The following are key elements of a financial strategy for sustainable infrastructure:

Asset Management

• Asset management systems and processes accurately value infrastructure assets, including depreciation and lifetime replacement costs. This information is critical to an efficient, cost effective infrastructure planning approach. It integrates financial and technical aspects and supports sustainability objectives. This delivers maximum value per invested dollar.
• Triple Bottom Line analysis is an emerging and valuable methodology that takes into account not only capital and operating costs but full life cycle costs and benefits, social costs and benefits, and environmental costs and benefits. 
  • For example, as part of its asset management program, Seattle requires a triple bottom line analysis of new projects so it can compare the net present value of multiple project options.

Internal Funding Allocation

• Getting budget approval for sustainability initiatives can be challenging. Some cities and counties allocate a percentage of budgets to initiatives that help meet targets, such as energy efficiency or use of renewable energy. This approach provides a consistent basis on which to move forward.
  • For example, Albuquerque originally allocated 1 percent of its capital improvement fund to sustainable projects that would pay for themselves within 10 years. This was later increased to 3 percent, and the payback criteria were relaxed so that investments need only to pay for themselves within the equipment lifetime. The focus was also expanded to support sustainability targets.

Federal, State and Utility Grants and Partnerships

• Local governments can look for ways to maximize leverage from grants and other funding programs.
• Many low-interest loans and rebate programs are available for renewable-energy and energy-efficient projects.

Alternative Financial Models

• Consider alternative financing models (such as public-private partnerships, or P3s) when there is a good business case.
• P3s should be evaluated on a net present value (NPV) basis.  They need to consider revenues, capital costs, operating costs quantitatively, and risk transfer and other public benefits in a qualitative manner.
• The NPV of a P3 needs to be evaluated against the NPV of obtaining the equivalent product or service through more traditional means.  The analysis of the more traditional procurement method is often called a “Public Sector Comparator.”
• One major benefit of a P3 is its ability to manage and control “scope creep” and obtain contractor/operator innovation.
• P3s work best when the scope of work includes design, construction and operation. Including the operating component ensures  that designs and construction have considered the full life cycle costing approach.   
• Often, especially in smaller public-sector organizations, the cost to operate a facility such as a small wastewater treatment plant will be higher for local government than it is for the private sector, which can manage several facilities from a central location.
• The biggest hurdle for most P3s is that savings achieved from private sector innovation and managing scope creep must exceed the typically higher cost of capital and the private sector’s required profit return.
• It doesn’t pay to transfer risk to a concessionaire that local government can’t manage.  Example: Making a concessionaire take on risk over revenues associated with demand or use of a facility will likely cost more (because of the concessionaire’s reserves to cover risk) than if the owner retains the risk. 
• There must be the right balance of private-sector investment at risk (i.e.: to be paid back through performance measurement during the operating period) and public-sector investment at a lower cost of capital.   

End-User Incentives and Financing

These are some of the tools and strategies that can be used:

• Incentives to encourage conservation and market adoption of desirable new technologies.
• Utility rebate programs.
• Financial incentives and grants, from the federal, state or local government or a private utility. 
  • For example, the Sacramento Municipal Utility District PV Pioneer program provided customers a reduced-cost photovoltaic system and allows them to receive the retail price for any net excess electricity generated by their systems.
  • The local government can act as an information broker to inform users about available funding and incentive programs.
• Net metering. Local governments can work with electricity providers so that people who generate power on their own land can sell energy back to the grid in periods in which they produce more than they use, helping to off-set capital costs.