Innovative Revenue Sources Can Help Communities Along the Mississippi River Finance Natural Infrastructure and Adapt to Climate Change

(RALEIGH, NC) The Mississippi River basin — which provides 20 million people with drinking water, supports 65% of U.S. harvested cropland and supports more than a million jobs — is imperiled by two related challenges: poor water quality and increasing periods of droughts and floods. Climate change, which often brings more extreme weather and heavier rainfall, is exacerbating both issues.

By restoring wetlands and floodplains and deploying other natural infrastructure solutions, municipalities in the river basin can protect drinking water and reduce flood risk. Natural infrastructure solutions have historically been difficult to finance through public loan programs like the Clean Water State Revolving Fund due to a lack of dependable revenue sources.

A new report from Environmental Defense Fund and Quantified Ventures — Generating revenue to finance natural infrastructure projects in the Mississippi River Basin — provides states, cities, towns and watershed groups five replicable ways to generate revenue and support natural infrastructure projects.

“Directing greater capital to natural infrastructure solutions is critical to protect communities against flooding and water quality degradation,” said Vincent Gauthier, manager for climate-smart agriculture at Environmental Defense Fund. “Establishing replicable revenue sources tailored to upstream natural infrastructure investments can help rural and urban communities collaborate to achieve clean water and climate resilience.”

“This report provides pathways to efficiently deploy natural infrastructure to achieve more equitable and resilient solutions to water quality and quantity risks facing millions of Americans,” said Tee Thomas, director of environment and resilience at Quantified Ventures. “The influx of dollars for public infrastructure and State Revolving Funds highlights the urgent need to build the pipeline of financeable non-point source projects with viable repayment streams to meet community water needs through a blend of natural and gray infrastructure.”

The report details five ways to finance natural infrastructure:

1. Municipal-agricultural watershed partnerships: These collaborations between municipalities, farmers and watershed organizations promote cost-efficient upstream water quality and quantity solutions by using drinking water and wastewater fees to pay farmers for agricultural best management practices and edge of field natural infrastructure.
2. Stormwater utility funds: Stormwater utilities fees can be used as revenue to repay loans for natural infrastructure investments by generating funds specific to stormwater management improvements such as green stormwater infrastructure.
3. Source water protection fees: These fees are surcharges to customers’ water bills that are used to protect source water quality and quantity. These fees can be used as a revenue stream to repay financing for natural infrastructure projects that contribute to source water protection.
4. Interim financing grant/loan mix: This financing mechanism turns the traditional use of grants for conservation work into revenue for loan repayment — allowing municipalities and their watershed partners to secure upfront investments for time-sensitive natural infrastructure opportunities while identifying additional sufficient grants to repay the loan.
5. Environmental markets: Outcomes from natural infrastructure projects that generate measurable, verifiable environmental improvements can be sold to an entity via environmental markets. The revenue generated from selling environmental outcomes can be used to repay financing for natural infrastructure projects.

Download the full report at edf.org/NIFinanceReport.