Though rarely seen by human eyes, the White Creek Wind Project in south-central Washington state has been getting some well-deserved attention for providing clean, renewable energy to the region. Hidden from the Columbia River Gorge by rocky bluffs and rolling hills, 89 wind turbines are quietly producing enough electricity to power more than 38,000 homes.

The project is the brainchild of four local utilities: Lakeview Light and Power, Tanner Electric Cooperative, the Klickitat County Public Utility District, and the Cowlitz County PUD. To finance the wind project, the public utilities partnered with private firms Meridian Investments, Lehman Brothers, and affiliates of Prudential Capital Group.

Completed in April, the project has been a win-win for everyone involved. The private partners benefit from the production tax credits associated with the project, and the public partners benefit by being able to use tax-exempt debt to prepay a long-term power purchase agreement.

Five years ago, the intersection between public finance and environmental protection was not so clear. But now, with the confluence of national political shifts, natural disasters like the Asian tsunami and Hurricane Katrina, rising gas prices, and mounting evidence of the long-term impacts of climate change, the market has begun to recognize the value of sustainable projects - and the environmental risk of continuing business as usual.

While the development of major renewable energy projects has generated much interest among public entities, the number of these projects has been somewhat limited. This is not due to lack of interest, but rather to a relative dearth of financial incentives. Because public entities cannot take advantage of the tax-credit incentives offered by the federal government for renewable energy development, most of the lucrative, early-stage development has been left to private developers.

The White Creek Wind Project's roots in public power are unusual in that the project was made possible by the public-private partnership structure. White Creek was the first major renewable energy project in the Northwest to be developed by public entities, and now other PUDs and electric cooperatives are looking to it as a model for future renewable energy development financings.

Renewable energy development represents one facet of the "green wind" that is sweeping through public entities and municipalities. Driven by an increasingly environmentally aware public and the landslide of data focusing on responses to climate change, more and more municipalities and public entities are choosing to go green in their capital projects.

Across the country, energy-efficient public buildings, greenhouse gas reduction strategies, transit-oriented development, land-use planning, renewable fuel standards, and land conservation are popping up as priorities for cities, counties, schools, and ports. These new priorities for public entities require a new way of doing business for the banks, asset managers, and advisers that work with them. The question now is this: As an industry, how do we best serve these entities in their green endeavors?

One potential response is to take advantage of public-private partnerships and the financing incentives that accompany them. P3s offer a way for both parties to capitalize on the low-cost financing incentives that contribute to the economics of a green development project. Namely, they create an opportunity to use tax credits and tax-exempt bond financing to fund capital costs.

A great example of this is the successful public-private partnership in green development that spearheaded the Civic Redevelopment project in Portland, Ore. Gerding Edlen Development partnered with the Portland Housing Authority to transform the old Civic Apartments into a mixed-used project with a condo tower, low-rise affordable housing, and retail shops.

The project integrated enhanced public spaces, energy-efficient building techniques, and a variety of stormwater management technologies - including courtyard bioswales, a 20,000-square-foot eco-roof, and a second-floor planted terrace. The affordable housing component of the project is LEED Gold-certified, making it one of the most environmentally sustainable affordable-housing buildings in the United States.

As the underwriter and placement agent on the Civic Apartments deal, Seattle-Northwest Securities structured the financing to take advantage of multiple funding sources to pay for the $21.6 million affordable housing component of the project. They included $8 million in permanent financing, $8.2 million in low-income housing tax credit equity, $4.1 million in subordinate debt from the Portland Development Commission and the Portland Housing Authority, $995,000 in a deferred developer fee, and $150,000 in business energy tax credits.

US Bank and Apollo Housing Capital were involved as the new markets tax credit and housing tax credit investors, respectively. The transaction had several components, all required to close simultaneously in conjunction with a traditional construction loan provided by JPMorgan for the market-rate condos. Many of the market-rate units sold quickly - with no advertising beyond a sign posted at the construction site - due to the appeal of a green building, an urban location across the street from a light-rail station, and thoughtful design.

As municipalities and other public entities increasingly move away from their dependence on fossil fuels toward a more sustainable energy future, this shift in energy use offers public finance firms a unique opportunity to get behind the green wind sweeping through the public sector and capitalize on public-private partnerships.

Today, efforts to find the nexus between public finance and environmental sustainability represent a small but rapidly growing opportunity for public finance firms to delve into a virtually uncontested market space. As the public becomes ever more environmentally aware, it is pushing legislators to do their part by mandating legislation for green public development. Now it's up to us to figure out how to finance these initiatives.

Ann Grodnik is an assistant vice president in public finance at Seattle-Northwest Securities. SNW hosted its sixth annual municipal finance conference, "Financing Sustainable Development in a Volatile Market," in Seattle on April 29.