Funding a sustainable future

Innovative funding solutions can make way for impactful climate action.

As the impacts of climate change reach disastrous levels, communities are looking for promising and bold solutions — inevitably raising the question: Who’s footing the bill?

See how local governments participating in the Bloomberg American Cities Climate Challenge are finding the funding — and fortitude — to build a more climate-resilient future.

CLIMATE PROBLEMS REQUIRE CREATIVE SOLUTIONS

While many Americans are pushing for stronger climate action, city governments are struggling to demonstrate action because they are strapped for resources. However, local governments have options: they can tap into existing funds, generate resident buy-in, or forge new partnerships to deliver results on a practical budget. The stories below demonstrate that cities can afford to fund climate change mitigation efforts. In fact, they can’t afford not to.

SPENDING SMARTER: PRIORITY-BASED BUDGETING IN PITTSBURGH

The answer to funding climate work might not be spending more but spending smarter. Cities can find money for climate action within their current budget through a process called priority-based budgeting, or PBB.

When climate initiatives were dismissed as “unicorn projects,” Pittsburgh’s former Chief Resilience Officer Grant Ervin introduced a process with potential to create a dedicated climate budget without raising a cent in taxes. The city partnered with PBB specialists at ResourceX and put the existing line-item budget under the microscope. Comparing actual spending against the impact of city services enabled Pittsburgh to better align its budget to its priorities. The result: Pittsburgh identified over $40 million in potential savings and new revenue that could be reallocated to meet the city’s climate goals, and established a more effective and strategic budgeting process for years to come. Because of this success, Pittsburgh is seeking further opportunities to expand the PBB tool across other goals, such as equity.

Learn more about how PBB helped Pittsburgh identify over $40M for climate programs here.

ENGAGING RESIDENTS THROUGH BALLOT MEASURES

Residents, understandably, may be resistant to footing the bill for climate action. However, engaging residents as part of the planning process can result in popular, democratically approved initiatives. Opportunities for community input, such as ballot measures, put climate funding in the hands of those who stand to pay for and benefit from the climate action itself: the voting public.

In Denver, the mayor won reelection in 2019 by focusing heavily on climate solutions, but the city then faced barriers in prioritizing and funding its objectives. Denver assembled a deliberative task force comprising stakeholders such as energy executives, indigenous youth, and community leaders to study existing efforts, identify the primary targets for emissions reductions, and analyze funding options. Building on this collaborative process, the City Council proposed a funding mechanism that allocates about $40M annually for equitable climate action, at least half of which must by law be spent in communities disproportionately impacted by climate change.

In its final form, Ballot Measure 2A proposed an increased sales tax — paid for, in large part, by visitors enjoying Denver’s tourist industry — while preserving existing exemptions for critical goods. The funds would be distributed across programs such as solar panel installation, expanded e-bike access, home electrification work for older, less-efficient buildings, adaptation and resilience response, green jobs training, and more. Because the measure spoke to the clear and present needs of the Denver community — and because the community itself had a hand in the planning and execution — Ballot Measure 2A passed with nearly 65% of the vote.

After years of public engagement and community input led by the city, citizens of San Antonio likewise approved a ballot measure that would improve the reliability of and access to their large-scale transit system. To avoid a potentially unpopular tax increase, said measure proposed reallocating a small portion of the existing sales tax — about one-eighth cent shares — to mass transit. In this case, a simple priority shift without an increased price tag won popular support and passed with 68% approval. With this revenue stream secured, San Antonio is now planning for additional bus lines to reduce stress on the existing transit system starting in 2026.

By opening discussions about budgeting and spending with representatives of interest groups in the community — and putting their combined work to a public vote — cities can secure sustainable funding for clean energy projects while inspiring future resident engagement.

EXPANDING ACCESS TO LOANS ACROSS THE SUN BELT

Responsibly implementing climate initiatives means ensuring the entire community benefits; residents of lower-income neighborhoods often live and work in older buildings with insufficient insulation, inefficient HVAC systems, and outdated appliances. These antiquated electric systems use more power than newer models, straining the power grid while driving up utility bills. However, upgrading these systems and appliances would normally require high up-front costs. Property owners and building managers might not be able to finance these high expenses, even if it could save them money in the long run.

San Antonio, Atlanta, and St. Petersburg are improving access to loans to fund change at this crucial level. Creative partnerships between government, residents, and non-profit groups have made vital improvements possible while stimulating the economy and bringing financial relief to underserved neighborhoods.

Property Assessed Clean Energy (PACE) Loans

PACE loans are assessed as debt on a piece of property instead of being attached to an owner; if the property changes hands, the loan remains with the property until repaid. This allows lenders to set lower interest rates and longer repayment periods, with less risk of default. These loans also encourage property owners to invest in their buildings without the worry of seeing a payback if they sell the property. Removing prohibitive costs enables lower-income property owners to afford the up-front cost of making building improvements, which in turn stimulates the local economy and creates jobs in construction, energy and water efficiency, and renewable energy. PACE programs have proven to be a cost-effective way to meet climate goals while also encouraging private investment in a city’s economic and energy-conscious future.

San Antonio passed a PACE policy in 2020 to improve water conservation and energy efficiency through retrofits of older commercial, industrial, and multi-family residential buildings. The program helps lower demand for energy — a major concern in Texas given the recent power grid failure — and contributed to water-saving goals. PACE creates a positive cash flow for property owners, as the loan repayment rate was lower than the savings incurred by the improvements.

Commercial Property Assessed Clean Energy (C-PACE) Loans

The Ygrene Energy Fund C-PACE initiative focused on larger commercial properties in Atlanta. With $500M in bonds available through Invest Atlanta, Ygrene could cover projects with price tags up to $20M. Business owners and property managers are able to repair or upgrade their buildings to save energy and water. And the program’s future is bright, with financing for commercial energy efficiency retrofits projected to reach up to $200M in 2023. Atlanta’s green economy anticipates adding a host of new, high-paying jobs into the bargain.

Non-Profit Partnership

In order to accelerate residential energy upgrades, particularly for low-to-moderate income (LMI) residents, St. Petersburg partnered with the non-profit Solar Energy and Loan Fund (SELF) to provide accessible loans to homeowners that may not be available to them from a traditional bank. SELF is a CDFI (Community Development Financial Institution) that works to provide fair and responsible funding and project management; as part of that mission, SELF also helps residents understand and build credit. A dynamic marketing campaign helped to raise awareness and interest; as SELF handled the financial end, city officials helped secure necessary permits, trained inspectors, engaged in workforce development efforts, and supported other sustainable start-ups. By the end of 2020, more than 260 improvement projects were approved and underway, and the initiative was publicly popular. The program caught on throughout Tampa Bay and nearby Orlando, and SELF continues to expand throughout the Southeast.

Innovative loan programs and partnerships help city governments achieve climate goals and serve disadvantaged communities without placing additional strain on municipal budgets. Strengthening residential infrastructure improves the quality of life for residents and returns money to the local economy.

WORKING TOGETHER TO ATTRACT FEDERAL FUNDING

Competition for federal funding is fierce at the country, city, tribal, and state levels. Presenting a compelling case, along with proof of concept or demonstrable cooperation with local stakeholders, goes a long way toward making a strong impression; a grant award will, in turn, raise a city’s profile and potentially open doors to additional funding.

Albuquerque caught the Biden administration’s attention with an equity plan that closely aligned with the goals of a Federal initiative: addressing energy efficiency and billing disparity in low-income neighborhoods. Residents of the historically underserved International District were trapped in a vicious cycle, spending up to 10% of their income on utility bills for inefficient buildings and appliances. The city audited the district’s energy use and applied a $100,000 grant to implement deep energy retrofits to 10 residences, saving over $500 in yearly utility savings per household. The project was a key success story used to amplify New Mexico’s application for federal funding under President Biden’s “Justice40 initiative” — a program focused on “marginalized, underserved communities.” U.S. Energy Secretary Jennifer Granholm even visited Albuquerque’s International District personally. With this highly visible proof of concept from Albuquerque and community cooperation, New Mexico is in a strong position to receive billions of dollars in federal funding, specifically earmarked for climate equity initiatives.

To secure a share of $1.2T in federal infrastructure funding, Orlando took great care to bring nonprofits, research institutions, and all levels of government to the table. Representatives from all agencies standing to benefit from the investments came together to align on a balanced, cooperative approach for developing proposals. And they already have proof of success: collaboration between the city, transit authority, and electric utility has Orlando’s zero-emission transit fleet operating ahead of schedule. Breaking out of the silo mentality is a key to progress, said Chris Castro, who until recently was Orlando’s Director of Sustainability and Resilience. “Partnerships are the only way forward.”

BRINGING IT ALL TOGETHER

Several cities in the Bloomberg American Cities Climate Challenge used novel financing mechanisms to accelerate climate action. While the details naturally vary, some key themes arise:

• Examine the budget closely; look for opportunities to align existing funds with climate priorities.
• Engage local communities who stand to benefit. Listen to their concerns, appreciate their values, and involve them in addressing their problems.
• Build partnerships with non-profits or special interest groups with the passion and professionalism to turn plans into action. Outside expertise is essential.
• Prepare a plan that serves your community first but also ties into larger state and national climate goals, to maximize chances of attracting additional funding.

The challenges inherent in funding climate action may seem daunting, especially for cities already struggling to pay for other vital initiatives. However, some creative thinking can generate the funding cities need to meet residents’ demands for stronger, more equitable climate action. The result, as demonstrated by the cities recognized in the American Cities Climate Challenge, is more than green spaces and clean air: it’s a stronger economy, engaged residents, and a brighter future.