Municipal Solid Waste Financing Structures PROFESSOR JEREMY GORELICK CENTER FOR CLEAN AIR POLICY (CCAP) SOLID WASTE WORKSHOP 24 APRIL 2017

Transcription

1 Municipal Solid Waste Financing Structures PROFESSOR JEREMY GORELICK CENTER FOR CLEAN AIR POLICY (CCAP) SOLID WASTE WORKSHOP 24 APRIL 2017

2 Agenda 1. Understanding the Obstacles 2. Understanding the Road Map 3. Feasibility Studies 4. Financial Structuring 5. Credit Enhancements 6. Questions

3 Obstacles facing city finance Own-source Finance Obstacle Ability to collect property taxes from citizens Ability to collect user fees from citizens Ability to manage own-source revenues Solution Improved cadastral mapping and tax collection, regardless of constitutionally-designated collection agency Improved billing systems and user fee collection Increased human resources and technology capacity External Finance Obstacle Ability to develop compelling, financially-viable projects ; knowledge of sources of external project funding Ability to constitutionally receive financing from external sources Ability to hedge against currency risk and project finance risk Solution Training and capacity building of financial and MSW department Training and capacity-building of legal department Training and capacity building of financial department

4 Obstacles facing project finance Obstacle Ability to assess user demand for project; ability to assess user willingness to pay for project Strength of link between project and overall city master development plan Completeness of project feasibility studies Obstacle Ability to reasonably forecast flows of capital to meet financial needs Ability to assess user ability to pay for project Project Technical Feasibility Solution Training and capacity-building of MSW department to better manage and anticipate need Training and capacity-building of planning department to better integrate MSW project into overall plan Engagement with external service providers to review/enhance studies Project Financial Feasibility Solution Training and capacity-building of financial department Training and capacity-building of MSW and financial department to better manage and anticipate need

5 Road Map Needs Assessment Field Research Feasibility Studies Financial Close Financial Structure Validation

6 Defining the Road Map 1. Needs Assessment 2. Field Research 3. Feasibility Studies 4. Validation 5. Financial Structure 6. Financial Close

7 Feasibility Studies 1. Technical Feasibility 2. Financial Feasibility

8 Feasibility Studies Who Pays? Bilateral organizations US government through USAID, US EPA, US DoE German government through GIZ French government through AFD British government through DFID Multi-lateral organizations Inter-American Development Bank World Bank United Nations Non-governmental organizations and charitable foundations Bill & Melinda Gates Foundation

9 Financial Structuring 1. City own-source 2. City borrowing 3. City partnership with private sector 4. What terms make the most sense?

10 Alternative Sources of Finance Beyond own-source finance, where can cities look for funding for capital-intensive projects Market-rate banks, offering one-on-one or syndicated loans Institutional investors through capital markets activities like bond issuance Funds, like the green climate fund (GCF) Carbon credit market

11 GCF NDAs in the Region Country National Designated Authority Argentina National Directorate of Projects with International Credit Organizations, Mr. Augustin Daniel Mai ; agumai@mecon.gov.ar Brazil Secretariat for International Affairs, Ministry of Finance, Mr. Marcello de Moura Filho ; and.gcf@fazenda.gov.br Chile Colombia Ecuador Mexico Peru Uruguay Ministry of Finance, Mr. Alejandro Micco ; mpalominos@hacienda.gov.cl National Planning Department, Mr. Manuel Fernando Castro ; mfcastro@dnp.gov.co Ministry of Environment, Lcda. Ms. Maria Victoria Nielsen ; maria.chiriboga@ambiente.gob.ec Ministry of Finance and Public Credit, Mr. Juan Carlos Conseco Gomez ; uaih_shcp@hacienda.gob.mx Ministry of Economy and Finance, Mr. Pedro Herrera Catalan ; pherrera@mef.gob.pe Ministry of Housing, Land Use and Environment, Architect Ignacio Lorenzo ; ilorenzo@mvotma.gub.uy

12 Case Study: City of Buenos Aires Financing the Feasibility Study

13 Case Study: City of Naucalpan - Analysis of status of waste management facility and existing needs - Interaction with external donors to identify funding for feasibility studies - Securing of funding from external donor to complete feasibility study (US EPA) - Development of potential financial structuring Total capital investment = 37.7 million USD Annual income = 4.9 million USD Full pay-back in less than 8 years - Initial commitments from financing sources FONADIN-PRORESOL grant of 40-50% of total project cost Investment into private operator for residual amount through PPP scheme

14 Potential Sources of Finance Domestic Financial Institutions Mexican International Financial Institutions North American, East Asian, European IFC (part of World Bank Group) Bilateral Government Investment Programs OPIC, KFW, Proparco Municipal Bond?

15 Credit Enhancement Boost to external perceptions of city creditworthiness Example of cities in the region that have benefited? Novi Sad 2011 Who guaranteed? USAID Development Credit Authority For what type of project? Wastewater project and road construction For how much money? 35 million euros

16 Questions Jeremy Gorelick