As the coronavirus pandemic continues to devastate the U.S. economy. And from the U.S., state and local governments are impacting revenue. As a result, many cities and towns will have to reduce spending and school systems will suffer. Fortunately, new advances in sustainable investment can cause these cities and towns to seek other tactics to reduce their spending, before they have to fire teachers and reduce educational programs.
It has earned the attention it deserves, but the coronavirus has wreaked significant havoc on the finances of states and local communities. In May, state sales tax revenue fell by 21% in the United States and more than 30% in six states.
When that income falls so hastily, they will have to be compensated elsewhere. Some states and cities would possibly raise taxes, but for the most part, this means spending cuts. Where will those spending cuts come from? Well, some local government facilities are still “essential”: waste will have to be collected and treated, you will have to have water in the tap, etc. And so, inevitably, attention is directed to some other primary domain of spending, education.
As Fitch Ratings said recently, although he claims that municipalities are likely to continue to pay their debts, this is done in charge of “kindergarten to grade 12 spending will continue to be a major stress point for states and school districts.” even darker, stating that “With the country’s attention still focused on COVID-19’s fitness crisis, school leaders warn of a currency crisis that can devastate many districts and push back a total generation of students.”
At a time when schools are likely to want more monetary resources just to keep up with the desired adjustments to deal with a pandemic, pressures on local government spending are intensifying.
Few people need to cut school budgets further. But desires must. After all, even municipal infrastructure projects are recently delayed or canceled anywhere they can. More than 700 U.S. cities They already have. While there is no shortage of municipal bondholders at the moment (although investors are no easier than they were before the COVID-19 crisis), those cities know they can’t borrow more to spend more.
This is where recent advances in sustainable finance can be helpful. Borrowing lessons from rooftop and networked sun markets, some investors are intervening to help cities embrace infrastructure modernization or simply their existing mandates for “essential services” at a lower cost.
How does it work? Well, the genuine (potential) hero is two decades of sustainability inventions around distributed waste solutions and water and wastewater technologies. Innovators and marketers have worked for years to expand responses located in those spaces that are less expensive (at least throughout the system, adding pipes, transportation, etc.) in relation to the prestige quo. And along the way, the explanation of why they are less expensive tends to be that they also require fewer resources and are therefore more sustainable. A win-win for the cities, right?
The challenge is that the adoption of these new responses has forced cities and other local governments to pay in advance (or borrow to do so) to obtain the systems, and then pay municipal staff to function. And it has been difficult, and perhaps in the existing context, for many municipalities.
Enter third-party capital to allow vendors to provide these new responses, and manage them, such as ‘waste/water as a service’. External investors pay for the projects to be built. They pay the staff to run the systems. The village submits a contract to purchase the supply, but at a lower cost than the existing answers, allowing savings from day one. This has already been a trend for large-scale projects, however, many of the load reduction opportunities at the municipal point (particularly for small and medium-sized cities) are on a smaller scale. Now, a new generation of inverters is allowing the same style for smaller, more distributed water and waste control systems.
Savings for each of the localized tasks can be relatively small, consistent with perhaps a few million dollars in savings consistent with the year. For the Aries Clean Energy plant in Linden, New Jersey, to treat wastewater bioformations (disclosure: the one my company is helping to finance), we estimate that nearby cities will save about $2 million a year once the plant is inconsistent. We’re looking for another opportunity with the City of Atlanta, which is looking to outsource its counterfeit biological waste to outside suppliers, saving the city about $3 million a year. The water and waste remedy does not hold headlines. And each of those individual tasks would save a little of the salaries one by one, not complete K-12 art programs… However, those are small individual tasks that can be replicated seamlessly. Imagine if there were dozens more in each region. And now it is possible, with the emergence of third-party capital for such “distributed infrastructure”.
Cities will have to provide essential facilities and are in the midst of a spending crisis that is largely beyond their control. Before turning to children’s schooling to make up for the difference, they deserve these new opportunities for outdoor investors to have funded water charge savings and waste remedies. These savings can be charged and can make a big difference.
I have been a fair investor in sustainable resources since 2004, and have served as a director, observer and board member of several corporations in
I have been an equity investor in sustainable resources since 2004, and have served or served as a director, observer and advisory board member of several power generation companies and the like sector. The reviews here are not public and are investment advice.