‘Pay for Success’ Model Will Help Fund Baltimore’s Stormwater Projects

The Baltimore City Department of Public Works (DPW) and the Chesapeake Bay Foundation (CBF) announced today a new strategy for improving neighborhoods and reducing water pollution. Baltimore will work with CBF to create innovative Environmental Impact Bonds (EIB) to help pay for more than 90 of DPW’s stormwater management projects planned throughout the city.

Baltimore will issue up to $6.2 million worth of EIB financing, first time they’ve been used in Maryland. The city’s repayment of the bonds would be based on the effectiveness of the projects.

“I’m proud that DPW is at the forefront of a creative, results-oriented approach to funding projects that improve the health and beauty of our communities,” said Mayor Catherine E. Pugh. “We need to explore new ways of paying for investment in our cities.”

Working with CBF and Washington, D.C.-based investment advisory firm Quantified Ventures, Baltimore will use EIBs to help fund construction of “green infrastructure” projects in dozens of neighborhoods. These strategically-placed stormwater projects replace hard, paved surfaces with plants, trees, and green spaces to soak up and filter polluted runoff before it reaches streams and the Harbor.

“These green infrastructure projects will change Baltimore for the better, and this new funding tool will help us diversify our financing portfolio,” said DPW Director Rudy S. Chow, P.E. “We need to always be mindful of affordability while building infrastructure that will last for generations.”

The key feature of the initiative will be its “pay for success” feature. Traditionally, local governments pay contractors to build the gardens, and that is the end of it. With EIBs, investment is recouped with interest, depending on the level of achievement of specified social or environmental indicators.

“Results matter. Local governments want a solution to this thorny problem of polluted runoff, but they also want to spend tax dollars wisely,” said CBF President Will Baker. “The use of this unique instrument for private investment offers better insurance that this expensive work will result in cleaner water, and the achievement of other community benefits in cities and towns.” 

In all, Baltimore is required by state and federal law to reduce and treat polluted runoff on more than 4,000 acres. The projects partially funded through EIBs are an important step.