often, if you built it right, no one will notice.

The highest value infrastructure investments for cities today are those that help clear the massive backlog of deferred maintenance projects, but the greatest value for investors are new greenfield projects that lock-in long-term revenue streams. This mismatch is most evident in the lack of a clear pipeline of financeable infrastructure projects.

Innovative financing doesn’t magically create new projects, let alone a whole pipeline of shovel-ready financeable projects. To understand why, let’s look at a few of the sexier financing tools which get a lot of air time.


Green Bonds
: Green Bonds, like other municipal debt, are tax-exempt issuances specifically earmarked for funding projects, assets, or business activities that have positive environmental and/or climate benefits. In 2016, issuances topped USD 50 billion by September (nearly 5x the 2013 issuances supporting everything from brownfield development, to transportation and energy projects). In addition, the number of corporations issuing green bonds has grown significantly in recent years, but most have been used to support corporate finance rather than project finance.

Social Impact Bonds: A Social impact bond (aka Pay for Success Financing or Social Benefit Bond), is tax-exempt municipal debt structured as a contract between private financiers, often philanthropies, and a public-sector agency. Funds are provided to pay for improved social outcomes that result in public sector savings. Investors are only repaid if and when improved social outcomes are achieved.

Payment for Ecosystem Services: PES contracts are most often structured as legal agreements whereby a user of an ecosystem service makes a payment to an individual or community whose practices, like land use or deforestation, directly affects the value of that ecosystem services.  Because payments are based on the quantity of services provided, ecosystem service programs must concretely measure the ecosystem benefits generated, which can be a difficult task. These schemes work best when private companies, public-sector agencies, and non-profit organizations collaborate, and have most often been used internationally to support corporate social responsibility agendas.

All three of these innovative finance tools have one thing in common: each one requires projects that are already designed, quantified, and valued. This means that public entities have had to invest up-front in designing a project to generate savings that can be attributed to a specific entity. Therefore, a city must have collected significant baseline data upfront, made sure that they can measure changes in that data across the lifetime of the investment, and committed that they have the capacity to capture those savings as payment commitments under contractual agreements. All of which can be a burden for big cities, let alone many of the small and midsize or rural communities across the country that are often both cash- and data-poor.

In all of these cases the biggest barrier to expanding innovative finance for infrastructure is the lack of funding available to design and develop strong infrastructure project proposals, not to build them. So, what can we, do to hasten the development of the project pipeline?  The first step is making it easier for cities to design new and innovative projects that tackle real problems, like upgrading aging and failing combined sewer systems, not just creating ribbon cutting opportunities.

Often being innovative for a city means being the second or third to do something. So, making sure successful projects are searchable and replicable is key.  The Atlas Marketplace has started to do that by capturing information about the people, policies, financing schemes, and procurement documents that got projects built.

The second step is improving project predevelopment starting at the ideation and design phase. Instead of relying solely on long-term capital improvement plans that respond to historic needs, cities should work to identify cross-sector opportunities that can create savings that up new opportunities. Like laying rentable dark fiber every time a road is repaved, or upgrading water infrastructure to reduce the costs of mudslides. This works best when cities engage early with financiers and engineers to unearth opportunities by issuing challenges or broad requests for ideas.

Finally, building local capacity is essential. There is a big difference between the type of data that governments need to support investment and the type of data private financiers need to support investment. Being clear about that and not conflating the two will go a long way in closing the gap between projects and money.

While it’s fun to talk about innovative financing, it’s time we change the conversation. Moving forward let’s focus on building a pipeline of innovative projects that opens the door for private financing. Because if we build it to make money, the private investors will most definitely come.

P3s are great, we want P3s! But what about…?

Last week, we proposed rethinking public-private partnerships (P3s). Instead of closing a financing gap, P3s should fill a project execution gap. This change in perspective can better align incentives upfront and address the fundamental fact that public and private partners have different priorities.

Today, we’re taking a closer look at the issues cited as top barriers to traditional P3s: political risk, payments, and responsibilities. Lack of clarity for any of these three issues will exacerbate differences and drive a wedge between partners when project financing, rather the project delivery, is the goal. Let’s dive into each area of concern, and consider how a focus on execution rather than financing could lead to more successful public-private-partnership.

 Political Risk: Traditionally in the US, P3s are developed after the project scale and scope has been established, and the project has become so big, complex and/or long-term that it cannot be entirely financed on a city’s balance sheet. These types of expensive, complicated, and long-term projects leave public and private partners exposed to all sorts of non-market risk — not the least of which is politicians changing their minds or being voted out of office mid-project. In traditional financing-focused P3s, changing political dynamics can doom an entire project. But if a P3 is designed for execution rather than just financing, then private partners are involved in troubleshooting and negotiations from the beginning, not just once it’s clear the money will be hard to find. That early engagement between public and private partners builds trust in a city’s staff and institutions, beyond individual elected leader(s) — which is key to ameliorating political risk. In addition, early engagement means all parties are driving towards and end goal that is focused on addressing local needs, not just on financing a solution. Some cities are already encouraging early engagement and participation with private partners through broader use of competitions and Requests for Information.

 Payments: Quality cash flows are one of the greatest risks for any public-private-partnership. Many public infrastructure deals have failed or been slammed by citizens because real cash flows end up being very different than were predicted. The Indiana Toll Road is just one of several P3s that filed for bankruptcy after revenue came in much lower than projected. On the other hand, Chicago’s 2008 parking meter deal with Morgan Stanley caused a citizen uproar when the city’s inspector general concluded, a year later, that it had undersold the rights by about $1 billion, forfeiting an important source of revenue for the City. When a project is designed from the start to focus on service delivery instead of solely on financing, there is often opportunity to uncover non-traditional funding sources. The same is true when designing a P3. When private partners are at the table to start, more creative work can be done to clearly identify and quantify a range of potential payback streams. Having private partners help design, verify, and securitize cash flows results in a better deal for the city, the developer(s) and the investor(s). That’s why availability-payment projects, which are focused on service delivery and often require earlier engagement by private partners, are often more successful and growing in popularity compared to revenue-backed P3s.

 Responsibilities: Designating a single entity — or at least a very clearly defined process — responsible for capturing, aggregating, and monetizing direct and indirect revenues is key to successful P3s. The easiest way to clearly define these responsibilities is through a contract between the city, the developer(s) and the investor(s) that allocates risk among the partners by defining sources of revenues, scope of work and payment terms, goals, and bonuses. A P3 focused on execution rather than financing helps define these lines more clearly so each partner can focus on what it does best. Government would set goals and standards to protect health and safety. Developers and investors would set targets, build and manage cost efficient systems. Government organized P3 offices have been used to successfully execute these arrangements internationally in Canada and Australia, and at the state-level domestically in Virginia, California, and Michigan. P3 offices provide the technical support public agencies need to coordinate public and private partners. These offices are effective because they steer governments towards projects that can thrive with P3s and help with upfront planning, and structuring using their in-house financial expertise.

P3s are an effort to make building and maintaining big-dollar, complicated, long-term infrastructure projects more efficient and affordable. P3s are complicated. There will always be questions about political risk, payments, and responsibilities. But well-conceived P3s — those focused on project delivery instead of financing — can effectively align incentives and address risks for all partners upfront. Not only can these well-conceived P3s save taxpayer money and reduce burden on local governments, they can also result in better service delivery for residents and maximize the social benefits of a project.

For example, the City and County of Honolulu partnered with Covanta on the H-Power waste-to-energy plant with the goal of eliminating landfills from the island while creating a sustainable energy source. Since its initial completion in 1993, the plant has not only consistently met or exceeded environmental permits and invested in innovation, it has also generated more than $201 million in revenues for the City, which has more than covered the costs of operation. More and more, we are also seeing examples of startups and other technology firms developing exciting P3s with cities to upgrade infrastructure systems.

Next in this series, we’ll explore various examples of successful execution focused P3s — from the traditional to the more exotic.