With their lush vegetation, high annual rainfall levels, and panoramic views of water, you might think that Caribbean islands have escaped many of the water management problems that other communities experience. But managing water in this setting has many challenges. Recurrent flooding problems are plaguing many islands. In Trinidad these problems are rooted in increased development and behavioral practices such as pollution. Managing this flooding, along with providing adequate and reliable public water supply, requires creative financing mechanisms.
Part 1 of this series gave some background on flooding in Trinidad and public financing options for water resource management. This sequel focuses on potential private sources of funding and how public and private funds can be used together.
The most effective measures for treating stormwater occur close to where the rain falls. Larger, more regional detention ponds, for example, are often less effective at managing runoff and are arguably less attractive. Hence, while installation on public land has merit, there is a need for private landowners to install these features locally too. Achieving the latter can be more challenging. One more direct way to incorporate private funds is to convince the private landowner (residential or commercial) to make the investment on their own property using their own funds. The education, tax and other financial incentives described in Part 1 help make this case.
A less direct way to access private funds is through “sponsorship” programs such as the “Adopt a River” project in Trinidad. Started around 2013, it “is an initiative to involve communities and corporate entities in the improvement of watersheds throughout Trinidad and Tobago in a sustainable, holistic and coordinated manner” (Adopt a River, 2015). Programs such as these involve donations from private companies for items from garbage bags to food for volunteers. The hours provided by volunteers can also represent a significant investment. With proper tracking and documentation, a dollar value can be assigned to these hours that can be used to leverage further funds for watershed efforts. For example, some grant programs require matching funds and, in select cases, volunteer hours qualify for this match. An alternative is a commercial entity simply donating money to the efforts, based on the history of significant volunteer hours. A potential corporate donor is interested in impressing large numbers of people. If there is proper recognition for the donor via signs, media coverage etc., the watershed group stands a better chance of corporate funding. A corporation that is using water from a specific river may also be more easily convinced to adopt or provide funds for that particular river. Likewise, religious and civic groups are apt to support efforts in their local watershed. However, schools have shown the most interest in adopting rivers at this point.
Public Private Partnership Financing Opportunities
Public and private financing do not have to be mutually exclusive. The challenge of financing stormwater protection, especially on private property, is leading governments across the globe to consider Public Private Partnerships (P3s). The P3 mechanism is a co-operation between a public entity and private parties such as financiers, construction companies, individuals, and other businesses. A P3 arrangement can involve any combination of design, build, operate, maintain, finance, and transfer. More than very localized grass blocks in private yards, a P3 approach may have relevance in a more large scale effort such as a national river channel management program. Narinesingh points out that embankments, de-silting, and concretizing of river channels are currently the most common approaches to river management, but that other options should be considered (Narinesingh, 2014).
A related approach where public dollars can be used to ignite private financing mechanisms is the “loan loss reserve.” Under this scheme, the government establishes a fund with public dollars that serves as a pool from which private banks lending for water related projects can draw if their loans go into default. Investments that benefit from the initial credit support provided by the loan loss reserve would create a track record of repayment/performance for this type of project. Other financial institutions would therefore be better able to assess projects on a more specific, empirical basis.
To illustrate these concepts, we can look at the example of installing a rainwater harvesting system on a private home or commercial building. Rainwater harvesting is an old concept in the Caribbean, but is being re-propagated by entities such as Global Water Partnership – Caribbean. While the practice has many other benefits (and even some challenges!), for the purposes of this post we will focus on the fact that collecting water off of a roof during a rain event delays the entry of that water into the river. This helps to reduce the flashiness of the hydrograph discussed in Part 1. Experts have developed fairly simple technology to improve safety and effectiveness of harvesting rainwater. However, adoption requires a financial investment by the user, perhaps in the form of a loan. Private banks may be unwilling to accept the risk involved in providing inaugural loans for this type of installation. However, if a government funded loan loss reserve is in place to help the banks mitigate default risks with the new type of loan, then banks may be more interested. Over time, once loans have been made and are being repaid, the private banks would have developed statistics on default rates etc. for rain water harvesting projects and may be willing to finance these types of projects without the government safety net.
Factors such as global warming and population growth are only expected to exacerbate flooding in Trinidad. Intervention needs to occur in order to alleviate the loss of property and disruption caused by these floods. Beginning with public education to address cultural attitudes to littering, pollution, and landscaping will go a long way to prevent future flooding. However, more informed consumers will also demand more water-sensitive products and services. The economic and financial systems are necessary for residential, as well as commercial customers, to finance these improved water quality practices. There is a tangible financial loss when crops are affected by flooding, as food shortages ensue and prices soar. One way or the other, the country is paying when it comes to flooding. Reserving some of these funds for “prevention” of flooding versus a “cure” after a flood event is worth consideration.
Narinesingh, P. An Assessment of River Maintenance Practices in Trinidad and Tobago. The Journal of the Association of Professional Engineers of Trinidad and Tobago. Vol.42, No.2, October 2014, pp.19-28