SAVING MATTHEWSLeeds Net Impact Case Competition 2015

“Water, water everywhere,and not a drop to drink.”

-Rhyme of the Ancient Mariner

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MA

TTH

EWS

2040

MO

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FO

R SU

CC

ESS

Civil Infrastructure: Matthews has reduced storm water impact by 90% by increasing porous surfaces to capture the first half inch of rainwater. By rezoning and incenting residential areas for gray water capture and use, it has reduced sewage treatment costs.

Living Shoreline: Two new square miles of wetlands absorb wave energy, reduce erosion, absorb large amounts of CO2, and increase abundance of marine life

Tidal Energy Generators: An underwater tidal field is generating clean, renewable, and predictable energy to power Matthews.

CIVILINFRASTRUCTURE

$640M

LIVINGSHORELINE

$727M

TIDAL ENERGYGENERATORS

$913M

MATTHEWS 2040 BENEFITS

CIVIL INFRASTRUCTURE

CIVIL INFRASTRUCTURE OVERVIEW

BUILDINGRaise historic buildings in the downtown area

BERMBuild berms along 1 mile of the coastline

PAVEMENTInstall 1.5 miles of permeable pavement across downtown

A portfolio of projects is designed to improve Matthew’s infrastructure and mitigate flood risks by disconnecting storm water from sewage overflow.

GREEN FITTING INITIATIVES

Rainwater Harvesting

Green Roofs

Rezoning

Sediment Basins STAKEHOLDERS• Residents• Commercial

Businesses• Historic Sites• Tourists• Fisheries• Insurance Providers

Building $11MBerm $3MPavement $2MGreen Fitting $5M

$21M

CIVIL INFRASTRUCTURE BENEFITSImplementing civil infrastructure projects yields economic, environmental, and social benefits.

ECONOMICBusinesses and residents of Matthews benefit from the reduction in flood cleanup costs and increases in property values.

• Reduces water pumping and filtration costs

• Increases commercial and residential property value by 4.5% annually1, thus also increasing Matthew’s tax base

ENVIRONMENTALInfrastructure improvements minimize the impact of floods by reducing potential structural damages and protecting the city’s water table.

• �Reduces lot peak discharge by 63.6%, reduces retention required by 88%2, and increases annual ground water recharge by up to 187.5M gallons of groundwater3

• �Saves 770+ MWh, and reduces harmful gasses equivalent to $475K in healthcare costs per year3

SOCIALInvolving tax payers aligns the interests of funders and benefactors, while also preserving the city’s infrastructure and beauty.

• Protects invaluable landmarks (historic buildings) that are central to the community’s identity

• By decreasing nuisance and costs, residents are more productive, less anxious, and able spend time and money in ways that produce more value

1National property values increased at an average of 4% annually. We assume a marginal increase above that average (http://www.freshcoast740.com/PDF/05_Benefits_Costs_Draft_Final.pdf)2Calculated using the Green Values Calculator (www.greenvalues.cnt.org)3Scaled from Milwaukee’s green infrastructure project (http://www.freshcoast740.com/PDF/05_Benefits_Costs_Draft_Final.pdf)

Cleanup Cost Savings $292M

Business Continuity Savings $275M

Insurance Premium Reduction $73M

Total $640M

MEASURES

Cleaner Water -

Sediment Reduction in Water Table -

Erosion Reduction -

Total -

MEASURES

Historic Landmark Attendance -

Tourism -

Total -

MEASURES

CIVIL INFRASTRUCTURE FINANCING STRUCTURE

BENEFITS• Aligns incentives for infrastructure improvement with main

local stakeholders

• Transparency: projects clearly defined and funded

• Enables community members to take ownership of the process

• Increases in property values (lead to higher tax revenues)

RISKS• Adoption could take longer than anticipated and participation

could be lower than expected

• Difficult to exclude non-payers (unless fines are instituted)

• Potential for negative political reaction

• Time to implement could delay potential impact

Flood mitigation projects are funded upfront by the Maryland Water Quality Rotating Loan Fund and supported in the long-run through cash flows accruing in a trust from property insurance savings.

Funding Structure: Defined Purpose Trust earmarked for specific infrastructure improvements

Funding Sources: Short term funding by the Maryland Water Quality Rotating Loan Fund with long term funding from local insurance premium savings

Funding Costs: Maryland Water Quality Rotating Loan Fund $9M

Key Terms:• Cost of enhancements recouped within 30 months• Most critical projects (buildings, pavement, berm) are prioritized,

longer term solutions supported

Cash Flow: $82M - $30M = $52M

Matthews Green Trust Designed to redirect defensive strategy to offensive strategy by channeling funds towards flood protection and mitigation

0%

20%

40%

60%

80%

100%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

• Berm, Pavement, Buildings Project fully repaid by Year 6 • Cost savings are passed on to consumers and used to fund further

capital improvement projects

MD Water Quality Rotating Loan Fund Insurance Savings

LIVING SHORELINE

LIVING SHORELINE OVERVIEWA living shoreline provides an aesthetically pleasing and powerful way to reduce the impact of flooding, while rebuilding the ecosystem.

$320M

TREELINE

Native trees and shrubs are planted along the coast to form a riparian buffer and reinforce the foundation above the tide line

WETLANDS

Grasses, rushes, and sedges at mid-tide elevation are implemented along with marsh grasses at low tide levels

INTERTIDAL

Biolog with toe boulders, oyster reefs, and underwater grasses make up the shallow water habitat extending into the water

Source: http://www.cbf.org/Document.Doc?id=60

STAKEHOLDERS• Taxpayers• Environmentally-

conscious Parties • Tourists• Fisheries

Development $320M

LIVING SHORELINE BENEFITSDeveloping a living shoreline along Matthew’s coastline yields economic, environmental, and social benefits.

ECONOMICBenefits include fewer business disruptions, lower insurance premiums, higher real estate value, and more productive fishing and tourism.

• Increased job security for those in fishing and tourism industries

• Creates 76 jobs to build the living shoreline and within the fishing industry2

ENVIRONMENTALProductivity in the new ecosystem is increased by reducing flooding, wave energy, erosion, and sediment in the habitat.

• 1,280 acres of temperate marshland would remove a minimum of 731 tons of CO2/year and absorb at least 95% of wave energy3

• Increases fish abundance by 36% as a result of implementing oyster reefs4

SOCIALA reinvigorated shoreline provides the citizens and visitors of Matthews an experience that highlights the city’s unique natural features.

• Creates more space for outdoor activities and opportunities to interact with nature

• Reduces anxiety over property loss due to erosion

• Provides opportunities to learn about biophysical cycles, society’s impact, and their consequences5

1http://www.americanrivers.org/assets/pdfs/reports-and-publications/20498-chesapeake-final-2011-1213.pdf?65c5e72http://www.conservationgateway.o rg/Cons erv ationPractices/ Marine/ Docum ents/M arine% 20Aggregation %20 Present ations/IOM %2 02/Judy %2 0H aner_Living% 20 Sho relin es_M arin e% 20Aggregation% 20 20 14.pdf3Ohio’s 140 acres of temperate wetland sequesters 80 tons of carbon/year. Tropical wetland covers nearly 290 acres and stores 300 tons of carbon/year (http://researchnews.osu.edu/archive/wetcarb.htm)4http://coastalgadnr.org/sites/uploads/crd/images/LivingShorelines/LivingShorelinesAlongtheGeorgiaCoastweb.pdf5http://www.americanrivers.org/assets/pdfs/reports-and-publications/20498-chesapeake-final-2011-1213.pdf?65c5e7

Cleanup Cost Savings1 $92M

Commercial Fishing Revenue $295M

Recreational Fishing and Bird Watching1 $216M

Total $603M

MEASURES

Water Quality and Quantity1 $72M

Habitat Quality1 $52M

Total $124M

MEASURES

Greenspace Utilization -

Membership and civil activity -

Fishing and Tourism Employment -

Total -

MEASURES

LIVING SHORELINE FINANCING STRUCTURE

BENEFITS• Catalytic capital and first-loss absorption tranches are leveraged

to attract additional investments

• Take advantage of historically low interest rates to fund long term project, tapping strong investor demand for green bonds

• Initial investments yield significant economic benefits in later years, allowing Matthews to channel funds for other projects

RISKS• Financing is more complex, need to coordinate with different

stakeholders for different return expectations

• May encumber Matthews’ long term credit issuance prospects

• Uncertainty in securing grants and initial catalytic investments

The funding vehicle is designed to involve different levels of risk appetite, return expectations, and social impact goals for key stakeholders and partners. This model incorporates grants, catalytic capital, and institutional investors in the open market.

Funding Structure: Three special purpose vehicles (grants, catalytic capital subordinated debt, green bond) with different risk and return characteristics

Funding Sources: Private donations, impact investors (catalytic capital), institutional investors (green bond), supported by tax revenues from higher building prices, and cleanup cost savings

Funding Costs: Green Bond $142M, Catalytic Capital $66M

Key Terms:• Separate vehicles designed to attract different profiles of

development partners• Project fully funded and installed by year 10, financing costs repaid

with tax and cost saving proceeds• Additional $435M accrued from taxes and cost savings to be used for

additional green projects

Cash Flow: $932M - $528M = $405M

Matthews Shores Alive FundDesigned to attract impact-seeking capital investments to capture long term environmental, social, and financial benefits

Term Return Target

$80M

20Years

3.85% Coupon

Institutional Investors Open Market

$50M 20Years

1.5%Coupon Impact Investors

$43M N/A 0%Coupon

Private Foundations and DonorsGrants

Catalytic Capital

(sub. debt)

Green Bond

TIDAL ENERGY GENERATORS

TIDAL ENERGY GENERATORS OVERVIEWThe funding model enables Matthews to become the first city to sustain itself on tidal power.

$290M9 TURBINESNeeded to Power the City

$27.5MCost per Station

3.18 MWhGeneration per Station

HARNESSING NATUREMarine currents are a consistent source of kinetic energy caused by regular tidal cycles. Tidal turbines can be installed on the seabed right off the coast to harness this source of predictable energy

ENERGY SOURCEAn array of tidal energy generators effectively form an underwater power field, providing a source of clean, renewable energy to Matthews residents and other consumers leveraging the grid

FLOOD MITIGATIONTurbines absorb tidal energy, thus reducing the impact of storms and lowering the city’s cleanup costs

Assumptions: A generator built in Ireland in 2008 for $11M is generating 1.2MWh (http://www.energybc.ca/profiles/tidal.html). A new generator producing 3.18MWh is now on the market. Its cost is unknown, but assumed to scale linearly (http://www.globalmarinerenewable.com/images/stories/2011Presentations/IndustryDevelopmentDay/MCT_short_presentation_9_Mar11.pdf)

STAKEHOLDERS• Energy Consumers• Utility Companies• Impact Investors

(VC’s)

Installation $193MOperations $97M

TIDAL ENERGY GENERATORS BENEFITSBuilding tidal turbines yields economic, environmental, and social benefits.

ECONOMICTidal turbines provide a reliable source of revenue to both utility companies and the city of Matthews, while lowering energy costs.

• Brings new green jobs to Matthews

• Generates sustainable and predictable revenue from selling generated electricity

ENVIRONMENTALMaryland communities currently generate most of their electricity from coal. Shifting to tidal power enables Matthews to go ‘off the grid.’

• Absorbs tidal energy, reducing impact of storms

• Offers reliability – SeaGen models have an 18 month energy payback and 8 month CO2 payback

• Generates a constant source of clean energy, preventing annual creation of 200K+ tons of CO21

SOCIALAs the first entirely green powered city in the US, Matthews will foster a greater sense of pride and community within its communities.

• Puts Matthews on the forefront of the sustainability movement

1Assumes that 216KWh are produced a year and coal produces 2.08lbs CO2/KWh (http://www.eia.gov/tools/faqs/faq.cfm?id=74&t=11)2A Stanford study estimates carbon emissions to cost between $37 and $220 per ton. The average was taken (http://news.stanford.edu/news/2015/january/emissions-social-costs-011215.html)

Green Jobs -

Energy Provider Growth $270M

Total $270M

MEASURES

Cleaner Energy2 $643M

Total $643M

MEASURES

Sense of Community -

Total -

MEASURES

TIDAL ENERGY GENERATORS FINANCING STRUCTURE

BENEFITS• Lowers entry barriers and attracts risk investors who can provide

capital for longer term benefits

• Sets an example for joint public / private clean energy and environmental projects

• Participate in sustainable financial returns as revenue is generated

RISKS• Concept, operational, and implementation risk assumed in

funding the new venture with longer payback periods

• Technology is changing rapidly, investment could quickly become outdated

• LCOE might not decrease as quickly as anticipated

• Installation sites may not be favorable

Matthews will harness the power (and problem) of tidal energy into a sustainable and affordable source of clean energy for the community, reducing the impact of tidal erosion and providing 100% of Matthews’ resident electricity needs.

Funding Structure: Joint venture offering $100M of first-loss reserves provided by Matthews, allowing for Matthews and partners to share in economic benefits

Funding Sources: Matthews Shores Alive excess funds, impact venture investments, energy utility capital contributions

Funding Costs: Energy Provider and Syndicates and VCs $162M, Matthews Shores Alive Fund $51M

Key Terms:• Matthews’ investment used to attract risk capital• Energy and VC partners benefit from attractive below market rate

upfront investment costs and future benefits of operating license• Initial investment is recovered after 10.7 years

Cash Flow: $478M - $222M = $256M

Matthews BayPower ProjectJoint venture with energy company and impact investing syndicate (VCs) to unlock the potential for triple bottom line revenue generation

25-Year Return Metrics:• IRR: 6.5%1

• CoC: 1.6x

1Comparative green tech investments have IRR’s around 4%

EnergyProvider

Syndicatesand VC’s

MatthewsInvestment

STAKEHOLDERS

• Residents• Commercial Businesses• Historic Sites• Tourists• Fisheries• Insurance Providers

• Taxpayers• Environmentally-conscious Parties • Tourists• Fisheries

• Energy Consumers• Utility Companies• Impact Investors (VC’s)

MATTHEWS 2040 FISCAL ECOSYSTEM

• Independent trust for the benefit of the community

• Short term funding needs bridged by Maryland’s Water Quality Rotating Loan Fund

• Projects funded and financed by savings from insurance premium reductions

• Three-tiered fund leveraging risk-agnostic and risk-neutral capital to encourage additional investments

• Early investments lead to higher property values (and tax revenue) and cleanup savings

• Long term capital investment to harness the power of tidal energy

• Joint venture with energy company and impact investors (VCs)

• Project funded by gains accrued from higher taxes and cleanup cost savings

Grants Catalytic Capital

Green Bond

MatthewsThriving

Matthews Green Trust

Matthews Shores Alive Fund

MatthewsBayPower Project

MATTHEWS 2040 GETTING THERE

2015Matthews raises capital through the rotating fund, changes zoning, and creates the joint venture. A berm is built and permeable surfaces are laid downtown, immediately reducing the risk and impact of flooding.

202050% of residents are capturing greywater and using it for yardwork and toilets, paying for improvements with reduction in flood insurance premiums.

2025The underwater turbines are online and generating much of the city’s needs while protecting the new wetlands from the worst impacts of major storms.Biodensity has reached 40 year highs.

2030The city’s entire power needs are being met by its turbines. Air quality has reached historic highs and property values have steadily increased. The fishing industry has reached record profitability.

2035A 100-year storm hits the area, but damage is far less in Matthews, where infrastructure absorbed, stored, and mitigated floodwater impact.

2040Matthews has become a model of public-private cooperation and forward thinking green infrastructure use and has become a case study for similar communities around the world.

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SAVING MATTHEWSLeeds Net Impact Case Competition 2015

CIVIL INFRASTRUCTURE

CIVIL INFRASTRUCTURE CASH FLOW

CASH OUTFLOW $21M

CASH INFLOW $82M

• Low interest rates can be achieved through the Maryland Water Quality Rotating Loan Fund

• Funds are collected over a three year period

$11M $3M $2M $5M

BUILDING BERM GREEN FIT FUNDPAVEMENT

$9M

MD WATER QUALITY ROTATING LOAN FUND1

• Proceeds from commercial stakeholders based on insurance premium savings

• Set at 50% of savings for first three years, reduced to 10% thereafter

$73M

INSURANCE SAVINGS

NET CASH FLOW $61M

1An alternative is the Property Assessed Clean Energy (PACE) Programs in California (http://energycenter.org/policy/property-assessed-clean-energy-pace)

LIVING SHORELINE

LIVING SHORELINE CASH FLOW

CASH OUTFLOW $528M

CASH INFLOW $932M

$320M $142M $66M

MARSHDEVELOPMENT

GREENBOND PAYMENTS

CATALYTICALCAPITAL PAYMENTS

$43M

PRIVATEDONATIONS

$50M

IMPACTINVESTORS

$80M

GREENBONDS

NET CASH FLOW $405M

$435M

PROPERTYTAXES

$293M

CLEANUPSAVINGS

LOCAL DONORS INVESTORSNATIONAL DONORS

LIVING SHORELINE POTENTIAL FUNDING PARTNERS

LIVING SHORELINE BENEFITS

Single Service Wetland Type Mean Value Range of Values

Yearly Median 25 Year Median value Yearly High 25 Year High value

Water Quality($684 | $207–$2,260) $875,520 $21,888,000 $2,892,800 $72,320,000

Water Quantity($208 | $10–$4,216) $266,240 $6,656,000 $5,396,480 $134,912,000

Recreational Fishing($585 | $156–$2,201) $748,800 $18,720,000 $2,817,280 $70,432,000

Commercial Fishing($1,276 | $177–$9,214) $1,633,280 $40,832,000 $11,793,920 $294,848,000

Bird Watching($1,988 | $866–$4,562) $2,557,440 $63,936,000 $5,839,360 $145,984,000

Habitat($502 | $156–$1,609) $642,560 $16,064,000 $2,059,520 $51,488,000

Source: A generator built in Ireland in 2008 for $11M is generating 1.2MWh (http://www.energybc.ca/profiles/tidal.html). A new generator producing 3.18MWh is now on the market. Its cost is unknown, but assumed to scale linearly (http://www.globalmarinerenewable.com/images/stories/2011Presentations/IndustryDevelopmentDay/MCT_short_presentation_9_Mar11.pdf)

TIDAL ENERGY GENERATORS

TIDAL ENERGY GENERATORS FLOW OF FUNDS

CASH OUTFLOW $308M

CASH INFLOW $567M

• Matthews Shores Alive Fund makes initial capital contribution of, lowering initial investment required by private investors

$223M $79M

INSTALLATION OPERATIONS

$45M

MATTHEWS INVESTMENT

• Private partnership contributes capital to fund project implementation

• Subsidized capital costs improves attractiveness of investment

$162M

SYNDICATE AND VC’s

• Partnership shares 90% of benefits of lower cost generation and higher margins

• Partnership further benefits from national clean energy tax incentives

$360M

ENERGY SALES PROFITS

NET CASH FLOW $259M

$7M

FINANCING

Source: http://si-ocean.eu/en/upload/docs/WP3/CoE%20report%203_2%20final.pdf

Source: http://www.globalmarinerenewable.com/images/stories/2011Presentations/IndustryDevelopmentDay/MCT_short_presentation_9_Mar11.pdf

TIDAL ENERGY GENERATORS SOURCES