DC Water Environmental Impact Bond

Last updated Thursday, December 7, 2017

Quick Facts

Current Phase
Issue Area
Service Period
Project Scope
Implementation Start

Due to a combined sewer system, an estimated 2 billion gallons of sewage overflows into the Chesapeake Bay Watershed from heavy participation annually. While the initial solution was a tunnel system designed to capture the combined sewer overflow, green infrastructure (e.g. raingardens, permeable pavement, green roofs, and rain barrels) has recently become a viable alternative.  Thus the DC Water and Sewer Authority issued an Environmental Impact Bond to fund the initial green infrastructure project in its DC Clean Rivers Project, which will aim to control stormwater runoff and improve the District's water quality. This will be done through the green infrastructure soaking up precipitation and slowly releasing it into the sewer system over time to prevent system overload. The terms are a $25 million, tax-exempt bond with a service delivery term of 4.5 years. In addition, green infrastructure will bring about other benefits such as sustainable green jobs, more appealing aesthetics, and healthier communities.


  • Market Overview

    • Year Launched
    • Service Delivery Term (Years)
    • Motivation for Project
      When the DC sewer system receives too much stormwater and overflows, a combination of the stormwater and sewage bypasses treatment plants, allowing wastewater to flow directly into local rivers and causing water quality and environmental issues for residents.
    • Project Objective(s)
      Control stormwater runoff and improve the District's water quality by reducing the incidence and volume of combined sewer overflows that pollute the District's waterways
    • Individuals Served
      Not applicable
    • Geography
      Washington, DC
    • Issue Area
    • Initial Investment ($ millions) [Note 2]
    • [2] This category captures the initial private investment raised to support the project that has the potential to be repaid if the project achieves its pre-determined outcomes. Many projects, particularly those in the supportive housing and health arenas, leverage existing public resources, such as subsidized housing and health insurance, to achieve program impact; the value of these resources is not included in these dollar values but are discussed in more detail in Sections 7, 8 and 9 of this report.
  • Project Partners

    • Service Provider(s) [Note 1]
      Anchor Construction
    • Payor(s) [Note 2]
      DC Water
    • Transaction Coordinator(s) [Note 3]
      Quantified Ventures
    • Evaluator [Note 4]
      DC Water
    • Validator [Note 5]
      DC Water
    • Project Manager [Note 6]
      DC Water
    • External Legal Counsel [Note 7]
      Squire Patton Boggs LLP; Orrick, Herrington & Sutcliffe LLP
    • Technical Assistance Provider(s) [Note 8]
      Government Performance Lab; Public Financial Management, Inc.
    • [1] Delivers program interventions to target population over the course of the PFS contract
    • [2] Makes payments when pre-determined outcomes have been met
    • [3]Roles and responsibilities may include: design and structure of PFS project and financing model; capital raise; stakeholder management; on-going performance management
    • [4] Design and implement plan for determining whether outcomes have been met
    • [5] Verify accuracy of data used in evaluation plan, or evaluation plan itself
    • [6] Intermediary during service delivery phase, and/or fiscal sponsor for project funds
    • [7] Provide assistance in drafting, reviewing and negotiating PFS contracts
    • [8] Provide support and expertise to project stakeholders in the project development and/or project implementation phases
  • Evidence and Program Design

    • Service Intervention(s) Model and/or Type
      Green Infrastructure
    • Evidence base for intervention
      Monte Carlo simulation using water-modeling software, with data from previous GI interventions coupled with DC specific environmental conditions
    • Has effectiveness of the intervention for PFS project target population been evaluated?
    • Has the service provider provided this intervention previously?
    • Is PFS project: Scaling an existing intervention by replicating at a larger scale? Demonstrating the effect of a new program model or combination of services? Transplanting an existing intervention(s) to a new target population and/or service delivery setting?
  • Evaluation

    • Evaluation Design Methodology
      Pre-test/post-test design
    • Data Source(s) for Evaluation
      Service provider
    • Outcomes Tied to Success Payments
      1) Runoff reduction
    • Outcomes Tracked, Not Tied to Success Payments
      Percentage of new jobs created that are filled by District residents
    • Length of Evaluation Period
      1 year
  • Service Provider Characteristics and Service Delivery

    • Single or multiple service providers?
    • Service provider type(s) (nonprofit, government, private)
    • Service provider OR site selection method
      Site determined by terms of EPA consent decree
    • Service Provider Experience with PFS Intervention
      In modifying the EPA Consent Decree to include Green Infrastructure and planning the pilot deployment, DC Water extensively analyzed and tested GI options and ran design challenges with community partners
    • Referral Method for PFS Target Population
    • Did the project have a ramp-up phase? (Y/N; brief description)
      1 year to collect baseline performance data prior to implementation of Green Infrastructure
  • PFS Contracting and Governance

    • Operational Oversight Structure [Note 1]
      Operations Committee includes engineers, service providers, finance team, evaluators, and Quantified Ventures
    • Frequency of meetings and/or reports
    • Executive Oversight Structure [Note 2]
      Executive Committee includes GM, CFO, Chief of Engineering, Quantified Ventures
    • Frequency of meetings
    • Investor role in project governance?
      None, but engaged early in discussions then heavily once draft term sheets produced
    • Frequency of reporting to investors
    • Non-standard Contract Termination Events [Note 3]
    • Appropriations Risk Mitigation Strategy [Note 4]
    • [1] Committee or working group involved in regular and/or day-to-day monitoring of project progress
    • [2] Oversight and decision-making body for PFS project
    • [3] Events that allow stakeholders to exit their contractual obligations, beyond those typically found in loan agreements and contracts
    • [4] Means by which to mitigate risk that funding is not available for investor repayment
  • Investors

    • Senior Investor/ Lender and Total Senior Investment ($MM)
      Goldman Sachs; Calvert Foundation ($25 total)
    • Subordinate Investor/ Lender and Total Subordinate Investment ($MM)
    • Deferred Fee Source and Total Deferred Fees ($MM)[Note 1]
    • Recoverable Grant Source and Total Recoverable Grants($MM)[Note 2]
    • Non-recoverable Grant Source and Total Non-recoverable Grants ($MM)[Note 3]
    • Guarantor and Guarantee ($MM) [Note 4]
    • Illinois Dually-Involved Youth Project
    • [1] Deferred fees are delayed payments for the services provided by service providers, transaction coordinators and/or project managers. Deferred fees are one way of structuring projects so that more stakeholders have a financial interest in ensuring project success.
    • [2]Philanthropies can use either their regular grant making protocols, or protocols for program-related investments (PRIs), to contribute to PFS capital stacks. If a foundation does not use a PRI, their investment may be structured as either a loan or a recoverable grant. The distinction between the two is in the expectation of repayment. A loan, even if from a philanthropic source, is expected to be repaid, and structured accordingly. A recoverable grant does not bear the same expectation of repayment.
    • [3] Non-recoverable grants are traditional grants contributed to capital stacks; if the project is successful and generates full repayment, the non-recoverable grants can remain with the service provider or project manager, or be recycled by the original funder.
  • Basic Repayment Structure

    • Initial Investment ($Millions)
    • Maximum Repayment Funds Committed by Payor ($Millions)
    • Full service delivery term (years)
    • Full repayment period (years)
    • Interim outcomes reported? Tied to payments?
    • Sustainability/ Recycling of Funds
      None specified
  • Detailed Repayment Terms

    • Interest
    • Trigger for initial repayment of principal [Note 1]
      Project completion, outcomes validated
    • Threshold for full repayment of principal
      Runoff reduction between 18.6% and 41.3%
    • Threshold for full repayment of principal plus maximum success payments
      Runoff reduction greater than 41.3%
    • Repayment timing
      Semi-annual coupon; principal repayment at year 5 (term end); success payments at year 5
    • Return to Investor [Note 2]
      3.43% base case; 6.4% maximum; 0% minimum
    • Success Payment to Other Stakeholders? [Note 3]
    • [1] Initial repayment does not equate to full principal return. Investors may recover only part of their principal if projects do not meet a certain level of success.
    • [2] There is no standard methodology for calculating investor return. These numbers are what is publically reported, and comparing from one project to another may not be an apples-to-apples comparison for the reason of potentially different calculation methodologies. Calculation methodologies may be provided in investor agreements, which are not available publically and were not available for this report’s analysis.
    • [3] Success payments for other stakeholders such as project managers and service providers create a financial incentive for project success.
  • Project Costs

    • Project Development Costs Not Covered by PFS Capital Raise
      Government Performance Lab fellow
    • Funding source(s) for project development costs, if any
      PFS Capital
    • Project Implementation Costs not covered by PFS Capital
    • Funding sources for implementation costs not covered by PFS capital