By Richard Seline And David Armes
Based on a model from Texas, public-private partnerships (P3s) can be the catalyst for making America’s water infrastructure more resilient to storms and catastrophic events.
The Texas P3 Resilience Marketplace is modernizing finance for public and private resilience infrastructure throughout Texas. The first-of-its-kind marketplace seeks to connect an entire spectrum of funding tools for broad development needs such as gray, blue, and green water projects. By bringing projects and funding together quickly and efficiently through advanced software, the program will make Texas more resilient to floods, water shortages, and other disasters. It is meeting fast-growing demand for environmental compliance, loss mitigation, and environmentally conscious “impact” investing.
The marketplace — which was created by Texas-based AccelerateH2O and Silicon Valley software company Aqaix, Inc. — arose as a solution to the challenges facing Houston following the 2017 Hurricane Harvey. Widespread flooding covered over 25 percent of Houston, an area the size of Chicago and New York City combined. More than 154,000 homes flooded. It was the third “500-year” flood in three years. It was also a national wakeup call, driving home the importance of making cities resilient to disaster by unleashing innovation, including alternative financing and investment.
Now, three years after Harvey, Texas has secured federal and state funding for mitigation-focused infrastructure in Houston and other areas, but it is faced with daunting organizational, communication, and data-collection challenges. With 254 counties, 7,000+ water utilities, and 5,000+ corporate campuses and sites, new project proposals need to be coordinated across often more than 300 stakeholder organizations, posing huge communication and transaction costs. One efficient way to achieve the required reach and scale is through enterprise software, which is what the Resilience Marketplace provides.
“The task of getting the Greater Houston and Texas regions to a higher level of flood resilience before the next big storm is enormous, and we need to mobilize all of the resources at hand to do that,” said Auggie Campbell, executive director for the Association of Water Board Directors of Texas. “We need to evaluate and choose among an enormous number of resilience infrastructure projects. And then we need to bring together government and private sources of capital to fund those projects. We also need to be able to coordinate and communicate among all the stakeholders in this process.
“With this many jurisdictions and opportunities, we face a complex problem including resource management, and the marketplace helps us solve it,” Campbell continued. “Through the marketplace, we leverage the important role of public agencies with the private sector capabilities by utilizing advanced software and marketplace models to organize, fund, execute, and monitor all of these projects so we make sure that we are getting the best, most successful result possible.
How It Works
The marketplace provides a single cloud platform that allows resilience project proposals to be collected, evaluated according to standardized criteria and technical models, and matched with funding sources. It brings government agencies together with funding from public and private sources to accelerate the evaluation and transaction processes. Through the marketplace, projects can be evaluated, ranked, and matched to funds in weeks or months rather than in years, and data-driven scoring models tie the funding processes into program criteria and performance metrics.
The first phase of the marketplace seeks to provide matching or alternative financing for nearly $20 billion in government funds. The funds have been provided by Congress to several federal agencies including the Federal Emergency Management Agency (FEMA) and Department of Housing and Urban Development (HUD). In turn, state and local governments have generated additional resources through bonds and appropriated funds. The marketplace process involves using information and rankings to match funding with projects and the appropriate impact and performance requirements.
In the next phases, additional capital will be invited in to work within the context of public-private-philanthropic partnerships (P4). There is huge demand among private “impact” investors and donors for projects with documented social, economic, and environmental impact. The marketplace allows for documentation of impact in a clear rating format.
"There is huge demand among private “impact” investors and donors for projects with documented social, economic, and environmental impact."
As executive director of AccelerateH2O, my view is that the scope of resilience is huge because it requires planning for every kind of potential disaster — drought, flooding, spills, leaks, and fires. It also requires financing that cannot be achieved through public funding alone. While federal, state, county, and municipal funding has jumped significantly, those dollars will not cover the entire current and future demand. And the COVID-19 economic malaise only complicates funding issues by reducing expectation for more public resources. Therefore, our goal for the Texas P3 Resilience Marketplace is to provide an avenue to alternative investment that can make up shortfalls by generating matching or additional pools of financing.
While the marketplace arose in response to Houston’s post-Harvey challenges, it is engineered for resilience infrastructure projects throughout Texas. Agency officials can coordinate project proposal acquisition from hundreds of locations and Texas municipalities. “For instance, the backlog of previously proposed projects coupled with thousands of new proposals may not be totally addressed by these competitive loans and grants,” said Aqaix CEO Michael Gardner. “Good projects still need resources. And private sector landowners, foundations, and investors can be vital partners.”
The centralized cloud location allows the originators of projects to “self serve,” meaning they can upload their own project listings. Project originators can add details such as budgets, timelines, social impact, environmental impact, and return on investment. They can add photos and documentation to provide project transparency to potential investors. Listings are shown in a standardized format to make comparing them easier. Because all stakeholders have secure access to information collected in a single, central location, the need for multiple emails, calls, and transferring documents is eliminated.
The marketplace also has powerful data integration and artificial intelligence capability. As a result, Texans can use the platform to build data sets to power future projects. The curated data can be analyzed to assist future documentation, making the process more efficient and increasing accuracy over time as to best-in-class project development. The data will come not only from the platform itself but also from local, state, and national sources of scientific and policy databases.
“The rollout of the marketplace coincides with the consortium of Texas agencies that have coordinated the Texas Flood Information Clearinghouse — a powerful solution bringing together the state’s full range of public resources,” Gardner said. “The marketplace opens the door to millions of dollars in resources not otherwise considered for meeting immediate and near-term goals for pre-disaster risk mitigation.”
Seeking Greater Impact
The marketplace approach of bringing together information from many sources into one easy-to-understand, cohesive platform has immense potential to change the way all types of infrastructure projects are completed not only in Texas but throughout the country. Prior to the Resilience Marketplace, Aqaix Inc. created a similar cloud marketplace for water groups seeking funding for their “master plans.” Today, many projects within water portfolios that need to be funded deal with resiliency, water quality, water treatment, water volume, and groundwater management.
The cloud marketplace is also aimed at “impact” investors who are looking for social return on investment (SROI). These investors from a range of asset classes seek projects that improve social, economic, and environmental outcomes. The platform provides these investors with a single, central location where they can evaluate good, safe water investments that ensure transparency.
One additional objective of the Resilience Marketplace is to provide a platform for the growing interest by national and global insurance and reinsurance companies toward investing and incentivizing pre-disaster risk mitigation. Even FEMA and HUD have launched programs that empower communities to identify projects that measurably reduce loss of life and property and affect facilities and business operations. We are already working with the Insurance Information Institute to connect their research, tools, and expertise to the marketplace’s rankings, assessments, and financing capabilities. This will expand the pool of resources beyond the public-centric programs.
About The Authors
Richard Seline is executive director of AccelerateH2O and managing partner of ResilientH2O Partners, both based in Texas. AccelerateH2O, a nonprofit organization, gathers government, academia, corporate, and entrepreneurial expertise to generate new solutions and practices for water management, and therefore introduce advanced technologies and novel early-stage equipment from around the world and within the U.S. Texas-Southwest region. ResilientH2O Partners was incubated and spun out of the nonprofit to facilitate public-private partnerships and alternative financing and jump-start project development. Learn more about AccelerateH2O at www.AccelerateH2O.org. Connect with Richard on LinkedIn at https://www.linkedin.com/in/richardseline/.
David Armes is director of Aqaix’s Central U.S. operations, based in Houston, TX. He has a passion for sustainability, particularly in the areas of finance and investments. Aqaix supports these sustainable efforts by working with municipalities, governments, and private funds, using technology to accelerate funding opportunities for infrastructure projects. David has over 15 years of experience working in fields from insurance and consulting to marketing and business development. Learn more about Aqaix at www.aqaix.com. Connect with David on LinkedIn at https://www.linkedin.com/in/davidarmes/.