Environmental Finance

For more than two years, the University System of Maryland has operated an Environmental Finance Center, part of the Coastal and Environmental Policy Program (CEPP) now housed at the Maryland Sea Grant. The Center puts on conferences and roundtables in order to attract creative thinking from financial experts, planners and others.

At the First Annual Mid-Atlantic Conference on Environmental Finance, sponsored by the Environmental Finance Center and supported by the Environmental Protection Agency, financial creativity was not lacking. Financial advisors like Scott Resnick, founder of Commonwealth Development Associates, spoke of "slicing and dicing," and other funding techniques normally considered the purview of Wall Street. Resnick pointed toward the use of structured municipal bonds that could differentiate risk and result in lower interest rates. These approaches could be used by small entities that do not normally take advantage of such techniques.

Michael Curley, a private investment banker and a member of the EPA's independent Environmental Finance Advisory Board, asked the audience to consider all the small waterworks around the country, all funded on a small-time basis, paying not-so-great rates to their local banks. These waterworks, he found, were on the whole extremely reliable investments, yet, he said, only about 5,000 of 60,000 nationwide have investment grade ratings. "They have simply been overlooked," says Curley.

"Why not," suggests Curley, "have many of these water systems join together, to share a common bond?" With waterworks from all over the country pooling their resources, he points out, they could negotiate large, long-term bonds at good rates. The savings on their debt service alone would cover anticipated costs for breakdowns or other predictable problems. "I estimate an immediate cost savings of twenty-five percent on the debt service," Curley says, "and it hasn't cost the rate payer a thing."

There are, Curley points out, some snags. Many states do not allow dealings of this type across state lines, or in some cases across county lines. Laws would have to be changed to make this work. But he asked the audience to consider the potential.

The Environmental Finance Center plans additional meetings and programs. For more information, contact Dan Nees at Maryland Sea Grant, (301) 405-7500.

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This page was last modified November 09, 2005

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