How to finance smart infrastructure for cities and counties

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WASHINGTON — Counties and cities, still waiting for signs of a federal commitment to infrastructure, are looking beyond the issuance of general obligation bonds and conduit bonds to finance resilient, environmentally sustainable projects.

“We’re not going to be able to spend our way out of our infrastructure crisis,” Matthew Chase, executive director and CEO of the National Association of Counties, said Tuesday at an Infrastructure Week forum. “We’re going to have to be smart about it.”

NaCo co-hosted a smart cities forum with the National League of Cities at which officials continued to hammer their longstanding message that the federal government needs to be their partner in future investments.

Clarence Anthony, executive director and CEO of the National League of Cities, said cities “have stepped up to do things with public-private partners and minimal investment on the federal level.”

Cities still need a federal partner, said Anthony and Chase, but smart technology has become important as well.

They also talked about how communities are looking for private investment as a supplement.

Chase gave disaster resilience as an example. Last year more than 830 counties, or about 20% of the counties in the U.S., had a presidential disaster declaration.

The federal government spent about $140 billion to help with disaster recovery, which Chase described as not sustainable.

“We have to be smart about how we build our communities, how we build our infrastructure and to make sure we are resilient,” Chase said.

Communities that have reached their debt capacity or that risk credit rating downgrade if they take on new debt can attract private investors who are focused on energy savings solutions and ways to address climate change.

Robert Johnson, senior vice president of Hannon Armstrong Securities, said his publicly traded firm engages in contracts with communities that can be credit neutral.

His firm’s focus is on three “Ds” — decarbonization, decentralizing energy production and digitization.

Hannon Armstrong has 2.8 gigawatts of wind energy connected to the electrical grid. Its investments include a facility at Paris Island, North Carolina, which produces a combination of solar and co-generation energy with a battery storage facility.

ESG investors who are focused on environmental, social and governance issues want resilience.

Thirty three percent of a local government’s carbon footprint reduction can be done through building improvements, which typically begin with new lighting, according to Lisa Brown, national senior director for Local Government and Municipal Infrastructure at Johnson Controls.

The challenge for a community is to show how its energy-saving project or resiliency improvements will provide a long-term return to investors.

Christopher Rezendes, chief business officer of SphericalAnalytics, said his challenge is often to get capitalists, innovators, entrepreneurs and public administrators and elected officials together.

“Show me not just the IRR, or return on invested capital, but show me how making this investment I’m not going to take $30 million or $300 million and suffer the same fate as my friends who invested in infrastructure bonds in transportation that some city in the Gulf Coast are suffering,” Rezendes said. “Nobody wants to repeat the sins of the last lost dollar.”

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