NATURAL 

INFRASTRUCTURE 

Investing in Forested Landscapes for 

Source Water Protection in the United States

EDITED BY TODD GARTNER, JAMES MULLIGAN, ROWAN SCHMIDT, AND JOHN GUNN
 ii WRI.org

Design and layout by:

Nick Price

nprice@wri.org

Staff in water utilities, municipalities, businesses, 

and local conservation groups can use this reference and guidance document to advance important 

dialogue around investing in forests for source 

water protection in their watersheds and to guide 

early design and implementation efforts like convening stakeholders, identifying sources of finance, 

and prioritizing investments across the landscape. 

The guide can be particularly useful to source water 

newcomers as a primer on natural infrastructure, 

as well as to source water veterans as a reference 

for familiar concepts and an update on innovative 

efforts across the country. The concepts, evidence, 

insights, and cases presented here can play a role 

in a “source water toolkit” alongside critical local 

knowledge, relationships, and expertise.

For source water protection coordinators in drinking 

water utilities, planners and conservation staff in 

municipalities, sustainability officers in the private 

sector, and water staff in local land trusts, this guide 

is a science and economics reference for making the 

case to institutional decision makers, and a general 

road map for early planning and implementation 

steps for natural infrastructure programs.

For decision makers in these institutions—

executive leaders, policymakers, and elected 

officials—the guide offers a suite of real-life 

examples demonstrating the business case and 

tradeoffs for investments in forests for source water 

protection, and a series of options for financing 

these investments.

For professionals working to advance approaches 

to water management that integrate natural infrastructure and built infrastructure, the guide is a 

comprehensive compilation of case studies, finance 

mechanisms, framing language, scientific knowledge, and economic findings that can serve as a 

valuable resource.

A REFERENCE AND GUIDE
Natural Infrastructure iii

TABLE OF CONTENTS

v Foreword

1 Executive Summary

9 Overview

9 Natural Infrastructure: An Underutilized Solution

13 Outline of the Guide

17 Part 1: Making the Case

17 CHAPTER 1: THE BUSINESS CASE

19 Source Water Quality and Drinking Water Costs

21 Green-Gray Analysis

26 Demonstrations of the Business Case

31 CHAPTER 2: THE SCIENTIFIC UNDERPINNINGS

32 Land Cover, Water Resources, and Prioritizing Parcels 

40 Forest Practices and Water Resources

44 Prioritizing Forest Management Practices

46 Watershed Modeling 

50 CHAPTER 3: IDENTIFYING OPPORTUNITY 

AND BEGINNING THE CONVERSATION

51 “Hotspot” Watersheds—Identifying Opportunity 

59 Initiating Dialogue in Water Utilities

63 Part 2: Design and Implementation

64 CHAPTER 4: THE PLAYERS AT THE TABLE

65 Stakeholders and Experts in Successful Programs

73 Engaging Landowners

74 Recommendations for Landowner Engagement

77 CHAPTER 5: NATURAL INFRASTRUCTURE FINANCE

79 Overview of Finance Mechanisms 

92 Accounting Standards and their Implications 

for Natural Infrastructure Finance 

99 Part 3: Case Studies

101 Denver Water—Wildfire Risk Management 

for Source Water 

104 Upper Neuse River Basin, North Carolina

107 Sebago Lake, Portland Water District (Maine)

109 Eugene Water & Electric Board (EWEB)

113 Staten Island Bluebelt—Natural Infrastructure 

for Stormwater Management 

117 Concluding Remarks

122 Table of Acronyms

122 References

129 Endnotes
 iv WRI.org
Natural Infrastructure v

Cities and towns across the United States face a 

growing water crisis. Aging water infrastructure, 

increasing demand, continued land use change, 

and increasingly extreme weather events are driving the costs of water management higher. Water 

challenges strain public budgets, limit productive 

economic development, and threaten public health. 

Resolving this water crisis is essential for community health and wellbeing across the United States.

Harnessing the water-related services provided by 

forests, wetlands, floodplains, and working lands—

known as “natural infrastructure”—has a major role 

to play in combating the water crisis, especially in 

a period of fiscal austerity. Investing in integrated 

water management strategies that combine engineered solutions with natural infrastructure can 

reduce costs, enhance services, and provide a suite 

of co-benefits for communities and the environment. This integrated approach, beginning with 

the protection of drinking water at its source, is the 

future of water management.

The World Resources Institute and its partners 

envision a world in which governments and businesses invest in conserving and restoring forests, 

wetlands, and floodplains as a key component of 

water management and economic development 

strategy. We are working to integrate natural 

infrastructure into day-to-day water management 

decisions to make this transformative vision a 

reality. The success of this effort ultimately relies 

on visionary but often unsung individuals in water 

utilities, businesses, and local governments.

This guide, the most comprehensive of its kind, 

threads together the experience and insights of 

over 50 authors from the front lines of source water 

protection efforts. It is a call to action for water utility staff and land managers alike to bring natural 

infrastructure into focus in their institutions, with 

this guide as a foundation from which businesses 

and municipalities can innovate in the face of a 

growing water crisis. 

 FOREWORD

Andrew Steer

President

World Resources Institute

G. Tracy Mehan, III

Former Assistant Administrator

US EPA

Natural Infrastructure 1

EXECUTIVE SUMMARY

Natural ecosystems like forests and wetlands 

provide essential services to water utilities, 

businesses, and communities—from water 

flow regulation and flood control to water 

purification and water temperature regulation. To ensure these ecosystem functions 

and associated benefits continue, communities can strategically secure networks 

of natural lands, working landscapes, and 

other open spaces as “natural infrastructure.” 

While concrete-and-steel built infrastructure 

will continue to play a critical role in water 

storage and treatment, investing in natural 

infrastructure can reduce or avoid costs and 

enhance water services and security as part 

of an integrated system to cost-effectively 

deliver safe drinking water (Table ES-1).

Now is a critical moment facing water resource 

managers and beneficiaries nationwide. Much 

of America’s aging built infrastructure for 

drinking water is nearing the end of its useful 

life (American Society of Civil Engineers 

2013). Yet funds for investment in water 

infrastructure are drying up in an era of fiscal 

austerity. As utility rates for drinking water are 

increasing faster than inflation and household 

incomes (Harris 2012), the need is clear for 

lower cost, integrated solutions to meet water 

infrastructure demands of the 21st century. 

Recognizing this critical moment, water 

resource managers are looking to invest 

in ecosystems to address emerging water 

issues. Promising efforts across the country 

have secured natural infrastructure for water 

management objectives through a variety 

of means—from land acquisition, zoning 

ordinances, and conservation easements to 

catastrophic wildfire risk mitigation and payments to private landowners for best management practices. These efforts have yielded a 

number of valuable lessons and highlighted 

several challenges.

A number of barriers have impeded efforts 

to scale up the integration of natural infrastructure into water management nationwide. 

For example, many utilities, municipalities, 

and businesses face knowledge gaps among 

key constituents or even internal decision 

makers. These entities often lack the financial resources or technical guidance needed 

to champion natural infrastructure. Moreover, utilities have struggled to quantify the 

ecological and economic benefits of natural 

infrastructure, a task made more difficult by 

imperfect science. 
 2 WRI.org

ture options, to secure adoption and commitment, 

and to begin early design and implementation 

steps on solid footing. It is the most comprehensive 

publication of its kind to date, pulling together the 

perspectives of 56 authors spanning the stakeholder 

groups and experts who need to be involved for 

natural infrastructure efforts to be successful. As 

such, it is a go-to reference for their colleagues 

across the water resource management and conservation fields, agencies at all levels of government, 

and academia.

Together, these authors have threaded together 

the evolving “story” of the forest-based natural 

infrastructure approach to source water protection. 

These take-aways from the economics and underlying science, the opportunity for the approach across 

the country, and lessons for program design and 

implementation comprise the guidance and overarching narrative of this guide.

Even where the case has been made, public utilities 

work with financial accounting standards that do 

not enable operations and maintenance spending 

on natural infrastructure as part of normal business 

practices, despite the clear benefits. Ultimately, 

however, the movement toward widespread, 

landscape-level investments in natural infrastructure nationwide can be successful if key decision 

makers in key institutions have the understanding, 

know-how, and tools needed to act. 

In light of these challenges and opportunities, this 

guide is intended to be a foothold for those who can 

champion natural infrastructure in water utilities, 

local conservation groups, and private businesses, 

and who need a persuasive case, a road map of 

next steps, and overarching guidance to do so. It 

attempts to provide the resources, science and 

economics, illustrations, and guidance needed to 

foster meaningful dialogue with watershed decision 

makers and stakeholders around natural infrastrucWATERSHED MAJOR ISSUES 

NATURAL 

INFRASTRUCTURE 

STRATEGY

COMPLEMENTARY 

BUILT COMPONENTS

Crooked River Watershed—

Portland, Maine

Forest conversion for 

development and need to 

maintain filtration avoidance 

waiver

Conservation easements, 

land acquisition, and best 

management practices as a 

cost-avoidance strategy in a 

healthy watershed

Ozonation, chlorination

La Cache Poudre and 

Big Thompson River 

Watersheds—Fort Collins & 

Greeley, Colorado

Costly sedimentation and 

flood risks associated with 

catastrophic wildfire in forested 

watershed

Wildfire risk management as 

a cost-avoidance strategy in 

the face of extreme and costly 

disruptive events

Off-river reservoir, presedimentation basin, ability 

to blend water from reservoir 

and Poudre, flocculation, 

sedimentation, filtration

McKenzie River Watershed—

Eugene, Oregon

Loss of forested riparian buffers 

to residential development, and 

associated water quality decline 

and incremental increases in 

treatment costs

Forested riparian buffers as 

a cost-reduction strategy in 

a non-regulatory setting in a 

healthy watershed

Chlorination, coagulation and 

flocculation, sedimentation, 

filtration

Upper Neuse River Basin—

Raleigh & Durham, North 

Carolina

Substantial degradation from 

development in heavily forested 

landscape leading to Clean 

Water Act requirements and 

high treatment costs; reservoir 

siltation against backdrop of 

flood and drought risk

Protection of forested riparian 

buffers, wetlands, and 

floodplains as a regulatory 

compliance, cost reduction, 

and risk mitigation strategy in 

a degraded watershed

Ozonation, coagulation, 

two-stage filtration (activated 

carbon and sand filters), UV, 

and chlorination; multiple 

reservoirs

Table ES-1 | Example Natural Infrastructure Strategies & Complementary Built Infrastructure 
Natural Infrastructure 3

conservative assumptions and careful sensitivity analyses can produce actionable results. 

However, being overly conservative about 

costs and benefits can also lead to underestimation of the returns of natural infrastructure.

Figure ES-1 | Example Natural & Built Options 

(millions $)

Medford, 

Oregon

Santa Fe, 

New Mexico

Auburn, 

Maine

Syracuse, 

New York

8

20

5

22

4

30

<1

30+

Total Investment (millions $)

 Natural Infrastructure

 Gray Infrastructure

Economics

1. The economic benefits can be substantial. High source water quality and 

well-regulated flow can reduce the capital and 

variable costs of providing clean and abundant 

water. Numerous studies have affirmed the 

intuitive: High source water quality can reduce 

treatment costs. And across the United States, 

we have seen utilities with high source water 

quality avoid dredging and maintenance costs, 

and even major capital investments, by bypassing elements of the conventional treatment 

process. Similarly, ecosystem-regulated water 

flow can have substantial economic benefits by 

avoiding flood-related damage and maintaining water supply through dry seasons.

2. The financial case can be made. The 

case for natural infrastructure investment has 

been made in several watersheds nationwide, 

and a methodology for “green-gray analysis” 

is available to compare the financial merits 

of integrated natural and built infrastructure 

alternatives (Figure ES-1). 

3. Natural infrastructure investments are 

actionable despite uncertainty. Ultimately, the strength of natural infrastructure 

economic analyses depends on the robustness 

of the underlying science. Even where detailed 

scientific modeling has not been conducted, 

“There are risks and costs to a program of action, 

but they are far less than the long-range risks and 

costs of comfortable inaction.”

- John F. Kennedy
 4 WRI.org

Science

4. The scientific foundation is imperfect, 

but robust. The water-related functions 

of healthy forested landscapes are wellestablished; maintaining healthy, forested 

landscapes and implementing best practices in 

forestry management can be effective strategies for promoting source water quality and 

regulating flow. For example, forests help to 

anchor soil against erosion, promote infiltration and minimize overland flow, prevent 

nutrient delivery to streams, minimize the 

impact of rain-on-snow events, and maintain 

snow pack later into the spring. Best practices 

in forest management can help maintain these 

critical functions and mitigate the potentially 

negative impacts of activities such as timber 

harvest and road construction.

5. Inherent variability poses challenges 

for quantification. While the science is 

robust, there is inherent variability across and 

within watersheds in the magnitude of water 

resources impact of a given land cover change 

or management practice. Quantitative watershed models can help to address part of this 

variability. These tools are advancing in reliability and usability, and can account for a portion of the variability in natural ecosystems. 

While there is a growing number of applications of these models, modeling remains relatively resource-intensive and results inevitably 

come with some level of uncertainty.

6. Risks and uncertainty can be managed.

Despite residual scientific uncertainty, natural 

infrastructure options are actionable. Given 

robust but imperfect science and the need 

to prevent the perfect from being the enemy 

of the good—as in all things—the dominant 

approach to natural infrastructure investments 

has been to manage uncertainty and maximize 

cost-effectiveness by a) prioritizing types 

of interventions (e.g., easements and best 

management practices) and the distribution of 

those interventions throughout the watershed, 

b) carefully monitoring the response of water 

resources throughout implementation, and 

c) managing investments adaptively to 

maximize outcomes.

Opportunity

7. The opportunity is widespread. Watersheds across the United States have opportunities to integrate natural infrastructure 

alongside critical built infrastructure. The 

fundamental conditions needed for natural 

infrastructure to be a potentially viable solution to water needs are quite basic and found 

in diverse watersheds across the United States. 

Unfortunately, costly water management 

challenges are increasingly widespread in the 

United States. Where there is a clear connection between these challenges and ecological 

conditions on the landscape—for example, 

loss or degradation of natural ecosystems due 

to development, wildfire, invasive species, or 

unsustainable forestry—the natural infrastructure investment approach can play a role.

8. Local decision maker participation is 

critical for success. The success of the 

approach depends on the ability of natural 

infrastructure champions to make the case to 

local decision makers and stakeholders, and 

to articulate a vision of success. Early engagement efforts with decision makers should be 

careful to understand and take into account 

their priorities, preferences, and perceptions 

related to water delivery, source water management, and natural infrastructure. 

Design & Implementation

9. Cultivating partnerships is an important first step toward success. In each of 

the successful attempts to build robust programs for investment in natural infrastructure, 

essential components have been collaboration 

among a variety of stakeholders and experts, 

and the emergence of champions within stakeholder groups to push the program forward. 

The co-benefits associated with natural infrastructure—benefits such as carbon sequestration, wildlife, and recreation—can motivate a 

wide range of stakeholder groups to partner 

with water utilities and other beneficiaries. 

These partnerships can be critical to success 

as they expand available resources, increase 

capacity, and provide political capital.
Natural Infrastructure 5

10. Landowner participation is essential in 

privately owned watersheds. Landowners 

are highly independent, value their autonomy, 

and generally engage in agriculture or forestry 

because it is a way of life as well as an economic enterprise. In addition to the financial 

inducement being offered, landowners consider how the program is designed and administered as part of their participation decision.

11. Investment must be large-scale and sustained. A long list of public, private, and hybrid 

public/private finance mechanisms is available 

to get dollars on the ground to restore, enhance, 

protect, and manage natural infrastructure for 

water resources. The primary challenge is to 

select a finance mechanism (or combination of 

mechanisms) that is capable of gaining the necessary political support for adoption, while also 

generating sufficient funds for meaningful and 

sustained investment in natural infrastructure.

Figure ES-2 | The “Actor Network” in Successful Natural Infrastructure Efforts

LOCAL CONVENERS 

AND ADVOCATES

Groups responsible for building the 

necessary capacity among local 

stakeholders required to establish 

an incentives system. Conveners 

are typically organizations with a 

local or regional focus, however 

national/international institutions 

can fill this role as well

MAINSTREAMERS

Organizations responsible for 

building national and international 

support for natural infrastructure 

approaches by building capacity 

among decision makers, 

exchanging knowledge and 

experiences, connecting pilot 

projects and creating consistency 

within the field 

IMPLEMENTERS 

/ TRANSACTION 

BROKERS

Entities that provide upfront 

financing, expertise to the production 

of watershed services, and/or 

aggregation of supply and risk 

INVESTORS/

BENEFICIARIES

Investors in natural infrastructure 

for enhanced watershed services 

where the business case has 

been made; typically utilities, 

governments, and businesses

SUPPLIERS

Landowners who supply watershed 

services by conserving or restoring 

ecosystem functions on their land

PHILANTHROPIES/

PRIVATE CAPITAL

Financing institutions that can 

provide upfront capital in the 

form of grants, loans, and 

investments to establish 

natural infrastructure projects

ACADEMICS/

MODELERS

Community responsible for 

advancing the field of ecosystem 

science through metric and 

model development and by 

seeking scientific answers 

AGENCIES

Agencies may signal demand 

by enforcing regulatory policy 

on utilities, businesses and other 

groups. Agencies may also facilitate 

opportunities through grant-making 

and cost shares

TOOLS

Software and equipment developed 

to facilitate the generation, verification 

and transaction of watershed services 

while providing transparency and 

public outreach 

KEY | Money Watershed Services Relationships Regulations Knowledge
 6 WRI.org

While there are several challenges facing the natural infrastructure approach, several forest-based 

water management efforts have been successfully 

implemented in watersheds across the United 

States to provide clean and abundant source water 

at reduced cost and with a suite of co-benefits for 

people and nature. These efforts and the lessons 

they produced are profiled in this guide.

From experience with the natural infrastructure 

approach, a set of “action items” are evident for 

both watershed stakeholders and the broader 

community of practitioners working to scale up the 

approach nationwide.

Action items for water managers, conservationists, 

and other stakeholders at the local watershed level

1. Assess the watershed for ecological condition 

and trends causing water-related issues tied to 

substantial current or projected costs;

2. Engage with key stakeholders and decision makers early and often to articulate a vision of success, expand capacity for program development 

and implementation through strategic partnerships and consultation with experts, and build on 

the lessons of past successes and failures;

3. Conduct necessary economic analyses to 

determine if natural infrastructure is the 

best approach and to make the case for 

financial investment;

4. Assess a broad array of finance mechanisms 

with an eye toward securing large-scale 

“anchor funding” as well as a broader “funder 

quilt” to ensure meaningful and sustained 

investment over the long term;

5. Prioritize investments across parcels and 

interventions (i.e., reforestation or forest best 

management practices), monitor outcomes, 

and adapt investments accordingly.

Action items for the broader community 

of practitioners

1. Actively participate in the community of 

experts, facilitators, consultants, and “mobilizers” seeking to scale up integration of natural 

infrastructure into water management strategies, in order to leverage others’ efforts;

2. Assist in securing large-scale natural infrastructure funds such as bonds by ballot measure and natural infrastructure “set-asides” like 

the 20 percent green infrastructure requirement in the State Revolving Funds (SRS);
Natural Infrastructure 7

3. Expand research to quantify forest-to-water 

connections and improve the reliability and 

accessibility of watershed models;

4. Improve accounting standards to enable operations and maintenance spending on natural 

infrastructure by public entities as part of 

normal business practices;

5. Build awareness among the water resource 

management industry, the urban planning 

field, ratepayers, and taxpayers of the importance of natural infrastructure as a cost-effective and beneficial element of an integrated 

solution to emerging water issues. 

Perhaps the two most important lessons learned 

from natural infrastructure efforts to date are the 

power of individuals and the importance of partnerships. Ultimately, the most effective messengers 

to decision makers and stakeholders affecting 

natural infrastructure decisions at the local level are 

influential individuals within their own institutions. 

Behind successful natural infrastructure programs 

are consistently the often-unsung source water 

coordinators, conservation staff, and sustainability 

officers creating real change. 

These champions can be those in positions of 

power, but they need not be. A source water coordinator or manager in a public utility, a risk manager 

in a private business, or a water program manager 

in a state environmental agency can have immense 

impact within their respective institutions—many 

have been creating that impact for decades. These 

champions lead and inspire by offering fresh ideas 

and creativity where precedent might otherwise 

win the day—and by coming to the table with the 

evidence base to support those ideas. They identify 

likely challenges within their institutions and seek 

external support where appropriate to overcome 

those challenges.

In the source water context, these champions 

may need to help decision makers step outside 

the bounds of their primary roles and grow their 

competencies through various learning processes. 

Water utilities and municipalities that have been 

able to innovate in the face of the internal and 

external challenges they face recognize that bringing the natural infrastructure approach to scale will 

require institutional change in combination with a 

concerted effort to provide external cover by raising 

public awareness. 

At the same time, successful cases have illustrated 

the importance of leveraging the resources, capacity, 

and political capital of a wide set of partners—including those who have not traditionally partnered with 

water utilities. The wide range of benefits offered by 

natural infrastructure—not just for water but also 

wildlife, recreation, climate, and rural economic 

development—offers a salient opportunity to build 

new coalitions across utilities, rural landowners, 

conservation groups, and private businesses. 

But the task is not easy. As one utility staffer put 

it, if this were so, we’d have been doing it at scale 

a long time ago. This guide can be a resource for 

these individual champions and their partners as 

they work to gain traction for investment in natural 

infrastructure in their watersheds.

Natural Infrastructure 9

OVERVIEW

Background

In the late 1990s, in the face of growing 

development pressures in its largely privatelyowned Castkill and Delaware watersheds, New 

York City initiated a plan to protect its source 

water and avoid the cost of an $8–$10 billion 

filtration plant. Strategic investments in its 

2,000-square-mile watershed were estimated 

to cost $1.5 billion. This watershed program 

staved off the need to build a filtration plant 

and provided an annual $100 million injection 

to the rural economy in the upper reaches of 

the watershed. The program provides financial 

incentives to forestland owners to keep forest 

intact and to farmers to fence off livestock, 

as well as payments to local contractors to 

install septic tanks and stormwater protection 

measures (Kenny 2006).

The fundamental premise of this highly cited 

example, and the “natural infrastructure” 

approach more generally (Box 1), is that 

healthy natural ecosystems provide essential 

services to water utilities, governments, and 

businesses—from water flow regulation and 

flood control to water purification and water 

temperature regulation. Investments in natural infrastructure can complement essential 

concrete-and-steel built infrastructure components as part of an integrated system for 

water treatment and storage. This integrated 

approach is commonly referred to by the U.S. 

Environmental Protection Agency (EPA) and 

the industry as the “multi-barrier approach.” 

Natural Infrastructure: An Underutilized Solution 

| Todd Gartner, World Resources Institute

| James Mulligan, Green Community Ventures
 10 WRI.org

A Critical Moment

Whether building on rich histories of watershed 

protection or creating new initiatives to address 

emerging threats, water resource managers 

and beneficiaries nationwide now face a critical 

moment. Much of America’s aging built infrastructure for drinking water is nearing the end of 

its useful life (American Society of Civil Engineers 

2013). Yet funds for investment in water infrastructure are drying up in an era of fiscal austerity. 

As utility rates for drinking water are increasing 

faster than both inflation and household incomes 

(Harris 2012), water resource managers are seeking 

lower cost solutions to meet water infrastructure 

demands of the 21st century. 

These factors provide a unique window of opportunity to integrate natural infrastructure into water 

resource management efforts to keep costs down, 

enhance resilience to climate change, and provide 

a suite of co-benefits for the air we breathe, the 

places we play, the wildlife we share our landscapes 

with, and the climate we live in. Recognizing that 

an integrated approach to securing clean drinking 

water and other watershed services is cost-effective 

and common sense (Box 3), stakeholders and water 

utilities in a number of watersheds nationwide are 

looking to natural infrastructure as part of a solution to growing challenges.

Opportunity

In the forest-to-water setting, opportunities to 

secure and invest in natural infrastructure tend 

to be forested watersheds that face challenges like 

projected land use change, detrimental land management practices, or risk of extreme events like fire 

and flood. The examples in Table 1 below illustrate 

the importance of forests and other ecosystems to 

potable water providers in a variety of ecological, 

financial, and regulatory settings. Detailed case 

studies can be found in Part 3.

While the ecological, regulatory, and “built infrastructure” context is unique for each of these watersheds, 

they all have opportunities to capture cost savings by 

investing in forest-based natural infrastructure, while 

continuing to harness essential built infrastructure 

components in parallel. This type of opportunity is 

common for many watersheds nationwide—particularly those relied on for drinking water.

BOX 1 | KEY TERMS DEFINED

The terminology in the water resource world, including 

the three terms below, can often have different meaning 

to different actors in different contexts. Because the three 

terms below are critical to the content and clarity of this 

guide, we offer our own definitions of these terms.

Source Water Protection

Refers to the protection of water quality, quantity, 

timing of flows, and associated benefits at the water’s 

source—before it reaches the intake of a drinking 

water system. In this guide, we are most interested 

in source water protection through investments in 

“natural infrastructure.”

Built Infrastructure

Refers to the human-engineered infrastructure for water 

resources such as treatment plants and dams.

Natural Infrastructure

Refers to the “strategic use of networks of natural lands, 

working landscapes, and other open spaces to conserve 

ecosystem values and functions and provide associated 

benefits to human populations” (Allen 2012). Forests, 

wetlands, riparian buffers, and other natural elements 

on the landscape can comprise natural infrastructure 

when strategically used and managed to provide services 

for communities, such as through land acquisition and 

conservation easements, low-impact development, 

conservation practices on agricultural and forest lands, 

and even beaver dams. As such, it is commonly referred to 

as “watershed protection,” “land conservation,” or several 

other more traditional terms. Natural infrastructure is also 

sometimes referred to as “green infrastructure”—although 

the latter term is also used more broadly for things such 

as rain gardens or even water meters and energy efficient 

equipment (Allen 2012). 

Natural infrastructure can be secured through a variety 

of means. In this guide, we are primarily interested 

in incentive-based approaches, by which financial 

incentives and/or technical assistance are provided to 

landowners to conserve, sustainably manage, and/or 

restore ecosystems to provide one or more watershedrelated ecosystem services. Such investments typically 

involve downstream beneficiaries paying upstream 

landowners. Use of incentives can be an efficient and 

viable approach to securing natural infrastructure. 

However, many of the successful efforts to date have 

used a combination of approaches, including non–

incentive-based mechanisms like zoning ordinances.
Natural Infrastructure 11

While concrete-and-steel built infrastructure plays 

a critical role in water storage and treatment, 

natural infrastructure can reduce or avoid costs 

and enhance water services and security,serving 

alongside necessary built infrastructure 

components as part of an integrated system to 

cost-effectively deliver safe drinking water.

WATERSHED MAJOR ISSUES 

NATURAL 

INFRASTRUCTURE 

STRATEGY

COMPLEMENTARY 

BUILT COMPONENTS

Crooked River Watershed—

Portland, Maine

Forest conversion for 

development and need to 

maintain filtration avoidance 

waiver

Conservation easements, 

land acquisition, and best 

management practices as a 

cost-avoidance strategy in a 

healthy watershed

Ozonation, chlorination

La Cache Poudre and 

Big Thompson River 

Watersheds—Fort Collins & 

Greeley, Colorado

Costly sedimentation and 

flood risks associated with 

catastrophic wildfire in forested 

watershed

Wildfire risk management as 

a cost-avoidance strategy in 

the face of extreme and costly 

disruptive events

Off-river reservoir, presedimentation basin, ability 

to blend water from reservoir 

and Poudre, flocculation, 

sedimentation, filtration

McKenzie River Watershed—

Eugene, Oregon

Loss of forested riparian buffers 

to residential development, and 

associated water quality decline 

and incremental increases in 

treatment costs

Forested riparian buffers as 

a cost-reduction strategy in 

a non-regulatory setting in a 

healthy watershed

Chlorination, coagulation and 

flocculation, sedimentation, 

filtration

Upper Neuse River Basin—

Raleigh & Durham, North 

Carolina

Substantial degradation from 

development in heavily forested 

landscape leading to Clean 

Water Act requirements and 

high treatment costs; reservoir 

siltation against backdrop of 

flood and drought risk

Protection of forested riparian 

buffers, wetlands, and 

floodplains as a regulatory 

compliance, cost reduction, 

and risk mitigation strategy in 

a degraded watershed

Ozonation, coagulation, 

two-stage filtration (activated 

carbon and sand filters), UV, 

and chlorination; multiple 

reservoirs

Table 1 | Example Natural Infrastructure Strategies & Complementary Built Infrastructure 
 12 WRI.org

Scaling Up in the Face of Challenges

Natural infrastructure efforts face a broad set of 

structural challenges—from the under-pricing of 

water and competition with development for space 

on the landscape, to accounting standards that do 

not allow operations and maintenance spending on 

natural infrastructure as part of normal business 

practices. While these and other challenges can be 

formidable, they are manageable—there are real 

examples of water utilities and stakeholders overcoming each of them. And despite these challenges, 

conditions are ripe for a major breakthrough in 

the practice of turning to natural landscapes to 

safeguard, enhance, and sustain the critical waterrelated services communities rely on.

Raise Awareness

There is a need to raise awareness of the importance and 

value of source water protection. Greater awareness is 

needed by utilities, of the role source water protection 

plays in the multi-barrier approach to providing reliable, 

high quality water at reasonable rates; by utilities and 

their management, of the value of source water protection; 

by consumers, of the benefits and value of source water 

protection; and by stakeholders, of the importance of 

protecting drinking water sources and the priority that 

should be given to drinking water concerns related to 

source water protection.

Enhance Coordination

Programs, efforts, and regulations affecting source water 

protection for drinking water supplies can at times be 

conflicting, redundant, or lacking in focus. There is a need 

for enhanced coordination overall (across all relevant 

operational and stakeholder groups), so that source water 

protection efforts and programs are better integrated and 

work together more synergistically; and among Clean 

Water Act (CWA) and Safe Drinking Water Act (SDWA) 

regulators, both at the state and federal levels, for more 

effective implementation of existing CWA regulations so 

that drinking water interests are more immediately and 

completely addressed.

Provide Support

Several water utilities interviewed that had not developed 

source water protection programs stated they were not 

sure where to begin and/or how to proceed with source 

water protection. It became apparent they might benefit 

from assistance from peers who were further along in the 

process of developing a source water protection program 

for their own utilities. In addition, several utilities lamented 

the shortage of funding for their efforts as well as a 

shortage of funding for technical assistance positions. 

In these ways, there is a need for greater support. 

Specifically, water utilities would benefit most from 

support provided by experienced water industry peers, 

for fellow drinking water professionals trying to plan and 

implement source water protection programs; state and 

federal funding agencies, so that source water protection 

needs are sufficiently addressed (for high-quality water 

sources as well as impaired water bodies); municipal 

officials, who can influence public support of regulatory 

and financial measures to implement source water 

protection; and customers, through water rates.

Increase Recognition

There are issues and efforts related to source water 

protection that should be acknowledged more publicly. 

Successful efforts being made to protect sources of 

drinking water should be noted and praised more 

frequently. Such recognition benefits a water utility and its 

community. Alternatively, regulatory inconsistencies that 

hamper source water protection should also be addressed. 

In these ways, there should be increased recognition 

by the public and the drinking water community, of 

successful source water protection efforts made by water 

utilities (i.e., recognition in terms of praise and extolment); 

and by state and federal regulators, of the inconsistencies 

and shortcomings of existing regulations that should 

be more effectively ensuring the protection of drinking 

water sources (i.e., recognition in terms of awareness and 

acknowledgment of the need to act).

BOX 2 | EXCERPT FROM SOURCE WATER PROTECTION VISION AND ROADMAP 

(SKLENAR & SHAM 2012)

A 2010 source water workshop identified four themes critical to advancing source water protection in the U.S.:
Natural Infrastructure 13

The scientific foundation clearly establishes the 

connections between natural infrastructure investments and water resource outcomes. The business case for investing in natural infrastructure 

as part of a water management strategy has been 

consistently demonstrated, and a framework for 

green-gray financial analysis is available to decision makers to apply in their own watersheds. A 

growing network of experts is emerging to assist 

with program design and development, enhancing 

prospects for scalability and long-term success. And 

a growing number of success stories are offering 

proof-of-concept and lessons learned. Perhaps most 

importantly, many utilities have key staff who have 

been, or have the opportunity to be, transformative 

in addressing many of the barriers identified above. 

Against a backdrop of aging water infrastructure 

and fiscal austerity, the opportunity for natural 

infrastructure to play an increasingly active role 

as part of the solution to water challenges over the 

next several decades is very real.

But the movement toward widespread, landscapelevel investments in natural infrastructure nationwide cannot gain real traction if key decision 

makers in key institutions lack the understanding, 

know-how, and tools needed to act (Box 2). Uncertainty can paralyze decision makers if they lack 

the economic analysis (Chapter 1) to understand 

the value of natural infrastructure, despite robust 

but imperfect science (Chapter 2). Natural infrastructure is likely to be seen as a “soft priority” 

close to the chopping block if decision makers or 

their constituents do not understand the urgency 

of emerging threats (Chapter 3) to source water. 

Decision makers who are ready to act may find 

the task overwhelming without the help of critical 

partnerships (Chapter 4) and a sense of potential 

mechanisms to finance investments (Chapter 5). 

In light of these obstacles, and recognizing the 

power of individuals, this guide is intended to be 

a foothold for those who can champion natural 

infrastructure in water utilities, local conservation 

groups, and private businesses, and who need a 

persuasive case, a road map of next steps, and overarching guidance to begin to integrate the natural 

infrastructure approach into institutional decision making in their watersheds. Throughout, the 

guide highlights lessons learned from early natural 

infrastructure efforts in sections written by utility 

managers, conservation practitioners, and government officials who have championed the natural 

infrastructure approach to water management.

Outline of the Guide

This guide includes the seven chapters in Figure 1, 

divided into three distinct parts: making the case, 

design and implementation, and case studies. Each 

chapter is comprised of contributions from experts 

and representatives from the key stakeholder 

groups who are championing the natural infrastructure approach to water management.

Figure 1 | Guide Chapters

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases
 14 WRI.org

PART 1 | Making the Case for Natural Infrastructure

Part 1 is a reference for early-stage efforts to 

spark decision maker and stakeholder interest 

and dialogue around natural infrastructure.

Chapter 1: The Business Case examines the 

evidence decision makers need to act. The chapter 

establishes connections between source water 

quality and costs of delivering clean and abundant 

drinking water, looks at a methodology and sample 

application for “green-gray” economic analysis, and 

provides examples of past natural infrastructure 

economic analyses and their results. The chapter 

substantiates the core premise that natural infrastructure can be a cost-effective component of an 

integrated system to provide clean drinking water.

Chapter 2: The Scientific Underpinnings

reinforces the business case by laying out the ecological and hydrological connections between various 

natural infrastructure elements and the watershed 

services they produce. The chapter covers both land 

cover-related natural infrastructure (i.e., forests) and 

practices in working forests (e.g., harvest and forest 

road practices). Given imperfect science, the chapter 

offers insights into decision making in the face of 

uncertainty, including modeling and prioritizing 

parcels and practices on the landscape.

Chapter 3: Identifying Opportunity provides 

guidance on the ecological, economic, and regulatory factors that set the stage for natural infrastructure investments. The chapter discusses the 

characteristics of “hotspot” watersheds and gives a 

sense of their geographic distribution. The chapter also provides guidance on beginning dialogue 

with watershed decision makers and stakeholders 

on opportunities for the natural infrastructure 

approach to water management.

PART 2 | Design & Implementation

Part 2 provides guidance on early-stage efforts 

to design and implement a natural infrastructure 

program. It focuses on two critical elements—getting the right players to the table and identifying 

finance options.

Chapter 4: Players at the Table identifies the 

broad set of experts and stakeholders whose participation is essential for the design, adoption, and 

implementation of successful natural infrastructure 

investment programs. The chapter then takes a 

close-up look at one stakeholder group in particular—landowners—including current knowledge on 

landowner preferences and a series of recommendations for engaging landowners in natural infrastructure programs.

Chapter 5: Natural Infrastructure Finance

provides a list of available options for putting dollars on the ground for natural infrastructure. The 

chapter also provides a close-up look at a range of 

innovative finance approaches, from auctions to 

carbon financing.

PART 3 | Case Studies

Part 3 offers a series of case studies that illustrate 

past and current applications of natural infrastructure. The case studies highlight challenges, successes, and lessons learned from the perspective of 

utility managers, conservation practitioners, and 

government agency leadership.

Finally, the editors offer concluding remarks on 

the practice and future of the natural infrastructure.
Natural Infrastructure 15

A strong and compelling case can be made for source 

water protection as an essential and cost-effective 

component and “first line of defense” in an integrated 

approach to public health protection. The “multiple barrier 

approach” refers to the various components in the train 

of providing safe drinking water to the customer—from 

the source (whether ground or surface water), to a water 

treatment facility, through a distribution system, and 

ultimately to the customer at the tap. Among the most 

important and effective strategies that can be deployed 

to protect sources of drinking water is investment in 

natural infrastructure. 

Source water protection (and natural infrastructure 

approaches in particular) makes both good common 

and economic sense. This is particularly true when one 

considers the plethora and ever-increasing number of 

both man-made and naturally occurring contaminants 

threatening sources of drinking water. It is far more 

effective (and typically cheaper) to prevent or reduce 

sources of contaminants at their source than it is to 

treat them at a public water system. A recent study by 

EPA of drinking water source protection efforts in six 

communities around the country concluded that, on 

average, every $1 spent on source-water protection saved 

an average of $27 in water treatment costs (Winiecki 

2012). Several other studies have also found that improved 

source water quality relates to lower treatment and 

chemical costs (Holmes 1988; Postel 2005; Dearmont et 

al. 1998; Espey et al. 1997; Forster et al. 1987; Holmes 

1998, Dearmont et al. 1998; Forster and Murray 2001; 

Freeman et al. 2008). 

A further reason for source water protection is the 

limitation of conventional water treatment technologies. 

Despite our best efforts and sophisticated treatment 

technologies, some contaminants are poorly treated by 

conventional water treatment plants or pass through 

untreated. While not all such contaminants pose a 

human health threat at the levels typically seen, others 

can. Further, the toxicity and carcinogenicity of some 

contaminants are currently poorly characterized. We 

simply do not know how big a problem some such 

contaminants are. Source water protection has an 

important role to play in helping water systems comply 

with regulated contaminant limits as well as in reducing 

or eliminating unregulated contaminants that can pose a 

public health threat when they enter finished water that is 

ultimately delivered to the customer. Indeed, the American 

Academy of Microbiology argued in a 1996 study that 

one of the best tools for reducing the transmission of 

waterborne diseases is the establishment of watershed 

protection programs (Ford & Colwell 1996 in Ernst 2004).

Decision makers at all levels—including state drinking 

water and clean water administrators—can play key 

roles as champions in fostering natural infrastructure 

investment. Their efforts in this regard can be aided by 

compelling case studies (similar to those situations they 

may face in their states), well documented and easy-toaccess reference materials, and consideration of these 

approaches at appropriate points in the planning cycle—

so that they receive the attention they are due.

BOX 3 | NATURAL INFRASTRUCTURE AND SAFE DRINKING WATER

| Jim Taft – Executive Director, Association of State Drinking Water Administrators; Co-Director, Source Water Collaborative

Natural Infrastructure 17

Part 1 

MAKING THE CASE

Chapter 1: The Business Case

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases

KEY TAKE-AWAYS

1. The economic benefits for utilities and other beneficiaries can be 

substantial (Section 1.1). First steps 

should center around engaging with 

decision makers to identify specific 

cost-saving opportunities associated 

with the services provided by natural 

infrastructure. 

2. The financial case can be made. 

Although many decision makers 

have acted without spending on 

detailed economic analyses, tools and 

methods are available to compare the 

costs and benefits of natural and built 

infrastructure side-by-side (Section 

1.2). Determine whether such an 

analysis is needed to motivate action. 

There are several examples from 

other watersheds that can be used to 

illustrate the business case to decision 

makers (Section 1.3).
 18 WRI.org

require explicit financial analyses demonstrating 

the financial returns on investment. Without strong 

metrics to guide investments, some utilities—recognizing the value of natural infrastructure generally 

but unable to quantify that value—are forced to 

operate with a more opportunity-driven approach. 

Indeed, the authors of a 2012 Water Research 

Foundation report noted that “before they will 

authorize related activities, many utility managers 

need to be convinced that source water protection 

is worth the effort and expenditures—there is not 

enough information on the costs and benefits of 

source water protection” (Sklenar and Sham 2012). 

For most utilities, quantifications of economic benefits and costs are not available and may be expensive to obtain. However, the tools (Section 1.2) 

and partners (Section 4.1) needed to pursue these 

metrics are increasingly available to help water 

utilities break the cycle of “opportunism” and adopt 

strategic programs needed to optimize expenditures 

across natural and built infrastructure. 

Ultimately, the business case for natural infrastructure is a story not only of substantial potential cost 

savings, but also of decision making in the face of 

uncertainty. Even discounting direct, private benefits 

to account for this uncertainty, however, the often 

overwhelming public benefits of natural infrastructure can attract a broader “quilt” of prospective 

funders and tip the scales clearly in favor of pursuing 

an approach to water resources management that 

integrates both natural and built components.

Introduction

Water resource professionals increasingly recognize 

the cost-effectiveness and broad-based value of an 

integrated approach to water resource management 

that includes investments in natural infrastructure. 

High source water quality is linked to several potential areas of cost savings related to built infrastructure, including reduced capital costs in the form 

of bypassed treatment processes like flocculation, 

sedimentation, membrane filtration, and activated 

carbon (Section 1.1); reduced dredging and other 

maintenance costs at water storage facilities and 

intakes; and reduced variable treatment costs 

associated with reduced need for chemical inputs 

(Section 1.1). In turn, carefully managed forested 

watersheds are linked to high source water quality 

(Chapter 2). These are foundational links underlying the business case for forest-based natural 

infrastructure for clean and abundant water.

The benefits of natural infrastructure in terms of 

avoided and reduced costs hold up as a general 

principle, but decision makers need to be able to 

justify investments to their constituents—be they 

utility board members, ratepayers, or taxpayers. 

Several utilities have made natural infrastructure 

investments based on an understanding of the 

direction of impact and clear indicators of costeffectiveness—but without extensive and detailed 

cost-benefit analyses (see, e.g., Denver, Colorado 

case in Part 3). Although the return for these utilities is clear in a general sense, other utilities and 

businesses facing a different set of challenges may 
Natural Infrastructure 19

Section 1.1: Source Water Quality and Drinking 

Water Costs 

| Jade Freeman, PhD, Office of Groundwater 

and Drinking Water, EPA 

| Rebecca Madsen, USDA Forest Service (Current Affiliation: Electric 

Power Research Institute)

| Kelley Hart, The Trust for Public Land

A 2008 white paper prepared jointly by EPA, USDA 

Forest Service, and the Trust for Public Land (Freeman et al. 2008) provided a review of the literature 

for empirical evidence supporting the relationships 

between source water quality and treatment costs, 

as well as original econometric analysis.

If incoming raw water quality is high, treatment 

plants may be able to bypass some of the processes 

in conventional treatment (Box 4). For example, in 

a dataset of 430 U.S. water utilities, Holmes (1988) 

found that most utilities with raw turbidity levels 

over 10 Nephelometric Turbidity Units (NTUs) had 

added a separation process, such as sedimentation 

or flotation (i.e., conventional versus direct filtration process—see Box 4). This indicates that there 

may be a sediment-related water quality threshold, 

at which utilities must make capital investments in 

conventional treatment processes. In other cases 

where water quality is poor, plants may need to 

augment conventional treatment with additional 

processes like membrane filtration or activated 

carbon (Cooperative Research Center 2003). 

Water utilities may be able to avoid capital costs 

for treatment processes like flocculation and 

sedimentation (Holmes 1988), and more advanced 

processes like membrane filtration and activated 

carbon by maintaining high source water quality 

through natural infrastructure investments. For 

example, seven U.S. cities with excellent water 

quality have saved from $500,000 to $6 billion in 

avoided water treatment infrastructure costs (e.g., 

see Section 1.3).

Reduced sedimentation in source water also 

prevents sediment build up in reservoirs over time, 

thereby maintaining critical water storage capacity 

and reducing dredging costs. In extreme cases, sedimentation in source water can clog water intakes, 

posing additional repair and maintenance costs 

for a water utility or other water user. The Denver 

Water Board case in Part 3 illustrates these issues.

BOX 4 | KEY TREATMENT 

PROCESSES DEFINED

Conventional treatment processes include:

Coagulation/Flocculation – Removes dirt and other 

particles suspended in water. Coagulation destabilizes 

negatively charged contaminants with aluminum or iron 

salt. Flocculation accelerates particle collision by gentle 

mixing and aggregates destabilized particles 

into larger precipitates.

Sedimentation – Settles out heavy particles (floc). 

The majority of particulate matter is removed for a 

refined filtration stage.

Flotation – Aerates the water to float finer particles 

onto the surface for removal by skimming, as part of 

the clarification process.

Filtration – Removes even smaller particles by passing 

water through filters—often comprised of anthracite 

and sand.

Disinfection – Kills any bacteria or microorganisms in 

the water with chlorine or some other disinfection method.

Storage and Transport – Holds water while 

disinfection takes place and then delivers water.

Select nonconventional treatment processes include:

Membrane Filtration (microfiltration and 

ultrafiltration) – An alternative to rapid sand filtration 

in conventional treatment, membrane filtration features 

smaller pore sizes in the filter in order to remove suspended 

solids, turbidity, some colloids, bacteria, protozoan cysts, 

and viruses. The process requires additional operational 

considerations relative to sand filtration. 

Activated Carbon – Used to absorb natural organic 

compounds, taste and odor compounds, and synthetic 

organic chemicals.

See EPA’s website for a more detailed description of 

conventional and nonconventional treatment processes. 
 20 WRI.org

In addition to large capital and maintenance cost 

savings related to high water quality, treatment 

plants with high-quality raw water may save on 

variable costs as well. For example, plants may need 

to add more chemicals like coagulants, disinfectants, 

and pH adjusters as water quality degrades (Dearmont et al. 1998). In an analysis of over 100 drinking 

water price models (directly related to cost), Espey 

et al. (1997) found weather to have an effect on water 

price, presumably through sediment and pollutant 

loads associated with storm flows. While surveying 

24 treatment plants, managers informed Forster 

(2001) that chemical costs were the variable costs 

most affected by raw water quality. 

Four economic studies investigated the effect of 

raw water turbidity levels on drinking water treatment costs (Forster et al. 1987 from Holmes 1988; 

Holmes 1998; Dearmont et al. 1998; Forster and 

Murray 2001). All studies reported a positive relationship between sediment or turbidity levels and 

drinking water treatment costs. Elasticity reported 

in the studies indicated that a 1 percent increase in 

sediment or turbidity levels would lead to a 0.07–

0.30 percent increase in water treatment costs. 

All of the studies assumed that fixed costs such as 

capital investments would not vary over the short 

term and thus looked only at variable costs. While 

the studies differed in some of the variables used in 

the cost equations, all studies used either turbidity 

or sediment loading rates as an indicator of raw 

water quality. Another economic study determined 

treatment costs by using water demand and supply 

models (Piper 1998). The study found that incoming water quality, the volume of water treated, 

the population density of the service area, and the 

source of water supplies all significantly affected the 

cost per unit of water delivered. 

Freeman et al. (2008) tested the relationship 

between source water quality and chemical treatment costs. The study found that treatment cost 

had a significant positive relationship with total 

organic carbon (TOC), and a significant negative 

relationship with a water quality index (comprised 

of turbidity, TOC, and alkalinity). In other words, 

higher water quality is related to lower treatment 

cost. These findings reinforce the intuitive—that it 

costs more to treat lower quality water. 

However, it is difficult to create a predictive model 

for the cost response of changing water quality for 

any given treatment plant. Within the sample of 60 

treatment plants in Freeman et al. 2008, there are 

differences in raw water sampling methods; differences in the type of water body used for source 

water; a rich diversity in the sequences of treatment 

and types of chemicals used; differences in climate, 

soil, and geography; and variations in the price of 

chemicals. In addition, water treatment plants often 

apply excessive treatment to their raw water. For 

example, some operators were seemingly not altering chemical treatment on the basis of raw water 

quality fluctuations, and some were systematically 

treating beyond required standards as a precaution. This would have the effect of dampening the 

potential impact of changes in source water quality 

on treatment costs. Moreover, it would be difficult 

to model changes in other variable costs like labor 

and part replacement due to differences in reporting and accounting procedures.

Despite these challenges, the economic literature 

strongly affirms the relationships between water quality at a drinking water intake and treatment costs. 

It is clear that poor 

water quality at a 

drinking water intake 

can be an indicator of 

high treatment costs.
Natural Infrastructure 21

Section 1.2: Green-Gray Analysis

| John Talberth, Ph.D., Erin Gray, Logan Yonavjak, and Todd Gartner, 

World Resources Institute

“Green-gray analysis” (GGA) is a type of investment 

analysis (cost-benefit analysis or cost-effectiveness 

analysis, depending on the situation) that provides 

a basis for considering both natural infrastructure 

(green) and built infrastructure (gray) alternatives. GGA is in its infancy and has yet to permeate 

public infrastructure investment decisions in a 

consistent, accessible, and robust manner. As a 

result, ecosystem-based options are still largely left 

out of investment decisions. While calculating the 

costs and benefits of built infrastructure is relatively 

straightforward, there is no formalized methodology for placing natural infrastructure costs and 

benefits on equal footing with built infrastructure 

costs and benefits. This methodological gap presents a formidable barrier to public infrastructure 

investment managers contemplating investment 

in natural rather than built infrastructure (Forest 

Research 2010).

Green-Gray Analysis in Action

Sebago Lake in Maine contains some of the cleanest 

water in the Northeastern United States. It is also 

the primary drinking water reservoir source for 

the Portland Water District (PWD), and supplies 

drinking water to over 200,000 people daily. PWD 

currently qualifies for filtration avoidance under the 

EPA 1989 Surface Water Treatment Rule. The rule 

waives public water systems from requirements 

to install filtration systems as long as concentrations of turbidity and either fecal or total coliform 

are maintained at or below regulatory baselines 

through land use practices upstream.

In recent years, it has become clear that upstream 

development, deforestation, and population 

growth trends may jeopardize the filtration waiver 

and force PWD to install a conventional filtration 

system—a present value cost of $97 to $155 million over 20 years. For example, the U.S. Forest 

Service determined that areas of the Sebago Lake 

watershed are at high risk of forest conversion 

from development pressure, which, coupled with 

unsustainable land use practices, is a major threat 

to water quality (Gregory et al. 2009). In response, 

the community is actively investigating natural 

infrastructure alternatives that would minimize 

the chance of losing the waiver and otherwise help 

reduce its water treatment costs. Using the GGA 

methods discussed below, we completed a preliminary analysis to provide a sense of economic 

tradeoffs involved and to identify data gaps and 

parameters that would need to be addressed for a 

more complete analysis. 

Using a cost-effectiveness analysis (CEA) framework, we compared the cost of a new filtration 

plant with investment in five forest-based natural 

infrastructure elements over the next 20 years 

that would mutually help retain the existing high 

quality waters of the Sebago Lake Watershed. These 

included riparian buffers, upgrades to culverts 

posing a significant threat to water quality due to 

risk of failure in severe storm events, sustainability 

certification of future timber harvests, reforestation 

in riparian zones, and conservation easements. The 

quantity available and costs associated with the 

natural infrastructure portfolio were determined 

through on-site consultations with stakeholders 

throughout the watershed, review of publically 

available data, and GIS analysis (see description of 

the Conservation Priority Index in Section 2.1).

Binary green-gray analysis can illustrate clear 

tradeoffs. However, the use of a filtration waiver as 

a “hinge point” creates complications. The political nature of decision making related to the waiver 

makes it not easily “modeled.” As a result, analysts 

are forced to make conservative assumptions 

about the condition of the watershed needed to 

maintain the waiver. However, even if the waiver is 

maintained over the study period, a filtration plant 

may eventually be required. There has been good 

dialogue with utility professionals around this issue. 

Ultimately, “permanence” is not a concept water 

resource managers can work with, given a changing 

ecological, technological, and regulatory landscape. 

Despite this reality, precluding the need for major 

capital investments over a 20–30 year period—a 

typical lifespan of built infrastructure before it 

needs substantial capital reinvestment—can be 

a worthwhile investment, particularly given the 

technological advances in built infrastructure that 

may occur over that period. 

With these issues in mind, we conducted a preliminary analysis comparing the present value of costs 

and benefits for natural infrastructure and built 

infrastructure alternatives over a 20 year period. 
 22 WRI.org

Since this analysis was preliminary, it did not 

include detailed biophysical modeling to connect 

natural infrastructure elements to water quality 

outcomes; instead, conservative assumptions were 

made regarding the scale of natural infrastructure investments required. The impacts of those 

assumptions were then tested by running scenarios 

with different natural infrastructure cost and 

effectiveness estimates. Also note that the analysis 

does not consider the effect of the natural option 

in reducing variable treatment costs by improving 

source water quality, nor does it consider the range 

of ancillary benefits associated with the natural 

option. The results simply reflect the estimated 

costs associated with a new filtration plant relative 

to the natural infrastructure investments needed to 

avoid building that plant.

Our bottom-line finding under the expected scenario (Figure 2) is that the natural infrastructure 

option represents a cost savings of more than $12 

million over 20 years, even when excluding public 

benefits such as carbon sequestration and Atlantic 

salmon habitat.

Given the uncertainty associated with the lack of 

underlying biophysical modeling, we tested this 

finding by running the analysis under different 

assumptions regarding the efficacy of the natural 

infrastructure measures, and various cost estimates 

for initial and annual costs of the alternative investment portfolios. Under an optimistic scenario for 

natural infrastructure (Figure 3), the option would 

generate savings of $110 million.

Under the least optimistic scenario—which assumes 

lower-bound cost estimates for the membrane 

filtration system, high use of costly conservation 

easements, and residual risk of waiver loss of 25 

percent—the natural infrastructure option would 

represent as much as a 46 percent increase in costs. 

However, even with these pessimistic assumptions, 

the natural option is economically superior when 

the wide range of ancillary benefits is considered. 

Based on a combination of empirical data on the 

ground and calibrated non-market benefits transferred from other settings, non-market benefits 

from carbon sequestration1

 and Atlantic salmon 

habitat alone are estimated to amount to $72 to 

$125 million over a 20 year timeframe. While it is 

Figure 2 | Preliminary Analysis for Portland, Maine—Baseline Scenario ($ millions)

$44

$106

$118

Reforestation 

(24,121 acres)

Riparian Buffers 

(1,602 acres)

Conservation 

Easements 

(10,936 acres)

Culvert Upgrades 

(110 units)

Forest Certification 

(4,699 acres)

Total Green Savings Membrane 

Filtration

$29

$29 $4 $0.1

$12
Natural Infrastructure 23

typically beyond the statutory authority of public 

utilities to raise rates for such non-water-related 

benefits, PWD is interested in the public benefits of 

its investments, and these benefits and others open 

the door to other potential funders such as land 

trusts and philanthropies.

Preliminary analyses like these can be used to 

determine whether a more in-depth study is warranted to pinpoint expected costs and savings. In 

this case, a “phase 2” analysis, drawing on biophysical modeling and addressing variable costs for PWD 

and potential carbon credit sales, would provide 

greater confidence that the prescribed natural 

infrastructure would stave off the need to build a 

filtration plant for the expected duration of time 

(20 years). In the meantime, PWD has committed 

to paying up to 25 percent of the cost of conservation easements in its watershed, while land trusts 

provide the remainder (Case 3 in Part 3).

Toward More Widespread and Robust 

Applications of GGA

Three insights emerge from our PWD case study. 

First, while there are certainly complexities 

involved, natural infrastructure investments can 

indeed be presented in a manner commensurate 

with conventional gray investments so the two can 

be compared dollar for dollar, apples to apples, by 

public investment analysts. This suggests that, once 

fully developed, a GGA methodology can be a standard part of infrastructure investment decisions for 

a wide variety of settings. 

Second, to be actionable, a GGA must rely on either 

highly conservative assumptions or robust underlying biophysical or econometric modeling to link each 

natural infrastructure component in the portfolio 

with the outcome sought. Thus, as GGA applications 

proliferate, availability of robust modeling capabilities will be key if these analyses are to give full credit 

to the potential returns of natural infrastructure. 

Figure 3 | Preliminary Analysis for Portland, Maine—Optimistic Scenario ($ millions)

$44

$155

Reforestation 

(24,121 acres)

Riparian Buffers 

(1,602 acres)

Conservation 

Easements 

(10,936 acres)

Culvert Upgrades 

(110 units)

Forest Certification 

(4,699 acres)

Total Green Savings Membrane 

Filtration

$15

$16

$12 $1 $0.1

$111
 24 WRI.org

Third, the underlying biophysical modeling may 

not completely resolve uncertainty associated with 

natural infrastructure outcomes. Thus, any GGA 

must place a heavy emphasis on identifying and 

mitigating risk and uncertainty through portfolio 

design (i.e., an integrated green-gray approach), 

analytical adjustments (i.e., modeling the risk of 

failure), and sensitivity analysis. Nevertheless, 

and as demonstrated by the PWD case study, 

natural infrastructure may represent a significant 

enough source of savings to warrant selection 

even under conditions of uncertainty. GGA that 

incorporates more accurate cost estimates and 

site-specific biophysical modeling will help investment analysts make a more convincing case for 

natural infrastructure. 

A Standard GGA Methodology

The GGA conducted in Portland, Maine, serves 

as an example for water utilities. Indeed, stakeholders in Fort Collins, Colorado, are investing in a 

similar analysis for their watersheds. A replicable 

GGA methodology can be one important step 

forward for scaling up natural infrastructure 

investments nationwide.

Drawing on standard methods of alternative investment analysis, we can distill six key components for 

an effective methodology:

1. Clearly specify the investment objective 

and constraints. Although intuitive, this 

step is essential for getting the math right, 

which involves making sure all relevant economic benefit and cost variables are included 

in the right units and in the right place in the 

investment tradeoff equations.

2. Develop portfolios that include both 

green and gray investments. In each 

infrastructure investment situation, there may 

be one or more gray, and likely several green, 

investment options under consideration. 

Developing a portfolio of gray options is fairly 

straightforward; technologies are relatively 

well established and understood. There is less 

familiarity with green options, although the 

literature on the number and applicability of 

various natural infrastructure solutions is rapidly evolving.2

 In constructing green portfolios, 

there are several unique aspects to consider 

such as physical constraints (i.e., there are 

only so many streams where riparian buffers 

could be restored), the need to incorporate 

redundancy (i.e., replanting two acres of trees 

instead of one in case one burns down) and 

sequencing (i.e., obtaining water rights before 

constructing wetlands).

Common Analytical 

Limitations:

1. Lack of detailed 

biophysical modeling;

2. Need to make 

(conservative) 

assumptions; and

3. Full range of benefits 

not quantified.
Natural Infrastructure 25

3. Model outcomes. This is perhaps the trickiest aspect of GGA, as noted in the case of PWD. 

Quantitatively establishing the relationship 

between the level of investment in any one 

natural infrastructure measure and the environmental outcomes requires careful modeling—biophysical, probabilistic, econometric, 

or some other approach that relates changes 

in ecosystem function to changes in economic 

services provided. In situations where there are 

inadequate resources for robust modeling or 

where there may be little scientific information 

to go on for the natural infrastructure components at hand, the trickiest step is documenting 

assumptions about biophysical relationships.

4. Quantify present value costs and 

benefits of individual green and gray 

measures. Before portfolios of green or 

gray options are considered, each individual 

measure needs to be analyzed by itself. Both 

green and gray options must be analyzed on 

a common platform so that costs and benefits 

can be directly compared or combined. The 

gray infrastructure option should serve as the 

baseline since in most cases GGA is undertaken 

to explore alternatives to some impending gray 

investment decision, and not vice versa. Adopting gray as the baseline requires evaluation 

of green options within the general analytical 

framework offered by standard infrastructure 

investment methods. The EPA provides a useful 

synopsis of standard “two stage” discounting 

to evaluate gray infrastructure investments in 

terms of present value costs, net present value, 

and cost-benefit ratio (EPA 2009). Present 

value costs and benefits of natural infrastructure can be modeled in precisely the same way, 

albeit with a few complexities. 

5. Compare investment portfolios. At the 

heart of GGA is alternative investment analysis 

to compare green against gray, or different 

combinations of green and gray together. Once 

the benefits and costs of individual green or 

gray measures are calculated, the next step 

is then to compare investment portfolios. 

Depending on the investment objective, the 

comparison is carried out by using either 

cost-benefit analysis (CBA) or cost effectiveness analysis (CEA). CBA is a technique used 

to estimate and sum up (in present value 

terms) the future flows of benefits and costs 

of policy alternatives to establish the worthiness of undertaking the stipulated activity 

against some set of alternatives. CEA on the 

other hand is a technique for identifying the 

least cost option for meeting a specific outcome. In either CEA or CBA, single solutions 

can be sought by way of optimization or the 

analysis can compare two or more discrete, 

exogenously assembled investment portfolios 

that can consist of green and gray measures 

together or green versus gray.

6. One must account for risk and uncertainty. Like built infrastructure, natural 

infrastructure investments can be risky and 

uncertain. Sources of risk include the possibility that floods, fires, insect outbreaks, extreme 

drought, and climate change significantly 

affect the function of natural infrastructure 

over the long run. Sources of uncertainty 

include poor existing data on implementation costs, speculative relationships between 

natural infrastructure elements and the 

environmental outcome sought, and lack 

of understanding about important land use 

trends, market trends, landowner behavior, or 

policy or regulatory changes that have bearing 

on the investment decision. Particularly where 

natural infrastructure avoids capital costs for 

built infrastructure elements, future changes 

in regulatory requirements can affect envisioned cost-effectiveness for a water utility. 

Risk and uncertainty can be dealt with in two 

fundamental ways—through project design 

and through project analysis. Redundancy, or 

having two or more natural infrastructure elements included to achieve the same outcome, 

is one way to reduce risk and uncertainty in 

the design of natural infrastructure investment 

portfolios. With respect to analysis, standard 

approaches for incorporating risk and uncertainty include sensitivity analysis, scenarios, 

and use of expected values.
 26 WRI.org

For example, some natural infrastructure investments reduce or eliminate the need for an upfront 

capital cost, some reduce or eliminate certain 

operating costs for the utility, and some do not 

reduce costs but provide greater benefits for a given 

investment. The business cases also measure a 

range of different natural infrastructure benefits. 

For example, some cases focus on the water filtration benefits of natural infrastructure for drinking 

water, while others focus on temperature reduction benefits. Finally, the results of each analysis 

are also presented over inconsistent time periods, 

and depending on the size of a utility, the political 

landscape, the utility’s financial situation, and many 

other factors, a given investment in natural infrastructure may have different impacts. 

Figure 4 | Example Natural & Built Options 

(millions $)

Medford, 

Oregon

Santa Fe, 

New Mexico

Auburn, 

Maine

Syracuse, 

New York

8

20

5

22

4

30

<1

30+

Total Investment (millions $)

 Natural Infrastructure

 Gray Infrastructure

Section 1.3: Demonstrations of the Business Case 

| Rowan Schmidt, Earth Economics 

| James Mulligan, Green Community Ventures

Natural infrastructure economic analyses are 

increasingly common in watersheds nationwide. 

Two emerging themes are evident from a review of 

these analyses: First, natural infrastructure is often 

(but not always) a cost-effective option; and second, 

decision makers in different watersheds require 

different levels of decision-making support and certainty before acting—presumably due to variations 

in their underlying political context. Note that some 

of the analyses we present stray from the forestto-drinking water context to demonstrate broader 

applicability of cost-effective natural infrastructure.

The series of examples presented below include 

both “prospective” economic analyses (cases where 

economic analysis contributed, or may contribute 

to, a utility’s decision to invest in natural infrastructure—Table 2), as well as “retrospective” economic 

analyses (cases where a utility’s past natural 

infrastructure investments were analyzed and their 

economic benefits calculated—Table 3). Though 

retrospective case studies do not show how to make 

the “business case” for natural infrastructure in 

decision making, their results are likely to be more 

accurate with the advantage of hindsight. Note that 

there is not yet an industry standard for how to 

present a business case for natural infrastructure. 

Some of the metrics presented in the examples 

below vary, and may have been calculated with 

slightly different methods. Figure 4 illustrates the 

costs of natural infrastructure and built infrastructure options facing some of the municipalities and 

utilities discussed below. See also Box 5 for a new 

tool to identify some of the central inputs to these 

types of analyses—ecosystem service values.

Note that an apples-to-apples comparison between 

the presented business cases is challenging for a 

number of reasons. They use a number of different 

economic methods to assess natural infrastructure, 

including avoided cost, replacement cost, or project 

benefits. Each of these methods uses different 

assumptions and/or proxies for measurement. 
Natural Infrastructure 27

LOCATION DESCRIPTION

Clean Water 

Services, Tualatin 

River, Oregon 

(2006)

Niemi et al. (2006) compared the costs of reducing thermal pollution of the Tualatin River in Oregon for natural 

infrastructure and built infrastructure options. The study found that the built option, installing two mechanical 

chillers to cool water before it is discharged to a stream, would cost between $60 and$150 million. The natural 

infrastructure option, establishing riparian forests to shade water and augmenting stream flows with releases from 

upstream reservoirs, was estimated to cost $6 million but came in at $4.6 million—realizing savings of $50.4-

$145.4 million relative to the built alternative. 

Denver Water 

Board, Denver, 

Colorado (2013)

No explicit, detailed cost-benefit analysis was conducted to support the Denver Water Board’s $16.5 million 

investment in fuel reduction in the National Forests that house Denver’s source water. However, the utility incurred 

$26 million in costs in the aftermath of two devastating fires in 1996 and 2002 to manage post-fire sedimentation. 

Fire suppression costs were another $47 million, the Forest Service has spent another $37 million on post-fire 

restoration and stabilization, and private insured property losses were an additional $38.7 million. These events and 

their costly aftermath provided sufficient impetus for Denver’s investments to manage against risk of future wildfires 

and associated sedimentation (Denver Water Board-this publication). See Part 3 for an in-depth look at this case.

Eugene Water & 

Electric Board, 

Eugene, Oregon 

(2012)

Riparian buffers in the McKenzie Watershed were shown by Earth Economics in 2012 to represent a value 

(including public benefits) of $1,031 to $6,713 per acre per year (Schmidt & Batker 2012). This valuation is being 

used to support and inform the development of an ecosystem services market within the watershed to protect and 

restore these sensitive areas. 

City of Medford, 

Oregon (2012)

The City of Medford’s wastewater facility discharges into the Rogue River but exceeds maximum temperature 

load requirements as allowed by its Total Maximum Daily Load (TMDL). In order to meet its temperature TMDL 

requirements, Medford evaluated three alternatives: lagoon storage for discharge later in the year, mechanical 

chillers, and riparian restoration and shading. An economic analysis showed that riparian restoration was three 

times more cost-effective than mechanical chillers for reducing thermal loads into the river and would provide 

additional benefits such as wildlife habitat and water filtration. Over the next 10 years, Medford plans to engage 

100 landowners through the project developer—The Freshwater Trust—to restore 30 miles of stream bank at a 

cost of $8 million, saving about $8 million compared with lagoon storage and $12 million compared to installing 

mechanical chillers—as well as greenhouse gas emissions that would occur as a result of operating the chillers 

(Sanneman 2012). The City of Medford’s Dennis Baker reported, “We weighed our options, and water quality 

trading was the lowest cost option, and offered significant environmental benefits” (OACWA 2012).

New York City 

Department of 

Environmental 

Protection, New 

York (2006)

In the late 1990s, in the face of growing development pressures in its largely privately-owned Catskill-Delaware 

watershed, New York City initiated a plan to protect its source water and avoid the cost of a filtration plant by 

investing in its 2,000 square mile watershed. A filtration plant would have cost the city $8–$10 billion in current 

dollars—roughly $6 billion to build and $250 million annually to maintain. In contrast, the cost of securing natural 

infrastructure in the watershed was estimated at $1.5 billion. The watershed program has staved off the need to 

build a filtration plant and provided an annual $100 million injection to the rural economy in the upper reaches of 

the watershed by providing supplemental income to farmers and forestland owners, paying local contractors to 

install septic systems and set up stormwater protection measures, and by promoting ecotourism (Kenny 2006).

Portland Water 

District, Portland, 

Maine (2013)

In the Crooked River Watershed, the World Resources Institute estimates the Portland Water District would save 

an expected $12 million—and possibly as much as $110 million—over the next 20 years by investing in natural 

infrastructure alternatives to a membrane filtration plant (Talberth et al. 2013).

Table 2 | Examples of the Business Case Made Through Prospective Economic Analysis 
 28 WRI.org

Key Themes

The following themes are important takeaways 

from these examples of the business case for natural infrastructure:

1. Natural infrastructure provides valuable services to water utilities, like sediment removal 

and water storage—as well as ancillary benefits 

like fish and wildlife habitat, increased property 

values, and recreational opportunities;

2. Methods of economic analysis and tools are 

available to calculate the value of natural infrastructure and support decision making; 

3. Based on economic analysis, in many contexts 

natural infrastructure is found to be a more 

cost-effective choice than alternatives;

4. Different utilities invest in natural infrastructure based on different levels of economic 

analysis;

5. The scale of analysis needs to fit the problem 

being addressed—broad scale analysis is typically sufficient to inform priority setting (i.e., 

to show that natural infrastructure is a worthwhile investment), while more precise modeling/valuation is needed at the site scale (i.e., 

to show which specific natural infrastructure 

project is the best option);

6. Economic analysis is always conducted within 

the context of a specific social and regulatory 

environment and in many cases is the last decision point that “tips the balance” toward natural 

infrastructure, rather than the only factor;

7. Economic analysis of natural infrastructure 

tends to be conducted by larger utilities/agencies (greater than 100,000 customers), suggesting that smaller utilities may not have the 

needed capacity in general; and

8. An effective way to make the business case for 

natural infrastructure is to compare it with 

built assets that provide similar services for 

the utility. For example, the cost of protecting 

a watershed can be compared with the cost of 

building a filtration plant. When the ancillary 

benefits of natural infrastructure are also considered and valued, the business case is likely 

to become stronger.

LOCATION DESCRIPTION

City of Santa Fe, 

New Mexico (2009)

In 2009 Santa Fe completed the Santa Fe Municipal Watershed Plan, largely in recognition of the potential cleanup 

costs associated with a fire in their municipal drinking water watershed. The Plan provides a framework and 

recommendations for long-term management, outreach, and funding for the Santa Fe Municipal Watershed. Santa 

Fe estimated the total cost of restoring the forest to be $4.3 million, at an average of $200,000 annually over 20 

years. This was compared with the alternative: not restoring the forest and incurring $22 million in expenses after a 

7,000 acre fire, estimated to be a 1-in-5 years event (Margolis et al. 2009).

Seattle Public 

Utilities, 

Washington (2005)

In 2005, Seattle Public Utilities (SPU) was in the planning stages for the Tolt River Levee Restoration and Habitat 

Preservation Project, a $5 million levee setback to benefit threatened Chinook salmon, native fish habitat, and 

maintain flood protection. With the project located in the Tolt River Watershed, the source of approximately 30 

percent of Seattle’s drinking water supply, SPU was interested in the full suite of ecosystem service benefits 

the project would achieve, and contracted with Earth Economics to identify and value the ecosystem services 

provided by the site in current conditions (in which the river was disconnected from the floodplain), compared 

with a restoration scenario. The ecosystem service benefits were estimated to range from $134,000 to $484,000 

per year, resulting in a net present value of $4.0 million to $14.3 million. This analysis confirmed the project was 

justified based on the public benefits and value provided by ecosystem services (Batker 2005). With the help of this 

additional information, the senior management committee approved the project unanimously, and construction is 

now complete.

Table 2 | Examples of the Business Case made through Prospective Economic Analysis (cont.)
Natural Infrastructure 29

LOCATION DESCRIPTION

City of Auburn, 

Maine (2012)

The Auburn Water Department spent $570,000 to acquire and protect 434 acres of land around Lake Auburn, part 

of the city’s drinking water watershed. This purchase saved the utility $30 million in capital costs, and an additional 

$750,000 in annual operating costs, by maintaining water quality standards and avoiding the need for a filtration 

plant (Ernst 2004). The land acquisition was funded with a Drinking Water State Revolving Fund Loan. Today, Lake 

Auburn Watershed Protection Commission controls approximately 1,600 acres in the 9,792-acre watershed of 

Lake Auburn (including 80 percent of its shorelines), and the Auburn Water District and Lewiston Water Division 

continue to be exempt from EPA filtration requirements (LAWPC 2012).

Seattle Public 

Utilities, 

Washington (2000)

Following the Great Seattle Fire of June 6, 1889, Seattleites voted to establish Seattle Public Utilities (SPU) to 

provide water to the city. Seattle began acquisition of the 100,000-acre Cedar River Watershed to provide and 

filter the community’s water. This was a radical and expensive idea at the time. By 1901 clean water was flowing, 

banishing cholera and typhoid. By 1909 Seattle was considered one of the healthiest cities in the United States. 

Today, SPU would have to pay an upfront cost of $200 million to build a filtration plant to filter the city’s water 

supply with annual operating and maintenance costs of $3.6 million per year if the forest did not do this job. Of 

course, after a century, it would likely have been the third or fourth filtration plant to be built (Cosman et al. 2011). 

Seattle now invests in the Cedar Watershed through its habitat conservation plan (HCP), which commits at least 

$79 million (in 1996 dollars) over the life of the HCP (Seattle Public Utilities 2000).

City of Syracuse, 

New York (2010)

Skaneateles Lake provides high-quality drinking water for over 200,000 residents in the City of Syracuse and the 

surrounding region. With increasing development pressure around the lake, Syracuse developed a watershed 

protection program that includes agricultural non-point source pollution control measures, open space and 

farmland protection, and public outreach and education. At a cost of $10 million, the program has allowed 

Syracuse to maintain high drinking water quality in Skaneateles Lake and receive a filtration waiver from EPA, 

avoiding construction of a $70 million filtration plant with $7 million in annual operating costs. The nearby Town of 

Skaneateles has also saved approximately $4 to 6 million in filtration costs (EPA 2010).

Table 3 | Examples of Retrospective Economic Analyses
 30 WRI.org

Limitations and Take-Aways

While the above themes can be inferred from this 

compilation of business case analyses conducted on 

forest-based natural infrastructure in the United 

States, the business cases must also be presented 

with a number of caveats. First, economic and 

financial analysis of natural infrastructure is 

relatively new, so there is a lack of historical cost 

and benefit data from which to draw. In comparison, there is a wealth of historical cost and benefit 

data for built infrastructure. This increases the 

perceived risk (i.e., uncertainty) associated with 

natural infrastructure, and such projects may have 

to pass a higher threshold in order to be considered. 

Indeed, many of the analyses presented here may 

underestimate the value of a natural infrastructure 

investment both because of conservative assumptions about the benefits of natural infrastructure 

as well as the omission of ancillary benefits. In 

time, however, efforts by economists in this area 

of research and the benefit of hindsight will lend 

additional clarity to the real returns provided by 

natural infrastructure.

Ultimately, however, any economic analysis is 

limited to the accuracy of the underlying science. 

The science connecting natural infrastructure to 

water resource outcomes generally is extensive and 

robust. However, predicting marginal benefits is 

still a challenge, often leaving economists to make 

conservative assumptions. Even with this conservative approach, however, analyses to date have demonstrated the clear potential for cost-effectiveness 

of a wide range of natural infrastructure options 

relative to built infrastructure alternatives. Meanwhile, the science underpinning the water-related 

benefits of natural infrastructure investments is 

advancing rapidly.

BOX 5 | ECOSYSTEM VALUATION TOOLKIT

| Corinne Cooley, Earth Economics

In making the business case for natural infrastructure, 

finding reliable data on the value of benefits provided 

by nature is frequently both essential and a challenge. 

The Ecosystem Valuation Toolkit (www.esvaluation.

org) includes a Researcher’s Library that assists in 

finding these values. The Library already contains full 

bibliographic information for nearly 50,000 documents 

of relevance to ecosystem service valuation. These 

studies either contain ecosystem services values, or 

have relevance to theory, practice, and implementation 

of ecosystem services frameworks. Approximately 

10,000 entries have been identified as containing 

candidate ecosystem service values, and are in 

process of being transcribed so that detailed ecosystem 

service value data are readily available for searching 

and viewing.

The Researcher’s Library’s custom transcription user 

interface includes hundreds of fields to fully capture 

data about the values of ecosystem services. These data 

undergo a multi-phase review process before being 

approved and “published” in the database for use in 

ecosystem service valuation.

The Ecosystem Valuation Toolkit also includes SERVES 

(Simple, Effective Resource for Valuing Ecosystem 

Services), a computational tool supporting calculation 

of monetary and non-monetary ecosystem service 

values for areas of interest using Benefit Transfer and 

Function Transfer. Values generated by this system are 

already being used by organizations such as Federal 

Emergency Management Agency (FEMA), The Nature 

Conservancy, Seattle Public Utilities, and many others. 

This computational tool still requires expert knowledge 

for proper use, but will be made available for wider 

use as the expert knowledge is codified into rules and 

validated by a panel of internal and external expert 

economists and ecologists.
Natural Infrastructure 31

Chapter 2: The Scientific Underpinnings Introduction 

Among the most important types of natural 

infrastructure for water in the nation’s landscapes 

is forest. About 53 percent of the freshwater supply 

in the contiguous United States originates in forests 

(Brown et al. 2008), although forests cover only 

about a third of the country (Sedell 2000). Water 

originating in forests is widely recognized as clean 

compared with water coming from other sources. 

Watersheds with more forest cover have been 

shown to have higher groundwater recharge, 

lower stormwater runoff, and lower levels of 

nutrients and sediment in streams than do areas 

dominated by urban and agricultural uses (Brett 

et al. 2005, Crosbie and Chow-Fraser 1999, Matteo 

et al. 2006). These features of forests are particularly important for communities in the face of a 

changing climate (Box 6).

There has been consensus for generations that 

well-managed forested watersheds are “good” for 

water resources. To provide the confidence many 

would-be investors need, we must have a more 

precise scientific understanding of the relationships 

between ecological conditions in the watershed 

and water-related outcomes.

The science is well established on the direction 

of impact—that maintaining healthy, forested 

landscapes and implementing best practices in 

forestry management are highly effective strategies 

for promoting source water quality and regulating 

flow. However, there is inherent variability across 

and within watersheds in the magnitude of water 

resources impact of a given land cover change or 

management practice. Quantitative watershed models can help to address part of this variability. These 

tools are advancing in reliability and usability, and 

can account for a portion of the variability in natural ecosystems. Models are being used in a growing 

number of watersheds to estimate, with varying 

degrees of accuracy, the quantitative outcomes from 

interventions such as reforestation, forest preservation, and increasingly even specific management practices such as road decommissioning and 

riparian buffer practices. Still, modeling remains 

relatively resource-intensive and results inevitably 

come with some level of uncertainty.

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases

KEY TAKE-AWAYS

1. The scientific foundation is imperfect, but 

robust. The latest science establishes the 

connections between natural infrastructure 

investments and water resource outcomes 

(Sections 2.1 and 2.2). These basic connections serve as important context for dialogue 

with decision makers and stakeholders. 

2. Inherent variability poses challenges for 

quantification of natural infrastructure benefits. Watershed models (Section 2.4) can 

address part of this variability, but remain 

relatively resource-intensive and inevitably 

leave some residual uncertainty. 

3. Risks and uncertainty can be managed. The 

dominant approach to natural infrastructure 

investments has been to manage uncertainty 

and maximize cost-effectiveness by prioritizing types of interventions (e.g., easements 

or best management practices) (Section 2.3) 

and the distribution of those interventions 

throughout a watershed (Section 2.1), monitoring, and managing adaptively.
 32 WRI.org

Yet, despite residual uncertainty, natural infrastructure options are actionable. Given imperfect science 

and the need to prevent the perfect from being the 

enemy of the good—as in all things—the dominant 

approach to natural infrastructure investments has 

been to manage uncertainty and maximize costeffectiveness by a) prioritizing types of interventions and the distribution of those interventions 

throughout the watershed, b) carefully monitoring 

the response of water resources throughout implementation, and c) managing investments adaptively 

to maximize outcomes. Watershed experts and 

conservation practitioners typically have a robust 

understanding of investments on the landscape that 

produce critical watershed services—and, where 

needed, basic watershed assessments can identify 

existing and potential sources of impairment given 

trends in ecological conditions. Types of investments can be ranked in terms of likely effectiveness and cost as documented in the literature, and 

parcels within a watershed can be prioritized in 

terms of the potential for conservation investments 

to positively impact water resources.

This chapter, a series of contributions from experts 

and practitioners, presents the current state of 

scientific literature underlying natural infrastructure, including approaches to investing in the 

face of residual scientific uncertainty—watershed 

models, targeting of specific practices, and parcel 

prioritization. Due to the nature of the topic, this 

chapter delves into a fair amount of technical detail 

to support the narrative laid out here.

Section 2.1: Land Cover, Water Resources, 

and Prioritizing Parcels

| Paul Barten and Craig Nicolson, University of Massachusetts Amherst

| Bill Van Doren, South Central Connecticut Regional Water Authority 

Water quality and water flow are strongly linked to 

land cover in a watershed, as streams are in a state 

of dynamic equilibrium (see, e.g., de la Crétaz and 

Barten 2007) with the natural vegetation communities and disturbance regimes within their watershed. For nutrient cycling, for example, the dominant analytical framework over the past 30 years 

(the Vitousek-Reiners [1975] hypothesis) is based 

upon the concept of mass balance; that nutrient 

flows through an ecosystem comprise inputs (e.g., 

from upstream flow, aerial deposition, and weathering), some amount of internal cycling, and outputs 

(through decomposition/outgassing and leaching). 

Thus when ecosystems are aggrading biomass, 

generally there will be a net uptake of nutrients. 

Water-Related Functions of Forests

Forests, in particular, have a number of characteristics that have been demonstrated to have a generally favorable effect on water resources:

 Forests have sturdy, long-lived roots that help 

to anchor soil against erosion (Beeson and 

Doyle 1995; Geyer et al. 2000). 

 Forests have multiple layers of vegetation 

(Dohrenwend, R.E. 1977) and especially thick litter layers that help to slow falling rain and reduce 

its erosive force (Stuart and Edwards 2006). 

“We kept hearing from local planners that we need 

metrics—it is nice to say forests are good for the 

environment, but we need metrics to quantify the 

impact and build it into decision-making processes.” 

-Buck Kline, Director of Forestland Conservation, 

Virginia Department of Forestry
Natural Infrastructure 33

 Multi-layered forest canopies have more 

interception (Brooks et al. 2003; Briggs and 

Smithson 1986), greater photosynthetic area, 

and deeper roots than other plant communities, and so promote greater evapotranspiration 

and thus soil water deficits (de la Crétaz and 

Barten 2007). The forest litter layer promotes 

infiltration of water into the soil and provides a 

barrier that slows downslope water movement 

(Dudley & Solton 2003). These characteristics, 

together with the very high infiltration rates of 

forest soils created by complex pore structures, 

minimize stormflow peaks and render overland 

flow and associated erosion unlikely for all but 

the most intense storm events. 

 This subsurface flow minimizes sediment and 

pollutant delivery to streams and gives ample 

opportunity for nutrient uptake by plants and 

microbes in the soil (de la Crétaz and Barten 

2007; Bormann and Likens 1979; Vitousek and 

Reiners 1975). Sediment delivery to streams 

contributes the majority of total suspended 

solids, five-day biochemical oxygen demand 

(BOD), total nitrogen, and total phosphorous 

in the nation’s waterways (Gianessi et al. 1986 

from Freeman et al. 2008).

BOX 6 | NATURAL INFRASTRUCTURE AND ADAPTATION TO CLIMATE CHANGE

As plainly stated in the draft 2013 National Climate 

Assessment, “Climate change, once considered an issue 

for a distant future, has moved firmly into the present.” 

The question is no longer “is the climate changing,” but 

rather, “can society manage the unavoidable changes 

and avoid the unmanageable?” (Bierbaum et al. 2007). 

In the Northeast, Midwest, and Great Plains, very 

heavy precipitation has increased over the past century 

and heavy downpours have led to flooding events and 

accelerated erosion and exceeded the capacity of built 

infrastructure. The drought in western states over the 

last decade represents the driest conditions in 800 

years (Karl et al. 2009; Schwalm et al. 2012). And in the 

Northwest, changes in timing of snowmelt and associated 

streamflow have already been observed reducing summer 

water supplies. In some areas, the increase in severe 

high temperature days in combination with dry air mass 

events—as well as fuel changes, successional growth, 

exotic invasive species, insect and disease, longer 

fire seasons, and more severe episodic drought—is 

contributing to an increase in wildfire frequency and 

intensity in the Intermountain West (Sexton 2013). Indeed, 

eleven of the twelve largest fires in modern U.S. history 

have occurred since 2004 (Sexton 2013). 

In addition to these clear water quantity impacts, air 

and water temperatures, precipitation intensity, droughts, 

and wildfire all affect source water quality as well in the 

form of increased sedimentation, nitrogen, and pollutant 

loads, and decreased lake mixing, reduced oxygen in 

bottom waters, and increased length of time pollutants 

remain in water bodies (National Climate Assessment 

2013). These water-related climate impacts have serious 

implications for communities.

Given these impacts, the need is clear to maintain healthy 

upstream ecosystems. The ability of forests to reduce 

peak storm flows, maintain snowpack, and filter sediment, 

nutrients, and other pollutants is an essential “first line of 

defense” against the extreme events expected to increase 

in frequency and intensity as the climate changes. Given 

the multiple benefits associated with healthy ecosystems, 

natural infrastructure can represent a “no regrets” 

adaptation strategy for downstream communities.

At the same time, however, investors in natural 

infrastructure must have an understanding of how a 

changing climate may impact the water-related functions of 

targeted natural ecosystems. Impacts like changing species 

composition and increasing incidence of disturbances like 

wildfire, insects, and disease can affect the water-related 

function of upstream ecosystems, potentially requiring 

additional and ongoing management interventions.

| James Mulligan, Green Community Ventures
 34 WRI.org

 In the Pacific Northwest, the forest canopy can 

minimize the impact of rain-on-snow events 

through interception. Additionally, as snowmelt is most sensitive to temperature and wind 

speeds (van Heeswijk et al. 1996), lower wind 

speeds beneath forest canopies reduce the contribution of snowmelt to runoff from forested 

areas (Marks et al. 1998).

See NRC (2008), Ice and Stednick (2004), and 

LaFayette (2012) for more review of current scientific understanding in the field of forest hydrology. 

Moreover, there is a body of literature examining 

correlations between forests and downstream water 

quality. Freeman et al. (2008) profiles a number of 

these statistical findings. For example:

 In a U.S. Geological Survey (USGS) study of 

nutrients in undeveloped watersheds (mostly 

forested), Clark et al. (2000) found that forests 

“produced the best water quality in the country” 

(Wear and Greis 2002). 

 In a large-scale watershed study analyzing 

16 river mixed-use basins in the Northeast, 

Boyer et al. (2002) found that nitrogen loading 

decreased as the percentage of forested land 

increased (de la Crétaz and Barten 2007). 

 In a study of Ontario watersheds, Sliva and 

Williams (2001) found that forested lands were 

important in mitigating water quality degradation (Gabor et al. 2004). 

 Houlahan and Findlay (2004) found a negative 

correlation between stream nutrient levels and 

forest cover over 2000 meters upland from the 

stream. 

 Freeman et al. (2008) found statistically significant relationships between forest land cover 

and indicators of water quality—affirming that 

land cover within a drinking water source area 

can be an indicator of water quality at a drinking water intake. 

Water Flow Effects of Forest Conversion 

& Disturbance

When forest vegetation is cleared, the effects on 

water yield and peak flows are commensurate with 

the scope and scale of clearing. Cutting trees and 

thus reducing transpiration will cause an increase 

in water yield primarily during the growing season, during which transpiration would be greatest 

(Hornbeck et al. 1997). Reduced transpiration 

and interception allow soil moisture to increase, 

generally causing greater increases in baseflow 

than stormflow (Hornbeck et al. 1995). However, 

poorly planned logging roads can channel water 

more quickly to streams and cause increases in 

peak flows (see, e.g., Wemple and Jones 2003; NRC 

2008). In the Pacific Northwest, snowmelt and 

runoff due to rain-on-snow events are substantially 

higher in cleared areas than in forested areas and 

can increase the potential for flooding. Higher wind 

speeds in cleared areas relative to beneath forest 

canopies can exacerbate the contribution of snowmelt to runoff (Marks et al. 1998).

Decades of paired watershed studies indicate that 

approximately 25 percent of basal area must be 

removed before noticeable increases in water yield 

occur (Hornbeck et al. 1995). However, persistent 

and substantial increases in water yield will occur 

if the forest is prevented from regrowing (Hibbert 

1967; Hornbeck et al. 1995; Hornbeck et al. 1997). 

The level of increase can be related to factors such 

as slope and aspect (Hibbert 1967) and dominant 

forest type (coniferous vs. deciduous). Generally, 

conversion of forest to shallow-rooted plants or 

agricultural crops—either row crops and pasture or 

forage—will result in less “use” (transpiration and 

interception) of water and thus will increase water 

yield (see, e.g., Patric and Gould 1976; Verry 1986). 

This can be problematic for communities in floodprone areas. However, such water yield increases 

are typically small and short-lived, and are less in 

dry years and dry areas when water is needed most 

by communities facing drought (Jones et al. 2009). 

Moreover, potential increases in water yield due to 

forest conversion are likely to be offset by concurrent 

deleterious effects such as declining water quality. 
Natural Infrastructure 35

Tilling the soil for agricultural purposes both 

homogenizes the pore structure and can tend to 

form a “plow pan”—a layer of hard soil. Thus, the 

soil loses the elements that give forests a very high 

infiltration capacity—the macropores, intermixed 

soil particle sizes, and litter layer—and the plow pan 

reduces the percolation and downward movement 

of water through the soil profile. This increases 

the ratio of stormflow to baseflow (de la Crétaz 

and Barten 2007), which can have effects on flood 

frequency, stream temperature, and ultimately 

stream fauna. While the draining of wetlands for 

agricultural use is an increasingly rare practice, the 

cumulative alteration of wetlands for agricultural 

and urban land uses can affect the timing of streamflow at a magnitude greater than their size alone 

would indicate (O’Brien 1988). 

Conversion of forests to urban land uses can also 

affect water flow. It is a common assumption 

that increases in imperviousness associated with 

urbanization result in an increase in the ratio of 

stormflow to baseflow. Impacted soil loses some 

of its sponge-like ability to slowly soak up and 

release water during storms, which can increase 

flooding and scouring. Impervious surfaces (e.g., 

roofs, driveways, and roads) increase the velocity 

of surface flows and scouring of the stream channel (Freeman et al. 2008). Schueler (1994; 2003) 

found that hydrologic functions begin to change 

when impervious surfaces cover a threshold of 5–10 

percent—and can change dramatically above a 25 

percent threshold (Braden and Johnston 2004 from 

Freeman et al. 2008). Walsh et al. (2005) describe 

the set of negative impacts from urbanization, such 

as increased flashiness and peak flows, as well as 

increased nutrients, as “urban stream syndrome” 

(Freeman et al. 2008).

While it is commonly assumed that urbanization 

can have the effect of reducing baseflow, some 

recent studies (Konrad and Booth 2002; Meyer 

2002) have found that this expected inverse 

relationship may not be as clear as once thought. 

Brandes et al. (2005), for example, found few 

watersheds that exhibited a pattern of decreasing 

baseflow as population density and associated area 

of impervious surface increased. They posit that 

leaky sewer pipes, treated water stream discharges, 

ground water pumping, and concentration of storm 

runoff allowing infiltration at a higher rate can 

interact in a complex manner to complicate the 

effect of urbanization on baseflow and stormflow. 

In addition to conversion, increasing incidence of 

unnatural, catastrophic wildfire in western lands 

can prime a watershed for dramatic surges in peak 

flows. Post-fire peak flows have been documented 

to be up to 900 times greater than the unburned 

reference case for up to 15 years after a fire, when 

rainfall surpasses a certain threshold (Martin 

2013). The USDA Forest Service expects a five-fold 

increase in wildfires by 2050, as a result of a series 

of factors including more severe episodic drought 

and longer fire seasons due to climate change 

(Sexton 2013).

Water Quality Effects of Forest 

Conversion & Disturbance

Sediment (Patric 1976) and nutrient yields (Ice and 

Binkley 2003) from forested watersheds are naturally variable. However, logging roads and increased 

flows can cause erosion, both from uplands and 

within the stream channel itself. Agricultural and 

urban lands have both been related to degraded 

water quality (Sliva and Williams 2001, Boyer et al. 

2002 from Freeman et al. 2008). Relative to forestland, agricultural land can have nutrient concentrations nine times higher, and sediment discharges 

five times higher (Omernik 1977; Gianessi et al. 1986 

from Brown and Binkley 1994).

Changes in flow pathways can occur from subsurface 

flow in forestland to overland flow in agricultural 

land resulting in increased sediment delivery to 

streams and water bodies. (see, e.g., Verry 1986; 

Sutherland et al. 2002). Long-term shifts in land use 

from forestland to agriculture and the concurrent 

changes in water yield and timing have effects on 

stream channel morphology that also cause erosion. 

Changes in biogeochemical cycling and use of agricultural inputs, while sometimes difficult to separate 

from the effects of urbanization, can also affect water 

quality (McDowell 2002; Beaulac 1982). 

Conversion of forestlands to urban uses can cause 

short-term but significant increases in sedimentation during construction. An early paired watershed study found that sediment concentration 

downstream of construction sites without proper 

sediment control were up to 70 times the concentration of sediments downstream of forested and 
 36 WRI.org

agricultural lands (Wolman and Schick 1967; de la 

Crétaz and Barten 2007 from Freeman et al. 2008). 

Weiss (1995) cited sediment loads 1,000–2,000 

times higher in uncontrolled construction areas 

relative to forests (Dissmeyer 2000 from Freeman 

et al. 2008). 

Catastrophic wildfire can also disrupt the water 

quality-related functions of forest and cause massive sedimentation. In some cases, post-fire runoff 

can release potentially toxic “legacy sediments” into 

drinking water systems. To illustrate the scale of 

post-fire sedimentation issues, the City of Fort Collins is planning to spend $24 million in sediment 

stabilization costs in the wake of its 2012 High Park 

fire (Gertig 2013).

The Bottom Line for Water Resources

The science is clear: forests are essential for the 

water-related services they provide to downstream communities (Jones 2009). As forests are 

converted to other land uses or are unnaturally 

disturbed, the benefits from forests will diminish, putting communities at risk of flood, drought, 

higher cost of treatment, and greater incidence of 

drinking water contamination. Recognizing this, in 

1996, EPA amended the Safe Drinking Water Act to 

reflect a need for a balanced approach starting with 

source water protection (EPA 2007).

Prioritizing Parcels—The Conservation 

Priority Index

A key step in getting a natural infrastructure investment program to “investment readiness” is understanding of where conservation and restoration 

activities on the landscape can have the greatest 

impact for water resources. Parcels in a watershed 

can be objectively prioritized based on importance 

for water resources (Figure 5). Yet, all too often 

land conservation proceeds in an opportunistic and 

haphazard manner. The tool described here prioritizes watershed land parcels in terms of importance 

Figure 5 | Illustration of Parcel Prioritization

Note: This graphic illustrates the importance of metric scores and the parcel ranking 

algorithm. The 9th-ranked parcel scores well overall, but if it was unavailable for 

conservation, how should conservation efforts proceed? On the basis of size and 

even ΣCPI80 score, the parcels ranked 19 and 162 would be difficult to distinguish. 

However, with the use of additional metrics and the parcel ranking algorithm, it 

becomes obvious that the 19th-ranked parcel represents a better conservation value. 

Scare outreach resources might better be allocated to the parcel ranked 19, rather 

than 162. Note also the presence of assessors’ maps and lot (M/L) numbers for 

easy parcel identification.
Natural Infrastructure 37

as natural infrastructure for watershed services. 

This prioritization enables the program administrator to direct capital (e.g., for conservation easements, riparian buffers, or other investments) most 

cost-effectively across the landscape. 

The Conservation Priority Index (CPI) is a component of the Watershed Forest Management 

Information System (WFMIS; Zhang and Barten 

2009). This ArcGIS extension, which intuitively 

and scientifically scores and ranks the importance 

of forestland for water supply protection, has been 

refined through over a decade of use. Watershed 

stakeholders can develop multiple metrics, totally 

or in part from the CPI, to generate a list of the 

highest-priority forested parcels and neighborhoods 

in their watershed that have the greatest potential 

to sustain water quality through improved management, or degrade it through conversion to other 

uses. This allows local experts to focus their efforts 

on those most influential parcels, and if necessary 

move on to the next in a quantitative, objective, and 

science-based fashion.

Moreover, the weighting of the inputs to the CPI 

(table 4) is flexible and can be adapted to a variety of settings and needs. For example, the slope 

ranges can be adjusted to common thresholds (e.g., 

slopes over 30 percent may need special protection 

regardless of how common they are), or prioritized 

based on their frequency of occurrence (flat, lowgradient watersheds may have an extremely small 

LANDSCAPE 

CHARACTERISTIC WHY IS IT IMPORTANT?

INCREASING 

IMPORTANCE

DECREASING 

IMPORTANCE

3 2 1 0

Land use Forests provides the best protection 

of water resources of any land cover.

Forest/

wetland — — All others

Distance to streams 

(feet)

Forests provide shade, organic matter, 

and woody material while they absorb 

nutrients and trap sediment. The “riparian 

forest buffer” has a major influence on 

streamflow and water quality.

0 to 100 100 to 200 200 to 300 > 300

Distance to ponds/

wetlands (feet) 0 to 100 100 to 200 200 to 300 > 300

SOILS (1/2 WEIGHT):

Depth to water table

If forests are removed more water 

enters the soil. If the shallow water 

table reaches the surface it can lead 

to overland flow and erosion.

shallow intermediate deep —

SOILS (1/2 WEIGHT):

Permeability

This is the rate at which water flows into 

and through soils. Poorly drained soils 

can lead to overland flow and erosion.

poorly 

drained intermediate well drained —

Slope

The rate of water flow is directly 

related to land slope. Steep slopes 

also may be less stable and more 

prone to erosion.

steep

(> 15%)

intermediate

(5 – 15%)

gentle

(< 5%) —

Water – 

Forest – Roads

The narrow strips of forest between 

roads and streams are especially 

important for water quality protection.

yes no no no

Table 4 | CPI Inputs Used for Crooked River Watershed
 38 WRI.org

area of steep land, resulting in a downward skewing 

of high-priority lands if arbitrary slope categorizations are used).

The CPI can also be useful for groundwater issues. 

In certain geologies, the water table is an attenuated 

reflection of surface elevation, and groundwater 

flows from areas of high elevation to low elevation. 

In other cases, there are regional aquifers that cross 

surface watershed boundaries. However, some of 

the same inputs to the CPI (soil permeability and 

land use) are especially useful in evaluating relative 

risk to groundwater in certain settings.

The CPI can incorporate economic and social inputs 

in addition to ecological inputs. The WFMIS interface allows for inputs that can then be weighted and 

integrated into the CPI, or the user could manually 

add these inputs to the CPI in a simple rasteroverlay process. Such inputs could include cultural, 

scenic, and social values developed through stakeholder consultation processes. 

Development of the CPI and associated parcel 

prioritization is a valuable tool for directing conservation efforts. Raw data inputs are generally 

available free from national and state Geographic 

Information System (GIS) data repositories; and 

while the WFMIS (which includes CPI) is an extension to ArcGIS—not inexpensive software—the 

analysis could also be performed as a raster overlay 

in an open-source GIS. The basic development of 

the CPI—acquisition and pre-processing of the GIS 

data and input scoring—along with validation of 

results, would take an intermediate GIS user up 

to one week to accomplish. Associated parcel and 

block prioritization, and collaborative integration 

with the goals of local cooperators (land trusts, 

watershed coalitions) and development of comprehensible maps might take up to another week for 

development and refinement. See Box 7 for additional detail on the CPI. 

The CPI was used in the Crooked River Watershed, 

upstream of Sebago Lake in Maine. In this context, 

the tool not only helped to prioritize investments, 

but also helped the World Resources Institute 

to target outreach activities associated with the 

preliminary economic analysis described in Section 1.2. The CPI was also applied by Snohomish 

County, Washington, in 2012 to Snohomish Basin 

as part of an effort to assess the viability of using 

payment-based mechanisms to encourage private 

landowners to protect forest cover on their properties and address issues related to stream flow, 

channel stability, and aquatic habitat. The CPI 

and the Washington State Department of Ecology 

Watershed Characterization (WC) were used to prioritize 268 subbasins within the Snohomish River 

watershed and the CPI was used to prioritize 288 

parcels within a pilot subbasin. HSPF hydrologic 

modeling (see Section 2.4) was performed in the 

pilot subbasin to evaluate how forest cover retention of high-priority parcels affects stream flows 

and its processes. The developed methodology will 

support future efforts in the protection of working 

forests and ecosystem services across the Puget 

Sound region (Gi-Choul 2013, pers. comm.).

While the CPI does not estimate quantitative water 

resource outcomes, overall it represents a very 

modest investment in return for a means of directing scarce time and resources to the forestland most 

influential in the provision of clean water.

Figure 6 | Illustration of Parcel Prioritization Total CPIraw Score

Parcel Size (acres)

10,000

8,000

6,000

4,000

2,000

0

0 50 100 150 200 250 300
Natural Infrastructure 39

The CPI is incorporated into the WFMIS, but the analysis can 

also be completed independent of the extension as a raster 

overlay process. Due to weighting and scoring rules, any 30 

m cell of forest or forested wetland could receive a CPI score 

(called CPIraw) between 5 and 18. On the low end, a parcel 

would receive 3 points for forest, 1⁄2 point for a deep water 

table, 1⁄2 point for being well drained, and 1 point for a gentle 

slope (if >300 feet from a water feature, no points are allotted 

for “proximity”). On the high end, only a small number of grid 

cells will be forest land with steep slopes, immediately adjacent 

to streams, with silt or clay soils that are frequently saturated, 

and would yield a score of 18 (Table 4). Once the CPIraw score 

is assigned, the 80th percentile and higher (top 20 percent) are 

extracted for further analysis in an index called CPI80. 

The GIS was used to calculate the sum of CPIraw and CPI80 from 

all grid cells within each parcel to create parcel-level metrics 

called ΣCPIraw and ΣCPI80. Figure 6 shows the strong statistical 

relationship between the area of the parcel and total CPI score. 

More importantly, it shows that because of differences in their 

location, soil properties, and terrain features, some parcels at any 

given size are clearly more important for water supply protection. 

Losing forest on high-scoring parcels to development would be 

the most damaging to streamflow and water quality. These two 

parcel-level metrics were combined with two other metrics—the 

residual from the relationship in Figure 6 (CPIresid), and the 

area of the parcel in the watershed—and parcels were ranked 

in descending order by their score for each metric. Across the 

Crooked River watershed the parcels ranking in the top 5 percent 

for multiple metrics received the highest score. The next priority 

was assigned to the parcels scoring in the top 15 percent, and so 

on as in Figure 7. The owners of the highest-ranking parcels are 

identified for initial outreach and conservation efforts, to ensure 

that scarce resources are focused on parcels with the greatest 

contribution to water supply protection (Figure 5).

When GIS tax parcel data are not available, or if additional 

analysis is warranted, roads, town boundaries, or water district 

or common well-head boundaries can be used to subdivide the 

watershed into neighborhoods to guide the outreach process. 

This creates groups of potential ownerships within which 

landowners often communicate with each other. The sum of 

CPI80 cells within these neighborhoods was calculated (the 

highest-quality forest land is identified), and then the Integrated 

Climate and Land Use Scenarios (ICLUS) data were used to 

identify neighborhoods with greater development pressure. 

In this manner, neighborhoods with the most valuable forest 

resource, under the most pressure for development, were 

identified. Local conservation experts can leverage existing 

contacts within these neighborhoods using place-based 

conservation efforts to better focus efforts and resources. 

Needed data for the CPI include:

 Watershed boundary shapefile from the USDA Natural 

Resource Conservation Service (USDA NRCS) Watershed 

Boundary Dataset (WBD).

 Slope (derived from elevation) from the USGS Seamless 

Data Warehouse at 30 m resolution.

 Land use/land cover from the 2001 National Land Cover 

Database (NLCD)—more recent data now available.

 Hydrography (linear: streams, rivers) from the USGS 

(2009) (National Hydrography Dataset [NHD] highresolution—1:24,000 scale); used to represent linear 

and areal surface water features. Note: the NHD may 

under-represent lower-order streams (see, e.g., Brooks 

and Colburn, 2011), and the tradeoffs between regional 

consistency (of national datasets) and potentially more 

accurate local datasets should be weighed carefully. 

 Hydrography (areal: lakes, ponds, wetlands) from a 

combination of the NHD and the National Wetland Inventory 

(NWI; U.S. Fish and Wildlife Service, 2009) to ensure a 

complete representation of surface water bodies.

 Roads (a principal source of sediment) from a 

combination of three Maine-specific GIS roads datasets to 

ensure as complete a representation of roads as possible. 

In multi-state analyses, TIGER/Line data available from the 

U.S. Census Bureau would be a logical choice to ensure 

consistency and alignment.

 Soils from a combination of large scale (±1:24,000) NRCS 

SSURGO data with coarser scale (1:100,000) STATSGO 

where necessary for complete soils coverage. Data were 

incorporated into the WFMIS through NRCS’s Soil Data 

Viewer (SDV, 2008), a free program that simplifies the 

process of summarizing the necessary soil characteristics, 

permeability, and depth to water table. 

 Parcel data and conserved lands from Maine-specific 

GIS data. Without these data, the analysis is limited to 

prioritizing broad regions or “blocks” coinciding with 

likely ownerships (bounded by roads and town lines). Data 

were manually reviewed to identify “non-parcels” such 

as roads and water bodies, a potentially time-consuming 

process. Because of economies of scale associated with 

working with the owners of larger parcels, only parcels 

greater than 20 acres were considered.

 Projections of future housing density (e.g., projected 

housing density in 2050 minus actual density in 2000) 

from the EPA for its ICLUS program (2009). 

Note that the accuracy of the CPI relies on the accuracy 

of underlying data. Though the accuracy of needed data 

files has improved in recent years—and that trend is likely 

to continue—results should be ground-truthed before 

investments are made.

BOX 7 | THE CPI MODEL
 40 WRI.org

Section 2.2: Forest Practices and Water Resources 

| Jodi Schoenen, Portland State University 

| Nikola Smith, USDA Forest Service

The manner in which forests are managed can 

have a significant impact on ecosystem function 

and valued benefits. This section shares basic 

principles of watershed function from a forest 

management perspective. 

Forestry Best Management Practices

Watershed function can be enhanced or degraded 

by timber harvesting and other management practices that impact the hydrologic regime, fish and 

wildlife communities, and vegetation (Hornbeck 

and Reinhard 1964, Corbett et al. 1978, Martin and 

Hornbeck 1994, Alexander et al. 2007). Forestry 

activities can impact downstream water quality 

through biomass removal, soil compaction, and 

forest roads. The former two typically have a shortterm effect, while forest roads can have a major 

and more permanent effect—accounting for up to 

90 percent of all the sediment produced in forestlands, for example (Beasley and Granillo 1988; 

Marion and Ursic 1993; and Blackburn et al. 1990 

from Azevedo et al. 2005.; Grace 2002). Overall, 

research indicates that effective implementation 

of forestry best management practices (BMPs)—

e.g., maintaining forested buffers on streams and 

designing stream crossings and forest roads to 

minimize sedimentation from storm events—can 

reduce water quality impacts from 80 to more than 

99 percent (Ice et al. 2004). For example, forested 

riparian buffers normally retain 80 percent of sediments that might otherwise be delivered to streams 

(de la Crétaz and Barten 2007).

Watershed structure and function includes not only 

the regulation of water quality, quantity, and timing of 

flow, but also maintenance of productivity and health 

of terrestrial and aquatic ecosystems (Hornbeck and 

Kochenderfer 2004). The literature strongly supports 

that structure and function is promoted through 

adoption of forest practices that maintain adequate 

infiltration within the system, minimize conversion of 

forest land to other land uses, and minimize inputs to 

streams and rivers through establishment of riparian 

buffers and forest road best management practices 

(Ice and Schilling 2012). 

Best management practices are typically prescribed 

by the state and vary across jurisdictions based 

on ecological context as well as political factors. 

Generally, prescribed practices relate to design and 

maintenance of forest roads and stream crossings, 

maintenance of riparian buffers, application of 

chemicals relative to streams, and harvest and road 

activities on unstable slopes. In some states, prescribed BMPs are voluntary, while in other states 

they are required by state law—however, implementation rates across all states are typically high (i.e., 

greater than 80 percent). While BMPs have been 

found to be generally effective at the local scale, 

regardless of jurisdictional differences in prescriptions (Ice and Schilling 2013), little research has 

investigated the effectiveness of the current suite of 

BMPs from a cumulative effects standpoint (Jones 

et al. 2009). In some watersheds, stakeholders are 

investigating the merit of providing incentives to 

BOX 8 | UNDERSTANDING BIOPHYSICAL 

CONDITIONS THROUGH 

WATERSHED ASSESSMENTS

Land managers and practitioners can conduct sitespecific watershed assessments that (1) address how 

climate, soil type, vegetation conditions, geology, and 

topography affect water movement on the landscape, 

and (2) identify existing or potential sources of 

impairment to water quality such as runoff from roads, 

unstable slopes, and development pressure—including 

geographic locations of those threats. In some cases, the 

scale of these factors and relevant ecological processes 

may cross land ownership boundaries. For example, the 

cities of Fort Collins and Greeley, Colorado, face a suite 

of drivers of source water quality degradation across 

a variety of landownership types—from catastrophic 

wildfire and forest roads on both public and private 

forestland to livestock feeding operations on private 

ranchland. A collaborative, landscape-scale approach 

to watershed analysis can improve understanding 

of the system and potential management actions 

needed to sustain it. Given that many land managers, 

municipalities, and conservation organizations are 

charged with sustaining intact, resilient forests that 

provide a range of benefits to people, it is useful to apply 

an integrated approach that addresses water quality and 

supply as well as fire and flood risk reduction, aquatic 

habitat restoration, recreation, and other values (Schmidt 

and Batker 2012). 
Natural Infrastructure 41

BOX 9 | MODELING FORESTRY MANAGEMENT PRACTICES

Recent developments in the modeling field have broadened 

the possibilities for modeling the benefits of specific forestry 

management practices. For example:

 The Agricultural Policy/Environmental eXtender (APEX) model 

(Williams et al. 2000, and see Gassman et al. 2009) is a smallwatershed-scale model with strong BMP modeling abilities 

(Borah et al. 2006) and recent improvements for forestry 

applications (Saleh et al. 2004, Azevedo et al. 2005), allowing 

assessment of the impact of specific forestry practices. 

 A platform called SWAPP has been created to integrate APEX with 

a broader watershed model (SWAT) in order to offer a largewatershed-scale modeling system with spatially explicit processes 

and strong performance in BMP analysis (Saleh 2004). 

 The Water Erosion Prediction Project (WEPP) is another smallwatershed-scale model (USDA-ARS National Soil Erosion 

Research Laboratory 1995, and see Flanagan et al. 2012), which 

has undergone development specifically for modeling forest 

roads and their watershed impacts (Elliot et al. 1999). WEPP 

has been hybridized with a broader watershed model (HSPF) to 

provide a more comprehensive modeling system that that can be 

used for large-scale projects (Imhoff et al. 2010). 

BMP 

CATEGORY SPECIFIC BMP FOCUS MODELING 

OPTIONS SOURCES 

General / Spatial PlanningSpatial arrangement of various LULC types, 

especially in relation to the channel network APEX, WEPP Gassman et al. 2009; Flanagan et al. 2012

SMZs Forested buffers (general) APEX, HSPF 

(crude)

e.g., Azevedo et al. 2005, Saleh et al. 2004; Shoemaker et al. 2005, and e.g., Liu and Tong 2011.

Forest Roads

Road slope, siting, and density (general) APEX (crude), 

WEPP e.g., Saleh et al. 2004; Elliot 2004

Road surfacing WEPP Elliot and Foltz 2001

Drainage systems (incl. fillslope erosion/

deposition) WEPP Elliot et al. 1999

Timber 

Harvesting /

Stand Mgmt

Harvesting (general) APEX, [GWLF & 

SWAT (crude)*]

e.g., Saleh et al. 2004, Azevedo et al. 2005; 

Dissmeyer and Foster 1984

Thinning APEX+HARVEST e.g., Azevedo et al. 2005

Revegetation / 

Stabilization

Mechanical site preparation APEX, [GWLF & 

SWAT (crude)**]

Gassman et al. 2009, e.g., Saleh et al. 2004; 

Dissmeyer and Foster 1984

Herbicide application APEX e.g., Wang et al. 2007

Burn operations APEX e.g., Saleh et al. 2004

Vegetation regrowth (general) APEX, SWAT, 

WEPP

Saleh et al. 2004; Gassman et al. 2007; e.g., 

Dun et al. 2009

SAMPLE FORESTRY BMPS ADDRESSED BY WATERSHED MODELS OR VIA HYBRID MODELING SYSTEMS*

Notes: *Not intended to be an exhaustive listing of BMPs or modeling options for any given BMP; **Possible via manual manipulation of LULC-type parameters in their 

erosion module using values outlined in a guide to forest erosion prediction by Dissmeyer and Foster (1984). See Section 2.4 for more information on watershed modeling.

| Charles Governali, World Resources Institute
 42 WRI.org

landowners to implement more stringent practices 

than are prescribed by the state (i.e., wider riparian 

buffers or more restrictive practices on unstable 

slopes). Box 8 discusses the watershed assessment 

approach to identifying potential natural infrastructure interventions, and Box 10 discusses the 

importance of coordinating natural infrastructure 

efforts across the site-, region-, and landscape-level 

scales within a watershed.

Complexity and Uncertainty

The effectiveness of a particular forest practice is 

influenced by a variety of factors, including soil 

type, geology, fire, weather patterns, species composition, and management history, among others 

(Black 2004). Complexity at the landscape level 

is a significant research challenge and limits the 

ability to quantify hydrologic function in relation to 

specific management practices (Hassan et al. 2005). 

This challenge is compounded with attempts to 

develop long-term cumulative effects or combined 

effects of multiple disturbances over space and time 

(Hornbeck and Kochenderfer 2004). 

In other words, while the principles of forest 

hydrologic responses are well-established (Jones 

et al. 2009) and the direction of impact is clear, 

precise predictions of the magnitude of benefits 

resulting from management practices are challenging (Hassan et al. 2005, Ice et al. 2004, Hornbeck 

& Kochenderfer 2004, Jackson et al. 2004). While 

studies of basic processes at research station scales 

over short time periods are fundamental to the 

interpretation of results from experimental watersheds in a particular region, there remain considerable research gaps for producing models that are 

useful to policy advocates of market approaches to 

ecosystem services (Hassan et al. 2005). 

Still, models have been successfully applied to 

approximate the impact of a variety of forest management practices on water resources in a quantitative fashion (e.g., La Marche and Lettenmaier 2001, 

Saleh et al. 2004, Azevedo et al. 2005, Liu and Tong 

2011). See Box 9 and Section 2.4 for more detail on 

watershed models.

Where do we go from here?

Forested systems are complex and must be managed according to their unique characteristics. 

Still, the principles described above can be applied 

within the context of that complexity and uncertainty. While it is challenging to transfer research 

findings across landscapes, the scientific literature 

in this area of research is extensive and resoundingly supports the general effectiveness of best 

management practices for safeguarding the water 

resources benefits of forests. Understanding the 

relative costs and effectiveness of various practices 

and the importance of specific parcels within a 

watershed can help practitioners to target natural 

infrastructure investments efficiently. 

High-level Strategies 

Underlying Forest Practices:

1. Maintain adequate 

infiltration within the 

system;

2. Minimize conversion of 

forest land to other land 

uses; and 

3. Minimize inputs to 

streams and rivers 

through riparian buffers 

and forest road BMPs.
Natural Infrastructure 43

BOX 10 | A SEAMLESS QUILT OF NATURAL INFRASTRUCTURE

First coined in the mainstream by President Bill Clinton’s 

Council on Sustainable Development in 1999, the term “green 

infrastructure” (or natural infrastructure, as referred to in this 

guide) is salient to many because it represents the foundational 

importance of the environment to the continuance and growth 

of a community. Since the term resonates with constituents 

across multiple disciplines, we must ensure it does not 

become meaningless through excessive breadth or malleability. 

Commonly accepted definitions emphasize the interconnected 

network concept and are mostly differentiated by the scale at 

which natural infrastructure planning is implemented. What 

is ultimately needed is a seamless quilt of planning and 

implementation across scales and jurisdictional boundaries. 

Toward that end, an operational framework with three scales—

landscape, region, and site—can be used to guide natural 

infrastructure implementation.

Landscape-scale natural infrastructure is based on the 

principle that landscape attributes should be the basis for 

land-use planning. Natural infrastructure network design, 

springing from landscape ecology and conservation biology, 

exemplifies that principle. Natural infrastructure network 

design consists of a system of core areas, corridors, and 

hubs that provide essential habitat to endangered and 

threatened species and connect with broader natural functions 

and processes at the ecosystem scale. Core areas contain 

functioning natural ecosystems and provide habitats for native 

plants and animals that meet a minimum size threshold based 

on landscape conditions. Hubs are aggregations of core 

areas, other habitat, and other natural land that support native 

species, and serve as an interface between ecological areas, 

working landscapes, and the built environment. Corridors 

are linear landscape features that allow for wildlife movement 

between core areas. As a guide to natural infrastructure 

network design, practitioners reference habitat preferences of 

umbrella and keystone species. Umbrella species are those 

whose habitat needs overlap with those of other species, while 

keystone species are those with a critical role in ecosystem 

function, such as pollinators or top predators. At the 

landscape scale, implementation focuses on land acquisition 

and adaptive land management by public and private 

landowners to preserve critical habitats as well as ecosystem 

processes and functions. An example of landscape-scale 

implementation is America’s Longleaf Initiative, which focuses 

on restoration of functional, viable longleaf ecosystems for 

ecological, social, and economic benefits. 

Region-scale natural infrastructure bridges landscape and 

site-scale and is often implemented within recognized 

jurisdictions to inform strategic, regional land-use and 

transportation plans and ensure land conservation. 

Site-scale natural infrastructure is usually categorized 

under low-impact development and urban-scale watershed 

protection. While site-scale implementation can serve 

landscape-scale functions, it can often stand on its own 

merits in terms of site-scale natural infrastructure benefits, 

with economic savings over traditional, built infrastructure.

Best-practiced natural infrastructure attempts to connect and 

coordinate planning and implementation across all three 

scales—landscape, region, and site.

| William L. Allen III, The Conservation Fund
 44 WRI.org

Section 2.3: Prioritizing Forest Management Practices 

| Ethel Wilkerson and John Gunn, Manomet Center for Conservation 

Sciences (Current Affiliation: Spatial Informatics Group – Natural 

Assets Laboratory)

There are several examples across the United States 

and around the world of informed decision making based on evidence that supports the direction 

of impact (positive or negative) and indicators of 

cost-effectiveness. Adaptive management can then 

be used to adjust investments based on monitoring 

results. In this section, we demonstrate how five forestry BMPs can be ranked based on benefits to clean 

water, aquatic habitat, and associated ecosystem 

services, as well as estimates of the financial costs of 

applying these practices on forestland. The practices 

evaluated are: (1) use of temporary bridges on skid 

trails;3

 (2) road and stream crossing monitoring 

and maintenance on an annual basis and periodic 

larger repairs for 15 years post-construction; (3) 

installation of appropriately sized culverts to ensure 

proper function under projected flow conditions; 

(4) creation of a harvest plan and implementation of 

on-the-ground planning and communications; and 

(5) establishment of low-impact riparian management zones. These are the types of practices included 

alongside reforestation and easements in the greengray analysis conducted for Portland, Maine (Section 

1.2). The results presented here are specific to Northeastern U.S. forests, although the general approach 

has broader relevance.

PRACTICE REDUCE 

SEDIMENT

PROTECT 

AQUATIC 

HABITAT

PROTECT OTHER 

ECOSYSTEM 

BENEFITS

ASSOCIATED COSTS

Temporary bridges on skid trails HIGH HIGH HIGH LOW

$4,500 or $75/harvest

Road and stream crossing monitoring, 

maintenance on annual basis, and 

periodic larger repairs for 15 years postconstruction

HIGH HIGH HIGH MODERATE

$9,400/15yrs or $627/yr

Installation of culverts properly sized for 

projected flow conditions HIGH HIGH HIGH

MODERATE to HIGHa

25–141 percent increase 

in materials cost

Harvest plan and on-the-ground 

planning and communications HIGH HIGH HIGH MODERATE$1,300/harvest

Low-impact riparian management zonesb

 75ft, 40 percent timber volume 

removal HIGH MODERATE MODERATE MODERATE$231/acre of RMZ

 75ft, no timber volume removal HIGH MODERATE MODERATE HIGH

$584/acre of RMZ

 150ft, 40 percent timber volume 

removal HIGH HIGH HIGH HIGH$692/acre of RMZ

 150ft, no timber volume removal HIGH HIGH HIGH HIGH

$1,152/acre of RMZ

Table 5 | Summary of Practice Costs and Benefits of Improved Forest Management Practices

a

 Cost category varies by width of culvert

b

 Cost estimates were adapted from LeDoux and Wilkerson (2006)
Natural Infrastructure 45

The Approach

Environmental benefits can be evaluated based 

on the effectiveness of a practice to: (1) prevent or 

reduce sediment flow to water bodies; (2) prevent 

or reduce the degradation of aquatic habitat (e.g., 

stream temperature regimes, supplies of coarse 

woody debris to stream channels, and populations 

of macroinvertebrates, periphyton, and fish); and 

(3) protect or enhance other ecosystem benefits 

(e.g., terrestrial habitat, landscape-level biodiversity, timber management, recreational access, or 

recreational fisheries). With a scientific literature 

review, practices can be scored (low, moderate, 

high) based on authors’ confidence that the practice 

can prevent or reduce negative impacts or enhance 

ancillary benefits. 

Determining the costs of timber harvesting and 

land management activities is extremely complex 

and can be highly variable depending on local 

conditions. Instead of attempting a comprehensive 

and potentially inaccurate cost estimate for each 

practice, the study focused on estimating the portion of the cost associated with the practice that was 

additional or incremental to “business as usual” 

management strategies. Costs considered include 

those associated with planning (design, engineering, and pre-harvest prep work), implementation 

(materials, labor, and other costs associated with 

applying the practice on the ground), monitoring 

and ongoing costs (post-harvest activities including 

follow-up visits, regular monitoring, and routine 

maintenance), and lost landowner revenue (lost 

timber value, short- or long-term reductions in the 

allowable harvest volumes, or other lost opportunity costs). Cost estimates were derived from quotes 

for materials and labor, computer modeling of 

operation and stumpage costs, and an expert panel 

of forests. Scoring criteria and cost estimates are 

detailed in Wilkerson and Gunn (2012). 

Results 

The cost and benefit evaluations for each practice 

are summarized in Table 5 above. 

 Temporary bridges on skid trails emerged as an 

affordable and highly effective way to maintain 

clean water and aquatic habitat and related 

ecosystem benefits. Federal and state agencies promote adoption of this practice through 

free ‘loaner’ bridges and cost-share grants. 

Supplementing existing programs or providing 

additional funds to individual landowners or 

contractors should be a priority for any payment for watershed services program. 

 Funding a road and stream crossing monitoring and maintenance over the long-term, and 

installing appropriately sized culverts scored 

high in protecting aquatic resources but with 

moderate to high costs to landowners. If incentive funding and potential buyers are limited 

(as is typically the case), natural infrastructure 

investment programs should prioritize forest 

parcels that play a significant role in the protection of clean water. Characteristics of these parcels may include: proximity to water bodies and 

wetlands, steep topography, poorly drained and 

wet, sensitive, soils and location between road 

networks and water bodies. The Conservation 

Priority Index (Section 2.1) is an example of a 

GIS tool that provides a framework to identify 

parcels with high value in terms of protection 

of clean water. 
 46 WRI.org

 Harvest planning and on-the-ground planning 

and communications scored high in protecting 

water resources but with moderate costs to the 

landowners. Professional foresters and loggers 

provide valuable knowledge and skills that 

benefit not only the protection of clean water 

but also the long-term value of land and timber 

resources. Involving professional foresters and 

logging contractors is critical to the success of 

any financial incentives program. 

 Establishing low-impact riparian management 

zones (RMZs) that prevent or restrict harvesting activities near water bodies was shown to 

be a moderately to highly effective strategy to 

project aquatic resources. Both the benefits and 

costs of this practice increased with the width of 

the RMZ. This analysis found that partial harvesting within RMZs can provide the benefits to 

the water resource while allowing landowners 

to realize some of the financial benefits of the 

timber resources contained within these areas. 

Any incentive program should permit management within RMZs with acknowledgement that 

careful planning and harvest design may be 

more critical to protecting water resources than 

specified buffer widths. 

Summary 

Applying forestry practices that protect or enhance 

aquatic resources represents a cost to the landowner and exact benefits are often difficult to 

quantify. Therefore, an efficient natural infrastructure investment program should prioritize practices 

across the landscape based on costs and approximate expected benefits. The cost and benefits rankings provided here for common forest management 

practices can serve as guidance for that purpose in 

Northeastern forests, while the general approach 

can serve as a model to be replicated in other 

forest types.

Section 2.4: Watershed Modeling

| Charles Governali, World Resources Institute 

| James Mulligan, Green Community Ventures

Predictive watershed models draw on current scientific knowledge of the relationships between various 

ecological factors and water resources to approximate quantitative impacts from various natural 

infrastructure interventions through multiple 

simulations. Once validated and calibrated to different watershed conditions, these models can greatly 

advance our ability to make quantitative predictions about the impact of natural infrastructure on 

water resources in a particular watershed. While 

the majority of cases of watershed investment have 

not relied on detailed watershed modeling, the field 

is advancing and can improve the basis for decision making. See Box 11 for sample applications of 

watershed models.

Watershed modeling currently offers relevant, 

credible, reasonably accessible, and useful tools for 

making quantitative predictions in a wide variety 

of regions and watershed conditions, on the annual 

to multi-decadal timescale relevant to investment 

decisions. Existing models are well developed for 

predicting the impacts of land cover change on 

water quality, quantity, timing, and distribution 

within watersheds. Existing models can also serve 

to predict the individual and cumulative impacts of 

various management practices across watersheds, 

especially for agricultural and urban BMPs, and 

increasingly for forestry BMPs. 

General Limitations of Modeling

On the whole, the application of quantitative watershed modeling to natural infrastructure investment 

decisions faces the following limitations:

1. First and foremost, even excellent models 

cannot explain some proportion of the variation in water quantity and quality measures. 

Optimistically, the best models often do not 

capture 20–40 percent of variation4 for annual 

predictions (performance tends to improve for 

multi-annual to multi-decadal predictions);
Natural Infrastructure 47

2. Substantial resources in the form of both 

expertise and personnel hours are still required 

to rigorously apply the most useful modeling 

systems—on the upper end, typically a multiperson team for a multi-month period in order 

to achieve high quality implementation from 

scoping to secondary analyses (see, e.g., Shoemaker et al. 2005);

3. Extensive data are required, including field 

monitoring data to calibrate models to local 

conditions, to achieve the highest-quality performance, although reasonable performance 

can be achieved without calibration; 

4. While models have the technical capacity to 

function in decision-making contexts, support for such non-academic (non-researchoriented) applications5

 is sometimes poorly 

developed, and organized support for forest 

management applications of existing models is 

largely absent; and

5. Hybrid modeling systems6 that allow for the 

best multi-scale, comprehensive watershed 

analyses still need to be mainstreamed (i.e., 

applied and critiqued by non-developers in a 

wide variety of regions and contexts); and

6. While methods for conducting uncertainty 

analyses abound and are well developed, there 

is not a standardized set of analysis tools built 

in to modeling systems or even applied in 

modeling studies across the board (see Pappenberger and Beven 2006).

While assessing the impacts of land cover change is 

a widespread function of watershed models, strong 

modeling capabilities for forest management practices are restricted to a small number of modeling 

systems—and much development has been relatively 

recent. There is a large need for more widespread 

testing of these capabilities, development of a 

more substantial body of support literature, and 

enhancements to the structure of modeling software 

programs to facilitate those approaches and analyses best suited to forest management applications. 

Another significant limitation of some of the most 

used and tested models, in the context of natural 

infrastructure investment applications, is the lack of 

spatial explicitness in the representation of the land 

cover pattern and small-scale features like forest 

roads. This shortcoming translates into an inability 

to physically represent BMPs that address the location of different land uses (and their associated pollutant sources) relative to each other and the stream 

network (e.g., siting of log landings).

BOX 11 | SAMPLE WATERSHED 

MODEL APPLICATIONS

The potential value of watershed modeling to guide 

natural infrastructure investments is well illustrated 

by several examples from the literature. A few are 

described here:

 Cerucci and Conrad (2003) used the Soil and Water 

Assessment Tool (SWAT) and the Riparian Ecosystem 

Management Model (REMM) to determine optimal 

riparian buffer configurations to minimize pollution 

in south central New York’s 37 km2 Town Brook 

watershed. They determined the marginal utility of 

buffer widths and the most affordable parcels in 

which to establish riparian buffers. 

 Azevedo et al. (2005) used a modified version of 

APEX and the HARVEST landscape model in east 

Texas to assess the impacts of specific, SFI forestry 

practices (limitation of harvest unit size, a “greenup interval,” and streamside management zones) 

on water and sediment yields, in comparison to a 

reference scenario without implementation of these 

practices. They estimated absolute differences 

between scenarios at different spatial scales and were 

able to identify riparian management zones as the 

practice primarily responsible for the differences.

 Pai et al. (2011) used SWAT in a 1,960 km2 

northwestern Arkansas watershed for spatial 

prioritization of subwatersheds for targeting 

management efforts. Prioritization was based 

on quantitative estimates (supported by model 

validation statistics) of sediment, total P, and 

nitrate concentrations for the 28 subwatersheds. 

GIS analysis showed that “the resulting priority 

subwatersheds comprised only 24 percent of the 

total area of the watershed but contributed 49 percent 

of sediments, 33 percent of TP, and 27 percent of 

NO3-N annual average loadings.” These results were 

supported by spatial correlations between priority 

subwatersheds and land cover characteristics that are 

expected risk factors.
 48 WRI.org

However, as discussed in Section 2.2 (Box 9), the 

field has recently developed new models that address 

some of the limitations of earlier models—including 

lack of spatial explicitness and modeling of forest 

management practices. These models tend to be less 

broadly applicable to natural infrastructure applications on their own, but can be integrated with the 

more comprehensive models to produce “hybridized 

models” with broader capabilities.

While there are many high quality watershed 

models, we profile three representative models 

with natural infrastructure investment applications: the Generalized Watershed Loading Function (GWLF; Haith and Shoemaker 1987), the Soil 

and Water Assessment Tool (SWAT; Arnold et al. 

1998), and the Hydrological Simulation Program—

FORTRAN (HSPF; Barnwell and Johanson 1981). 

These models offer a number of qualities7

 that are 

important for natural infrastructure applications. 

All three perform well in predicting water quantity 

and common quality measures (e.g., total N, P, and 

sediment loads) at watershed outlets at annual to 

multi-annual time scales, when applied well.8

However, GWLF, SWAT, and HSPF are each best 

suited to quite different natural infrastructure contexts because of fundamental differences in modeling 

system structure and function. They vary in terms 

of complexity, input requirements, output spatial 

and temporal scale, accuracy, built-in uncertainty 

analysis tools, and institutional support for implementation. It is important to carefully select the 

best model for a given context and set of objectives. 

Reviews such as Shoemaker et al. (2005), Borah 

et al. (2006), and Moriasi et al. (2012) can provide 

valuable comparative information to aid model 

selection. Table 6 above highlights some important 

differences. See the Resources Section in the Appendix for additional information on these models, and 

discussions of more recent model hybridization and 

using model outputs as inputs to economic analysis. 

See also Box 12 for a discussion of a user friendly 

modeling interface developed in Virginia to serve as 

the basis for payments to landowners.

Even the best watershed modeling systems still 

face shortcomings, including resource demands 

and accuracy limitations. However, when coupled 

with uncertainty analysis,9

 quantitative model 

HSPF SWAT GWLF

Pollutant 

Transport / 

Fate Processes

Highly detailed Highly detailed—somewhat 

less so than HSPF (see, 

e.g., Radcliffe and Lin 2006)

Only simple loading functions (i.e., no representation 

of fate of pollutants after leaving source areas; 

Shoemaker et al. 2005, Borah et al. 2006) 

High-Profile 

Uses

EPA’s Chesapeake Bay 

Program (HSPF; EPA 2010)

USDA's Conservation 

Effects Assessment Project 

(CEAP 2007, Mausbach and 

Dedrick 2004)

State-level TMDL work in Illinois, Virginia, and 

Pennsylvania (Borah et al. 2006)

Data Inputs Requires extensive local 

data inputs (i.e., streamflow 

and water quality monitoring 

data) for calibration before 

use (Borah et al. 2006)

Can be run uncalibrated 

with only publicly available 

data (Haith et al. 1992)

Can be run uncalibrated with only publicly 

available data (Neitsch et al. 2011); demands 

fewest data inputs of the three

User Support Well-developed interface, 

GIS-platform, and 

supporting literature for 

implementation10

Well-developed interface, 

GIS-platform, and 

supporting literature for 

implementation11

Well-developed interface, GIS-platform, and 

supporting literature for implementation;12

however, lags behind in terms of available 

support

Table 6 | Major Differences Across the HSPF, SWAT, and GWLF Models
Natural Infrastructure 49

BOX 12 | InFOREST

To provide metrics to support natural infrastructure 

decision making, the Virginia Department of Forestry 

developed a web-based application known as InFOREST.

InFOREST is a user-friendly interface that enables the 

user to input watershed scenarios, which are then run on 

a model housed on a Virginia Tech server. The interface 

currently draws on the GWLF model—discussed in 

more detail in Section 2.4 above. However, InFOREST is 

“plug-and-play”—that is, if a case is made for a better 

model, that model can be plugged into InFOREST. The 

GWLF model does not capture efficiencies gained from 

forestry practices (e.g., implementation of BMPs), and is 

not spatially explicit (i.e., the model does not incorporate 

where a given parcel is situated within the larger 

watershed). All acres of a given land cover are statistically 

assigned the same nutrient and sediment loading values 

based on the extent and type of land cover found in the 

watershed of project area. 

InFOREST allows the user to estimate both baseline 

conditions and changes from baseline under a variety 

of scenarios for both water quality (nutrients and 

sedimentation) and carbon sequestration. The tool will add 

models for air quality and biodiversity in 2013. The user 

can run the tool for water quality at either the watershed 

level or the project level. At the watershed level, the 

user could input a scenario such as conversion of 1000 

acres from forest to impervious surface, and the model 

will produce statistically discovered changes in nutrient 

loading and sedimentation in the watershed from baseline 

conditions. At the project level, the user can input a 

scenario such as reforestation of 200 acres of steep grade 

marginal pasture, and the model will produce the “delta” in 

terms of nutrient loading and sedimentation.

To date, InFOREST has been used to produce the data 

necessary to make payments to forest landowners for 

the water quality benefits their lands produce. The 

tool has also been used to identify the most impaired 

watersheds—in terms of forestry land cover, nutrient 

loading, and sedimentation—to tailor rental payments 

to landowners to attract more participation in those 

impaired watersheds. 

One of InFOREST’s recent applications has been for 

a payment for watershed services (PWS) program 

in Albemarle County, Virginia. The Rivanna River 

watershed is about 60 percent forested. The watershed 

benefits immensely from having its headwaters located 

within Shenandoah National Park, and mountainous 

terrain on private lands bordering the park has limited 

development there. But further downstream, development 

has accelerated substantially—particularly as the river 

approaches the City of Charlottesville. 

A stakeholder advisory committee was organized 

and quickly realized that prioritization and targeting 

was needed to identify potential participating 

landowners, heavily impaired subwatersheds, and the 

forest management practices that provided the most 

environmental lift. This was important for two reasons: 

First, to most efficiently spend the limited conservation 

dollars available, and second, to more successfully build 

the business model for water utilities that demonstrates 

natural infrastructure is a necessary and important 

complement to built infrastructure. 

InFOREST provided the metrics for identifying how 

forest cover reduced sediment and nutrient loading. This 

enabled the team to prioritize critical subwatersheds and 

set landowner payments. Payments to landowners to date 

have been grant-supported. However, there has been keen 

interest among utilities in the region in how watershed 

work can maintain or lower treatment costs. While 

those downstream water utilities that benefit from forest 

conservation have yet to offer up dollars themselves, an 

important dialogue has been started, in part with the help 

of InFOREST.

| Buck Kline, Director of Forestland Conservation, VA Department of Forestry
 50 WRI.org

predictions offer a major improvement over proxybased and other non-computational techniques for 

estimating returns on natural infrastructure investments. While many of the active natural infrastructure programs nationwide have not hinged 

on the availability of such quantitative predictions, 

an improved understanding of expected financial 

returns on investment may be critical to appeal to a 

broader set of water beneficiaries.

Modeling Outputs as Inputs to Economic Analysis

Overall, while limitations remain, recent progress 

and ongoing work in model system expansion and 

hybridization promise even greater applicability 

of watershed modeling for natural infrastructure 

investment decisions. While natural infrastructure 

economic analyses are often forced to make (conservative) assumptions about the water resources 

impact of a given natural infrastructure investment 

based on literature syntheses and proxies (see, for 

example, the Sebago Lake watershed green-gray 

analysis by Talberth et al. discussed in Section 1.2), 

detailed watershed modeling can produce quantitative predictions that can serve as inputs to those 

economic analyses. 

For example, the Natural Capital Project’s Resource 

Investment Optimization System (RIOS) tool (still 

in development), is being explicitly designed to 

integrate natural infrastructure scoping analysis 

(siting and alternative investment portfolios), biophysical modeling of returns on natural infrastructure investments, and economic analysis of implementation costs and returns. RIOS will be able 

to incorporate biophysical outputs from multiple 

models (including SWAT), but will include in-house 

watershed modeling already in existence—components of the Integrated Valuation of Environmental 

Services and Tradeoffs (InVEST) toolbox13 (Tallis et 

al. 2011, Vogl et al. 2012, and Vogl, pers. comm.). 

Quantitative modeling with some of InVEST’s modules (for various ecosystem services) has already 

been applied to aid land management decision 

making on multiple continents (Natural Capital 

Project 2012). The workflow that RIOS formalizes 

has already been used without a quantitative model 

in scoping and establishment of “water fund” projects in Latin America (Vogl and Tallis 2012, Vogl, 

pers. comm.). 

Chapter 3: Identifying Opportunity and 

Beginning the Conversation

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases

KEY TAKE-AWAYS

1. Forests are critical for the provision of clean, 

timely, and plentiful water. They are the 

source for 53 percent of the freshwater supply 

in the contiguous United States. 

2. The opportunity for natural infrastructure 

is widespread. The fundamental conditions 

for the approach to be viable are quite basic 

and found in diverse watersheds across the 

country—healthy and degraded, privately 

owned and public. Assess the watershed 

for ecological trends causing water-related 

issues tied to substantial current or projected 

costs (Section 3.1).

Local decision maker participation is critical 

for success. Engage with key stakeholders 

and decision makers early and often to articulate a vision of success. Tailor engagement to 

the knowledge base and major priorities and 

preferences of decision makers (Section 3.2).
Natural Infrastructure 51

Introduction

Natural infrastructure programs should begin at 

square one with broad scoping of opportunity and 

early efforts to spark dialogue among key decision makers and stakeholders. The opportunity 

is widespread for natural infrastructure to play a 

cost-effective role as part of a solution set for a wide 

range of water-related challenges. The fundamental 

conditions needed for natural infrastructure to be 

potentially viable are found in watersheds across 

the country. 

While the approach can be an exciting new initiative for many stakeholders, a few basic conditions 

must be in place in order to drive meaningful 

investments from water beneficiaries. It is critical 

that early program partners—ideally with assistance 

from conservation practitioners and experts—realistically assess the likelihood of success and longterm sustainability. Section 3.1 can help to guide 

initial thinking on this important first step.

If prospects for a viable program appear to be real, 

the next and often difficult step is to foster dialogue 

with decision makers and stakeholders. Early 

engagement efforts with decision makers should be 

careful to account for their priorities, preferences, 

and perceptions related to water delivery, source 

water management, and natural infrastructure. Section 3.2 offers some insights into the priorities and 

preferences of water utility managers and associated guidance for beginning conversations around 

approaches to water management that integrate 

both natural and built infrastructure components.

Section 3.1: “Hotspot” Watersheds—Identifying 

Opportunity

| James Mulligan, Green Community Ventures

Every watershed is different. Yet, in one way or 

another, everyone benefits from the services provided by natural infrastructure. Natural ecosystems 

provide businesses and communities—often represented by public water utilities—with a wide range of 

services in the form of flood control, flow regulation, 

reduced sedimentation of reservoirs, and enhanced 

water quality. Major water-related issues vary from 

watershed to watershed based on political, regulatory, economic, and ecological factors—but the 

landscape plays a consistently critical role.

While natural infrastructure plays a consistently 

critical role in the provisioning of critical waterrelated services, some watersheds have combinations of characteristics that make them particularly 

ripe for substantial natural infrastructure investments. These watersheds are “hotspots.” They offer 

salient opportunities to enhance water security and 

reduce costs relative to built alternatives.

This section is intended to serve as broad guidance 

for identifying watersheds ripe for natural infrastructure investment. The characteristics of these 

hotspot watersheds relate not only to ecological 

conditions and trends across the natural landscape, 

but also the economic, regulatory, and political factors at play in a watershed.

Foundational Elements

The following foundational elements make a watershed a hotspot for natural infrastructure investment:

1. One or more clearly identified current 

or projected water-related issue(s).

These issues can be purely economic—such 

as water quality degradation that threatens 

increased costs for drinking water treatment 

or other industrial processes. Or they can 

relate more directly to water security—for 

example, issues related to flood or drought risk 

like property damage, water supply shortages, 

a need to expand services due to a growing 

population, and/or loss of reservoir storage 

capacity due to sedimentation. These issues 

can also be tied to regulatory drivers, like 

impending loss of a filtration avoidance waiver 

under the Safe Drinking Water Act, or noncompliance with the Clean Water Act or other 

regulations (Box 13). To-date, action has typically occurred at substantial scale only where 

regulatory or cost drivers are imminent and 

substantial; however, there is a strong case for 

more proactive investment in natural infrastructure as part of an integrated approach to 

water resources management.

2. Substantial economic value associated 

with identified water-related issues. For 

substantial investments to mobilize—and be 

worthwhile economically—there also needs 

to be real economic value tied to current or 

emerging water-related issues in a watershed. 
 52 WRI.org

There needs to be sizeable “willingness to pay” 

in the watershed to resolve or avoid the critical 

water-related issue at hand. Here, we refer to 

willingness to pay in a strict economic sense. 

In some cases, for example where investments 

are made to meet regulatory requirements, 

the buyer may not be truly “willing.” Sizeable willingness to pay is typically found in 

watersheds that serve major beneficiaries—for 

example, public utilities and their ratepayers 

in urban centers or industrial entities that rely 

on abundant clean water, such as manufacturers, agricultural producers, and hydropower 

plants. It can also be found in watersheds that 

receive regulated inputs from large pointsources, which may find it cost-effective to 

meet regulatory requirements through investments in natural infrastructure.

3. A clear connection between the waterrelated issue(s) and ecological conditions on the landscape. Ecological conditions in hotspot watersheds include current 

or projected degradation or outright loss of 

ecosystems, typically due to development 

pressures, agriculture, or industrial forestry 

(including legacy impacts). In Virginia, for 

example, an ecosystem services workgroup 

spawned in 2007 in response to net annual 

loss of 20,000–30,000 acres of forest land to 

BOX 13 | OVERVIEW OF LEGAL & REGULATORY FRAMEWORKS & DRIVERS

The regulatory framework that governs water resources 

is critical for sound natural infrastructure investment 

decisions for two reasons: 

First, traditional “command and control” regulations 

provide the baseline for what is already being protected 

under federal, state, and local laws. For example, 

many municipalities require setbacks and buffers 

between certain types of development and streams. 

Natural infrastructure investments should provide 

“additionality”—that is, an impact over and above the 

business as usual scenario, which typically includes what 

is required by law.

Second, many of the regulations governing water 

resources take a flexible approach and allow the regulated 

community (including water utilities and others) to use 

natural infrastructure to achieve compliance in ways 

that reduce cost and may achieve greater environmental 

benefits than are possible under a traditional regulatory 

approach. Where the regulations allow for this flexibility, 

natural infrastructure approaches can be a costeffective alternative or complementary strategy to built 

infrastructure in achieving compliance.

The principal provisions of federal law that govern water 

quality are the Clean Water Act (CWA) and the Safe 

Drinking Water Act (SDWA). They are administered by the 

U.S. Environmental Protection Agency, which delegates 

significant regulatory authority to the states. 

Safe Drinking Water Act (SDWA)

Under the federal SWDA, all drinking water taken from 

surface water sources must be filtered to remove microbial 

contaminants. Maximum Contaminant Levels (MCLs) are 

set by EPA to determine the amount of a substance that 

is allowed in public water systems. Typical contaminants 

include arsenic, chlorine and E. coli. 

Source water protection is voluntary and implemented 

at the local level without additional federal mandate or 

funding support. However, as a strategy to meet the 

MCL standard, protecting raw water in streams, rivers, 

lakes, and aquifers can yield long-term savings on water 

treatment and capital investment (Mehan et al. 2009).

In 2002, EPA promulgated the Long Term 1 Enhanced 

Surface Water Treatment Rule. This Rule strengthened 

the filtration requirements for “all public water systems 

that use surface water or ground water under the direct 

influence of surface water...and serve fewer than 10,000 

persons.” EPA may waive this requirement for water 

suppliers if they can demonstrate that they have an 

effective watershed control program and that their water 

meets strict quality standards. Water systems with filtration 

waivers have a strong incentive to invest in upstream 

natural infrastructure in order to maintain those waivers, 

since protecting water at the source is often more costeffective than installing expensive filtration technology. As 

discussed earlier in this guide, source water protection can 

also help to reduce variable treatment costs.

| Katherine Garvey, Vermont Law School
Natural Infrastructure 53

development. However, a wide range of factors 

can be at play. In Colorado, for example, pine 

beetle infestation and fire suppression has 

increased risk of wildfire, which in turn threatens catastrophic sedimentation in Denver’s 

reservoirs. Additionally, watersheds that have 

already weathered a period of development 

without experiencing substantial degradation 

of watershed services may find that remaining 

natural infrastructure is inadequate to handle 

future impacts related to climate change.

The elements described above can be found in many 

different degraded and healthy watersheds in both 

public and private ownership across the country. In 

privately owned watersheds, conversion of forest 

for development represents a clear and common 

threat to water resources. For utilities that benefit 

from public ownership of their watersheds—either 

by the utility itself or by another public landowner 

such as the local municipality, or state or federal 

agencies like the USDA Forest Service—major 

threats to drinking water are typically less clear. 

BOX 13 | OVERVIEW OF LEGAL & REGULATORY FRAMEWORKS & DRIVERS (CONT.)

Clean Water Act

Section 402 of the CWA allows states, with EPA approval, 

to establish procedures for permitting point-source effluent 

discharges. Under § 303 of the Act, approved states 

must establish water quality standards (WQS) under the 

National Pollution Discharge Elimination System (NPDES). 

When an NPDES permit has been issued, waterbodies are 

monitored to determine whether the state WQS are being 

met. If monitoring indicates that the water quality does not 

meet WQS then that waterbody is considered impaired and 

is included on the state’s “list of threatened and impaired 

waters” maintained under § 303(d)—“the 303(d) list.” 

Once a waterbody is on the 303(d) list, the state is required 

to establish Total Maximum Daily Loads (TMDLs)—the 

amount of specific pollutants that the waterbody can 

receive and still meet WQS. Pollutants are capped based 

on the carrying capacity of a particular body of water, plus 

a margin of safety. TMDLs are not self-implementing; in 

order to comply with TMDL standards, states and local 

governments must develop a Continuing Planning Process 

which contains the TMDLs for pollutants and provisions 

for “adequate implementation, including schedules of 

compliance, for revised or new water quality standards.” 

Achieving compliance with TMDLs under the Clean 

Water Act has often meant costly technological 

improvements to facilities that discharge pollutants, such 

as wastewater treatment plants. One way to reduce the 

cost of implementing TMDLs is through water quality 

trading. Voluntary trading programs allow those sources 

with high pollution control costs to purchase equal or 

greater pollution reductions from sources with lower 

abatement costs—either other point sources or non-point 

sources (e.g., forest, farm, or ranch owners). Credits 

for pollutant reduction within a trading program must 

achieve greater environmental benefits than those under 

existing regulatory programs. About 100 point sources 

have participated in water quality trading—about 80 

percent of which have been point source to point source 

trades (Willamette Partnership 2012). The Willamette 

Partnership, with contributions from the Pinchot Institute 

for Conservation and the World Resources Institute, has 

developed an in-depth water quality trading guidance 

publication, titled “In It Together: A How-To Reference for 

Building Point-Nonpoint Water Quality Trading Programs.” 

State Law

In addition to groundwater protection, states have other 

regulations that protect water quality. These range from 

best management requirements for practices on working 

lands to very specific land use restrictions. Some states 

have land use acts of statewide application that regulate 

major development in ways that have an impact on water 

quality. In all states, state law enables municipalities 

through zoning to regulate development and use along 

waterways and within flood zones. Many municipalities 

require setbacks and buffers between certain types of 

development and streams. Some municipalities are 

required to regulate along waterways under state law. 

These requirements set a regulatory baseline for land uses 

that affect water quality. Investing in natural infrastructure 

above and beyond this regulatory baseline (e.g., expanded 

riparian buffers or conservation easements on high-impact 

lands without development restrictions) can often be a costeffective means to manage water quality, quantity, and flow.

| Katherine Garvey, Vermont Law School
 54 WRI.org

However, ongoing protection and management 

efforts are likely needed to improve and maintain 

the watershed as natural infrastructure.

For example, Portland, Oregon, works hand-inhand with the USDA Forest Service to manage the 

Bull Run Watershed for the primary purpose of 

providing clean drinking water. The watershed does 

not face threats of private development as a result 

of wise decisions long ago—it has been protected as 

a water supply source since the 1890s, and has no 

private homes, farms, or businesses. The management unit prohibits commercial timber harvest as 

well as all forms of recreation. Excluding the vast 

majority of common pollutant sources has helped 

Portland keep its raw water very clean and thereby 

significantly reduce the treatment costs necessary to 

protect public health. Portland’s watershed protection program emphasizes avoidance and prevention, such as monitoring for invasive plant species, 

mapping slopes vulnerable to landslides, and maintaining roads. Portland also provides supervised 

tours so that both adults and school children can 

see and learn about the watershed resources behind 

the locked gates.

Zeroing in on Forest-to-Faucet Hotspots

In this guide, we are primarily concerned with 

watersheds where ecological conditions of concern 

are forest-related. Recent work by the USDA Forest 

Service helps to guide our focus in this regard.

The USDA Forest Service’s Forest to Faucet project 

(Box 15) modeled and mapped the continental United 

Figure 7 | Forest Importance to Surface Drinking Water and Watersheds with High Risk (Top 10 percent)

Source: USDA Forest Service Forests to Faucets.
Natural Infrastructure 55

States forest land areas most important to surface 

drinking water supplies against watersheds with the 

highest risk (top 10 percent) due to development, 

insects and disease, and wildfire. The areas of overlap 

between these two variables (Figure 7) give a highlevel sense of where the ecological and economic conditions for natural infrastructure investment may be 

most ripe. Further investigation of these watersheds 

may be needed to confirm feasibility of the natural 

infrastructure approach and there are likely to be 

opportunities outside of the areas identified here (particularly for non-forest-based natural infrastructure).

Beneficiaries in many watersheds nationwide have 

already recognized the role natural infrastructure 

can play as part of the solution to the critical water 

issues they face. Figure 8 below shows a sample of 

those major cities that have invested in forest-based 

natural infrastructure. In addition, Ernst (2004) 

provides several salient examples of watershed 

protection in smaller counties and towns.

Private Businesses as Potential Investors 

in Natural Infrastructure

Domestically, it is most often the municipality or 

public utility that makes the investment on behalf 

of taxpayers or ratepayers. However, a wide range 

of private industries are heavily reliant on a steadily 

available supply of clean water. As water scarcity 

emerges as one of the defining challenges of the 

21st century, private companies and investors are 

realizing that there are many ways a company’s 

water use can pose significant risk to its bottom 

line. Dwindling or variable water supplies can bring 

manufacturing to a halt. Deteriorating water quality 

can lead to higher capital and operating treatment 

costs. Changes in regulation can expose polluting 

industries to fines and sanctions. Additionally, a 

company’s reputation can be damaged by unsustainable water use, leading to a decline in sales and 

revenues. Further complicating the issue, exposure 

to water risk in all of its forms varies significantly 

from region to region and across sectors.

Figure 8 | Sample of Cities that Have Invested in Forest-Based Natural Infrastructure

BELLINGHAM

WORCESTER

PORTLAND

NEW YORK CITY

SEATTLE

TACOMA

SNOHOMISH COUNTY

SNOHOMISH COUNTY

MEDFORD

EUGENE

SALT LAKE 

CITY

SANTA FE

SAN ANTONIO

LITTLE ROCK

ASHEVILLE

CHARLOTTE

AURORA

DENVER

FLAGSTAFF

TUSCON

SAN 

FRANCISCO

LOS 

ANGELES

RALEIGH

PORTLAND
 56 WRI.org

BOX 14 | BIG SKY BREWING COMPANY & WATER RESTORATION CERTIFICATES

Private-sector companies stand to benefit from 

participation in water resource initiatives—whether to 

manage real water-related risks (direct or indirect) or to 

strengthen the communities where their employees live 

and play. For some companies, participation in these 

initiatives is philanthropic. For others, it is a business 

strategy to manage increasing costs and brand risks in the 

face of projected water resource degradation. 

Big Sky Brewing Company first opened its doors in 

Missoula, Montana, in 1995. Since its beginnings, Big 

Sky Brewing Company has grown to Montana’s largest 

brewer and the 37th largest craft brewery in the United 

States. The company is known for brands like Moose 

Drool, having as much fun as possible, and a dedication to 

giving back. As a brewery that prides itself on recreation, 

Big Sky Brewing Company also possesses a hunting, 

fishing, and recreation conservation ethic with history of 

supporting the natural resources that define its home in 

Montana and its beer. This starts with water. 

Written on the side of every can of MOOSE DROOL is the 

company’s slogan: “WE MAKE WATER FUN.” This mantra 

hails from a culture that embraces the free-flowing rivers 

that define Montana and the obvious importance of water. 

The brewery brews and packages over 44,000 barrels of 

beer a year—using over 1.3 million gallons of water. The 

water used at the brewery’s Missoula home originates in 

the plentiful and healthy Missoula Aquifer. Although water 

is abundant at this location, other critical water resources 

in the state are not so fortunate. The state is home to over 

4,000 miles of dewatered streams—most of which lack 

sufficient flows for trout, or run completely dry due to 

irrigation withdrawals. To a company that brews a beer 

called Trout Slayer, employs a workforce with a fly rod in 

almost every garage, and realizes a cold beer is a fitting 

end to a Montana fishing day—this is a problem. 

The Bonneville Environmental Foundation (BEF) released 

Water Restoration Certificates in the Summer of 2009 as 

an effective way for businesses to take responsibility for 

their water consumption by returning an amount of water 

equal to what they have used back to the environment. The 

specific details of the transaction include an instream flow 

lease that is credited as a Water Restoration Certificate 

and marketable to any individual or company interested 

in restoring their water footprint. In essence, one Water 

Restoration Certificate represents 1,000 gallons of water 

restored to a critically dewatered river or stream. Through 

this program, Big Sky Brewing Company has taken strides 

to restore all of the water that goes into the company’s beer 

back into a dewatered Montana stream. 

Prickly Pear Creek flows from the Elkhorn Mountains north 

to the Helena Valley, past the small town of East Helena, 

continuing through agricultural farmlands, pastures, 

and small rural subdivisions upon entering Lake Helena. 

The Creek is home to a variety of fish species. Sadly, 

however, decades of timber harvest, mining, and water 

withdrawal have taken a heavy toll on Prickly Pear Creek. 

Legacy mining impacts have contaminated ground water 

in places, and the creek is chronically dewatered due to 

over-allocation of surface water rights. As a result, EPA 

has listed Prickly Pear Creek as not meeting a number of 

federal environmental standards, and the creek goes dry in 

most years.

Water Restoration Certificates purchased from BEF have 

restored more than 4 million gallons of water instream for 

a three year period (2010–2012) in Montana’s critically 

dewatered Prickly Pear Creek—allowing the creek to 

maintain connectivity through the irrigation season for the 

first time in many years. All BEF restoration projects are 

certified by the National Fish and Wildlife Foundation to 

ensure that water is returned at a time and place that will 

produce real environmental benefits. 

For Big Sky, investing in Water Restoration Certificates 

is an opportunity to lead, producing a measurable benefit 

where it is needed most and in a way that aligns with the 

brewery’s brand. Since its original investment, six other 

breweries have joined this worthy cause.

| Chris Corbin, Lotic Water
Natural Infrastructure 57

Consider the toll taken on the U.S. agricultural 

economy in 2012 in what the National Oceanic and 

Atmospheric Administration (NOAA) has called 

the country’s most extensive drought in more than 

50 years. U.S. crop yields were steadily reduced 

across the 29 states in the affected area, impacting 

a wide range of suppliers, consumers, communities, and others. In 2011, the Texas drought resulted 

in $5.2 billion in agricultural losses, driving Gap 

clothing company to cut its profit forecast by 22 

percent because of higher cotton costs. And Kraft, 

Sara Lee, and Nestle all announced plans to raise 

prices in the wake of droughts and floods. Events 

like these—which are projected to become increasingly common should climate change continue 

unabated—provide a sharp reminder of how heavily 

communities and global economies rely on water.

Water is a critical component in many industries—

not just agriculture and those that directly rely on 

agriculture like food and clothing. The beverage, 

energy, and manufacturing industries, for example, 

are all heavily reliant on water—and many businesses are susceptible to damage from flood. 

Quantity matters, but so does quality. Water quality 

can be directly important to manufacturing processes or products like bottled water, and it can also 

affect the cost of water.

Across the country and worldwide, we are beginning to see the impacts of water risk reflected in 

companies’ investment choices. Companies such 

as MillerCoors, PepsiCo, Coca-Cola, Ford Motor 

Company, IBM, Intel Corp., and many others have 

Figure 9 | Aqueduct--Measuring, Mapping, and Understanding Water Risks

Low stress (< 10%) 

Low to medium stress (10-20%)

Medium to high stress (20-40%) 

High stress (40-80%)

Extremely high stress (> 80%)

Arid and low water use

BASELINE WATER STRESS

Source: WRI 2013.
 58 WRI.org

BOX 15 | FOREST TO FAUCET PROJECT

Forests and drinking water

Forests play a critical role in providing drinking water 

in the US. Forests capture, store, and slowly release 

precipitation, in addition to trapping and transforming 

chemicals, nutrients, and sediments from rain or adjacent 

runoff. This refills underground aquifers, cools and 

cleanses water, slows storm runoff, reduces flooding, 

and sustains watershed stability and resilience, among 

many other benefits. 

Restoring, conserving, and sustainably managing 

forests has been a key strategy for maintaining drinking 

water quality. But with approximately 78 percent of the 

continental U.S. within a surface drinking water watershed, 

and a third of the nation’s land area as forests, there is 

a lot of land to protect, conserve, restore, and maintain. 

Conservation professionals dedicated to watershed-based 

efforts to protect and maintain drinking water quality 

are therefore challenged to identify those key land areas 

most important for surface drinking water. These areas 

are high-impact targets for conservation and sustainable 

management. Note, however, that while interventions 

to protect source water in these areas may be critical, 

it is also important to manage forest land for multiple 

ecosystem benefits.

The Forests to Faucets Project 

Expanding on the earlier Forests, Water, People report 

(Barnes et al. 2009), the Forests to Faucets project hones 

in on forest and non-forest areas most important for 

surface drinking water by creating a watershed index that 

incorporates three components:

1. The number of surface drinking water consumers of 

each intake (stream location where water is withdrawn),

2. Surface water flow direction and distance of each subwatershed to the intake, and 

3. Water supply (precipitation minus evapotranspiration—

model and data from Brown et al. 2008).

This approach highlights the importance of not only those 

areas directly surrounding surface drinking water intakes, 

but also those upstream areas that contribute to water 

quality at the intakes. The results of the first analysis step 

show high index values (indicating high importance for 

surface drinking water) in much of the east due to high 

population densities and high reliance on surface rather 

than groundwater. There are other clusters of high values 

throughout the west—those of note include the Colorado 

Front Range, Sierra Range, and the Cascade Range. 

By incorporating data on land use type and forest ownership 

in the second step of the analysis, we can see the role forests 

(private, public, and protected areas) play in protecting the 

areas most important for surface drinking water quality. 

In other words, these Step 2 results show the forest areas 

where people are most dependent for their surface drinking 

water. The third step of the analysis focuses in even further 

to identify forested areas most important for surface drinking 

water that are also highly threatened by insects and disease, 

development, and wildland fire.

Overlaying these “hotspot” areas elicits interesting 

patterns, and this can start to paint the broad brushstrokes 

picture of not only where the hotspots are for forest 

management, restoration, and conservation for surface 

drinking water, but also what types of challenges and 

strategies may be most relevant for different areas. For 

example, distinct patterning occurs in the Sierra Range 

where we see, from west to east, bands of hotspots of 

development, fire, and then insects and disease. 

This project also sets the groundwork for identifying 

watersheds where a water-centered natural infrastructure 

project may be an option for financing conservation and 

management on forest lands. The Forests to Faucets 

data on a broad scale identify areas that supply surface 

drinking water, have consumer demand for this water, 

and are facing significant threats that could be minimized 

through a payment designated for forest management or 

protection—all important criteria for successful natural 

infrastructure initiatives. As such, these hotspots can be 

used to determine good candidates for projects.

| Emily Weidner, USDA Forest Service
Natural Infrastructure 59

all made efforts to reduce water-related risk. For 

example, Mondi’s South African forest plantations and processing plants depend on healthy 

watersheds and riparian zones. Mondi has taken a 

leading role in promoting the awareness, improved 

management, rehabilitation, and protection of 

wetlands in order to secure its license to operate 

as well as provide benefits to the local community. 

Coca-Cola, meanwhile, joined forces with the World 

Wildlife Fund to improve the water quality of the 

upper reaches of the Yangtze River in China—one 

of the world’s top ten most threatened rivers. One 

result has been a united recommendation to the 

Chinese government on the implementation of pollution regulations. Coca-Cola operates 39 bottling 

plants in China. See Box 14 for a domestic example 

featuring Big Sky Brewing Company.

WRI’s Aqueduct program identifies, measures, and 

maps the key indicators that drive water risk with 

an unprecedented level of detail. Aqueduct’s maps

and the underlying water information database are 

designed to: 

1. Help companies and investors understand the strategic importance of 

reducing their exposure to water risk in 

high stress areas. Aqueduct can help users 

identify and disclose potential sources of water 

risk in their operations and supply chains, and 

prioritize areas to implement risk mitigation 

solutions.

2. Encourage public sector leaders to collaborate with domestic, agricultural, 

and industrial water users to achieve 

more equitable, efficient, and sustainable 

water resources management in waterstressed basins.

3. Highlight trends and opportunities for 

innovative solution providers, informing the next generation of water management 

technologies, techniques, and policies.

Section 3.2: Initiating Dialogue in Water Utilities14

| John Tynan, Sustainnovate, LLC (Current Affiliation: Central Arkansas 

Water; formerly on Board of Greenville Water System)

The U.S. Endowment for Forestry & Communities 

(the U.S. Endowment) contracted with Sustainnovate, LLC to collect the perspectives of water utility 

professionals throughout the country on source 

water protection. Sustainnovate conducted over 50 

interviews and reviewed similar past efforts, including the 2010 AWWA Source Water Protection Survey 

(a poll of 127 large utilities), A 2011 Education Survey 

by The Rocky Mountain Section of the AWWA (200 

utility member respondents), and A Conversation 

with Utility Managers (100 interviews with utility 

managers in 2009). The results of the effort indicate 

key internal and external challenges, priorities, and 

preferences related to natural infrastructure, and 

a corresponding set of guidelines for water utility 

staff and others seeking to start meaningful dialogue around integrating natural infrastructure into 

water management strategies. Box 16 details lessons 

learned for conservation practitioners.

Challenges

Three major challenges face natural infrastructure 

champions in water utilities: resource constraints, 

lack of public understanding, and lack of access 

to the quantitative business case for natural infrastructure strategies.

Water utility managers resoundingly highlight limited time and resources for utilities to participate in 

planning as a challenge to source water protection 

efforts. The scarce resources that utilities have, 

from their own revenues or from a state agency, are 

typically quickly consumed by regulatory requirements, leaving few resources for voluntary programs regardless of the benefit. Many utilities do 

not prioritize implementation of source water protection plans because there are few or no regulatory 

requirements to do so. Source water professionals have found success in the face of constrained 

resources by bringing something to the table—such 

as grant funding and partnerships that leverage 

the utilities’ expertise and capacity. Focusing on 

these opportunities early and often can provide a 

jumpstart for source water professionals seeking 

to advance the natural infrastructure conversation with key decision makers and stakeholders in 

their watersheds. While a wide variety of available 

finance mechanisms is available to support natural 
 60 WRI.org

infrastructure investments (Chapter 5), at minimum, proponents should recognize the impact that 

real and perceived funding constraints may have on 

forward progress.

Compounding resource issues is lack of public 

understanding of the real value of water. This is a 

critical challenge for the ability of utilities to raise 

rates for source water protection efforts (to avoid 

larger rate increases in the future). Several effective 

ratepayer communication strategies (see, e.g., Box 

23) are available and should be part of early conversations around natural infrastructure.

Finally, while general awareness of the importance of upstream ecosystems for water utilities is 

advancing, source water professionals and other 

champions of natural infrastructure must still make 

the case to decision makers in their institutions and 

to the public. Without access to reliable quantitative analysis demonstrating the business case, those 

charged with protecting source water are limited to 

qualitative arguments for landscape investments. 

According to one source water protection manager, 

“I have been pushing the qualitative ‘prevention 

is better than remediation’ case and have ridden 

that argument pretty far over the past 14 years. 

But I would be eager to be able to make the case 

quantitatively.” The field of analysis focused on the 

financial case for natural infrastructure is relatively 

new and rigorous watershed-specific economic 

analyses are rarely available unless pursued by the 

utility. Earlier chapters have focused on making the 

scientific and business case for natural infrastructure and can be used in presentations and memos 

to gain traction for dialogue.

Priorities

Water utility managers frequently cite the central 

importance of four issues when considering any 

new program: 

 Avoided regulation and/or increased regulatory 

compliance, 

 Cost reduction, 

 Reduced risk and uncertainty, and 

 Long-term and short-term economic 

development. 

As discussed throughout this guide, investments 

in natural infrastructure can serve a major role in 

addressing each of these issues. Framing natural 

infrastructure in terms of these issues can help 

build traction for meaningful internal dialogue 

among decision makers.

Preferences

Water utility managers have articulated clear preferences for various program design elements. Emphasizing these elements early in the process may help 

to facilitate dialogue. First and foremost, natural 

infrastructure efforts must clearly demonstrate 

results. Managers and governing boards must see 

some benefit from their investment within reasonable 

timeframes. While this requirement is likely to be a 

challenge where natural processes are slow to produce 

measureable changes and where the benefit in question is the prevention of water quality degradation or 

flooding, for example, a program design that includes 

robust validation, monitoring, verification, and adaptive management may resonate with decision makers.

Additionally, utility managers frequently suggest 

that forest-based efforts must be a component of 

an integrated approach to water treatment, rather 

than an attempt to eliminate it. Early dialogue 

should emphasize integrating forest preservation 

into treatment optimization processes. Similarly, 

the researchers behind the 2010 AWWA survey 

noted that source water protection efforts should be 

aligned with other top utility priorities rather than 

serve as a stand-alone program.

Partnerships

A consistent theme in the natural infrastructure field 

of practice is the importance of partnerships. While 

some utilities historically may not have considered 

working with land trusts or other “conservation” 

organizations, these partnerships are critical for 

bringing needed capacity and resources to the table 

to execute successful source water protection efforts 

that focus on natural infrastructure. When questioned about community partnerships, utility staff 

often note logical connections with local watershed 

organizations. Water conservation and efficiency in 

particular are identified as initial areas of collaboration between utilities and local groups. These local 

watershed groups (especially those with existing 

efficiency partnerships with utilities) may serve as 
Natural Infrastructure 61

an effective “bridge” between forest landowners and 

water utilities. However, less than half of large utilities have reportedly engaged stakeholders in their 

efforts, despite recognition of the importance of collaboration with stakeholders for source water protection efforts (AWWA 2010). Building these partnerships and highlighting the doors they open related to 

funding or capacity may be a successful strategy for 

initiating dialogue around natural infrastructure.

Take-Aways

There is often a broad set of decision makers whose 

active engagement or tacit support is required for 

natural infrastructure efforts to be successful—and 

whose technical backgrounds may not include source 

water protection and natural infrastructure. These 

can include budget managers and finance officers, 

lead engineers, environmental compliance directors, 

utility executives, board members, municipal officials, and major rate payers. While it would be folly 

not to recognize the unique perceptions, preferences, 

and backgrounds these decision makers may carry 

with them, there are a number of common themes 

identified here that should be carefully considered 

when working to foster dialogue. 

BOX 16 | FOR CONSERVATION PRACTITIONERS—ENGAGING UTILITIES

The primary recommendation from the U.S. Endowment’s 

2011 convening work with a group of conservation, water 

utility, forestry, and government leaders was that natural 

infrastructure advocates must engage the water utility 

industry as an early partner in any project. Sustainnovate’s 

interviews with water utility managers and review of past 

utility surveys yielded the following recommendations 

related to engaging water utilities:

1. Facilitate peer-to-peer dialogue in workshops and 

conferences—utility managers rely most heavily on 

their peers for new programs and ideas, often through 

informal dialogue;

2. Align framing with issues utilities care about: cost 

reduction, regulatory compliance and certainty, and 

economic development;

3. Tailor efforts to the local context;

4. Secure funding for utility participation in planning efforts;

5. Encourage partnerships;

6. Integrate efforts into a larger treatment optimization 

scheme;

7. Educate the public and water utilities on the need for 

short-term rate increases to avoid long-term costs; and

8. Clearly demonstrate results and make utility payments 

contingent on achievement of benchmarks.

Engagement efforts should also recognize differences in 

knowledge base, existing platforms for education, and 

major issues of concern:

 In the Northeast, there is clear recognition of the linkage 

between forest preservation and improved water quality. 

Framing efforts should focus on improved stream flow 

and reduced energy costs. Efforts in the Northeast should 

also build upon the multitude of existing partnerships, 

including AWWA sustainability committees.

 In the Midwest, a vast majority of utilities in the 

Midwest obtain their water from groundwater or the 

Great Lakes. Consequently, the best opportunity for 

natural infrastructure relates to connections between 

improved forest management and groundwater protection. 

Midwest utility associations have had good success in 

engaging and educating utilities through webinars.

 In the Northwest, watershed councils are existing 

collaborations that should be engaged to promote 

natural infrastructure efforts. Framing efforts should 

focus on natural infrastructure as a healthy alternative 

to traditional chemical treatment. The Eugene Water and 

Electric Board is an emerging regional leader in source 

water protection, and supporting and publicizing their 

efforts would provide strategic outreach opportunities.

 In the Southeast, education and outreach is needed 

both to utility managers and the general public. Many 

southeast utilities rely on state or federal agencies to 

provide source water protection, believing that their 

treatment begins at their intake.

 In the West, framing efforts should focus on natural 

infrastructure as a strategy to ensure sustainable 

water supplies for regional growth. Existing utility 

collaborations can be leveraged to engage a wide variety 

of large and small utilities. Also, association newsletters 

can be an effective Western tool to reach a wide-range of 

utility managers about natural infrastructure efforts.

Natural Infrastructure 63

Part 2

DESIGN AND 

IMPLEMENTATION

The first part of this guide focused on key elements of securing adoption of an integrated 

natural and built infrastructure approach—

the business case, underlying science, and 

opportunity. Once decision makers and 

stakeholders in a watershed have adopted 

the approach, the next task is to design and 

implement an investment program. 

Natural infrastructure investment programs 

have several components that can “make or 

break” the credibility, scalability, and longterm success of the program. These components include:

1. Stakeholder engagement;

2. Quantification Tools and Metrics—the 

measures or proxies of watershed services that serve as the basis of payment;

3. Protocols—the “rules of the game” for 

buyers, sellers, and third parties (e.g., 

landowner eligibility, service areas, and 

additionality requirements);

4. Risk-management tools such as private 

finance and insurance;

5. Software, online platforms, and 

other technological tools to facilitate 

investment;

6. Finance mechanisms; and

7. Ongoing monitoring, adaptive management, and documentation of 

performance 

The extent and complexity of design elements 

will depend in part on the scope and scale 

of the natural infrastructure program. For 

example, markets for watershed services—

such as nutrient trading programs with 

multiple buyers and multiple sellers—tend 

to require robust “program infrastructure” 

like protocols for validation and verification 

of reductions, broker arrangements, and 

technological platforms for trading and tracking credits. These components are necessary to assure buyers, regulators, and other 

stakeholders that the program is achieving its 

objectives. Some of these components—for 

instance, broker arrangements and online 

platforms—also keep transaction costs down, 

improving the viability of the market, and 

allowing it to reach meaningful scale.
 64 WRI.org

On the other end of the scale, a one-time direct payment (e.g., for conservation easements) by a single, 

large buyer such as a water utility to small group of 

large landowners may succeed with a much simpler 

framework. The clear exception is when the transaction is geared to achieve regulatory compliance 

for the buyer, in which case more extensive validation, monitoring, verification, and rules for adaptive 

management may be required.

In Part 2, we hone in on early-stage design components—bringing the right stakeholders and experts 

to the table and scoping the broad parameters of 

promising finance mechanisms. The remaining 

components should be designed in close collaboration with stakeholders and ideally with heavy 

engagement from experts who specialize in metrics, 

protocols, technological platforms, and validation 

and verification.

Chapter 4: The Players at the Table

KEY TAKE-AWAYS

1. Cultivating partnerships is a critical first 

step toward successful implementation. 

Partnerships can expand funding, capacity, 

expertise, and political capital for natural 

infrastructure efforts (Section 4.1). Seek 

out key partners, build durable stakeholder 

commitment, articulate a vision of success 

and related goals, and build on the lessons of 

past successes and failures.

2. Landowner participation is essential in 

privately owned watersheds. Landowners are 

highly independent, value their autonomy, 

and generally engage in agriculture or 

forestry because it is a way of life as well as 

an economic enterprise. In addition to the 

financial inducement being offered, landowners consider how the program is designed 

and administered as part of their participation 

decision (Sections 4.2 and 4.3).

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases
Natural Infrastructure 65

Introduction

This chapter begins with a look at the roles 

needed for a natural infrastructure investment 

program to be successful—including stakeholders 

who need to say “yes” and experts who supply 

critical input for the design and implementation 

of successful programs. 

Then, we offer a close-up look at one stakeholder 

group in particular—landowners. Harnessing sufficient supply of natural infrastructure in privately 

owned watersheds requires an effective landowner 

engagement strategy and a program design to 

entice and enlist landowners as suppliers. It is often 

assumed that if adequate financial incentives can 

be provided, landowners, as economically rational 

actors, can be counted on to provide the necessary 

supply of natural infrastructure. While financial 

incentives are increasingly a core mechanism of 

incentive-based natural infrastructure programs, 

understanding and trust among landowners are 

also essential. Programs must be designed to meet 

landowner interests (which typically extend well 

beyond financial interests) and minimize landowner transaction costs.

We offer a picture of current knowledge on landowner preferences pertaining to the design of a 

natural infrastructure program and landowner 

willingness to engage, and a suite of recommendations for engaging landowners as suppliers of 

natural infrastructure.

Section 4.1: Stakeholders and Experts in 

Successful Natural Infrastructure Programs 

| Todd Gartner and Josh Rego, World Resources Institute 

| Bobby Cochran and Carrie Sanneman, Willamette Partnership

In each successful attempt to build robust investment in natural infrastructure, an essential component has been collaboration among a variety 

of stakeholders and experts (Figure 10) and the 

emergence of champions within stakeholder groups 

to push the program forward.

New York City worked with upstate stakeholders 

for seven years before brokering a deal to preserve 

and enhance the Catskills watershed. In Eugene, 

Oregon, the water utility carefully expanded its 

capacity to develop a payment scheme to maintain 

riparian buffers by partnering with a range of stakeholders with diverse missions. Portland, Maine, 

recognizing that neither the Portland Water District 

nor the state’s Drinking Water Program have the 

tools or authority to manage land use and development—short of buying land—sought out allies with 

common interests in clean water and land uses that 

help generate clean water. And in each of these 

efforts, champions emerged to recruit stakeholders, 

facilitate collaborative efforts, leverage their respective capabilities, and drive efforts toward fruition 

for natural infrastructure investments.

In addition to those actors who have a real stake 

(e.g., beneficiaries of watershed services, landowners who supply those services, regulatory agencies 
 66 WRI.org

responsible for ensuring compliance, and the suite 

of organizations whose core missions and interests 

are affected by natural infrastructure investment), 

there is an increasingly clear need for a broad and 

advanced set of expertise to properly implement a 

natural infrastructure investment program. Ecologists and hydrologists, market-based conservation 

experts, policy experts, third-party verifiers, and 

model and tool developers all bring important 

expertise and capacity to a program.

The stakeholders and experts critical to the establishment and operation of a successful natural infrastructure investment programs can be divided into 

ten groups. These groups, the roles they play, and 

their incentives for participation are discussed here.

Figure 10 | The “Actor Network” in Successful Natural Infrastructure Efforts

LOCAL CONVENERS 

AND ADVOCATES

Groups responsible for building the 

necessary capacity among local 

stakeholders required to establish 

an incentives system. Conveners 

are typically organizations with a 

local or regional focus, however 

national/international institutions 

can fill this role as well

MAINSTREAMERS

Organizations responsible for 

building national and international 

support for natural infrastructure 

approaches by building capacity 

among decision makers, 

exchanging knowledge and 

experiences, connecting pilot 

projects and creating consistency 

within the field 

IMPLEMENTERS 

/ TRANSACTION 

BROKERS

Entities that provide upfront 

financing, expertise to the production 

of watershed services, and/or 

aggregation of supply and risk 

INVESTORS/

BENEFICIARIES

Investors in natural infrastructure 

for enhanced watershed services 

where the business case has 

been made; typically utilities, 

governments, and businesses

SUPPLIERS

Landowners who supply watershed 

services by conserving or restoring 

ecosystem functions on their land

PHILANTHROPIES/

PRIVATE CAPITAL

Financing institutions that can 

provide upfront capital in the 

form of grants, loans, and 

investments to establish 

natural infrastructure projects

ACADEMICS/

MODELERS

Community responsible for 

advancing the field of ecosystem 

science through metric and 

model development and by 

seeking scientific answers 

AGENCIES

Agencies may signal demand 

by enforcing regulatory policy 

on utilities, businesses and other 

groups. Agencies may also facilitate 

opportunities through grant-making 

and cost shares

TOOLS

Software and equipment developed 

to facilitate the generation, verification 

and transaction of watershed services 

while providing transparency and 

public outreach 

KEY | Money Watershed Services Relationships Regulations Knowledge
Natural Infrastructure 67

BOX 17 | USDA NATURAL RESOURCES CONSERVATION SERVICE (NRCS)

The 2008 Farm Bill included a new section in the 

Conservation Title called “Environmental Services 

Markets.” In it, Congress expressed a broad vision for how 

America’s landowners—farmers, forestland owners and 

ranchers—can participate in these new emerging markets 

for conservation on private lands. This has resulted in 

much discussion in and outside USDA and NRCS to gain 

an understanding of the claims by advocates of marketbased incentives and credit trading programs as well as 

the criticisms from skeptics. NRCS continues to explore its 

role in environmental markets. NRCS has provided basic 

information about environmental markets to our field office 

staff to help answer landowner questions. This includes 

releasing the Natural Resources Credit Trading Reference. 

The NRCS Conservation Technical Assistance Program

provides a wide range of services to support voluntary 

planning, conservation design, and implementation to 

improve environmental outcomes. The breadth of local and 

community knowledge that NRCS personnel have could 

contribute significantly to the success of environmental 

credit trading programs by explaining the programs and 

their potential benefits and pitfalls to participants. In 

order for NRCS staff to help answer landowner questions, 

they will need additional training about each emerging 

environmental market proposal.

The NRCS offers a variety of Conservation Financial 

Assistance Programs to aid landowners with implementing 

conservation on their lands. The question often comes 

up about landowners selling environmental services that 

resulted from conservation practices applied through these 

financial assistance programs. USDA policy has explicitly 

stated that all returns to agricultural producers from the 

sale of environmental credits generated by the adoption of 

conservation practices, whether or not they are paid for in 

total or part by USDA conservation programs, accrue to them 

solely. NRCS retains the authority to ensure that operation and 

maintenance requirements for USDA funded improvements are 

met. Where activities required under an agreement to produce 

environmental credits may affect land covered under a USDA 

program contract, participants are encouraged to request a 

compatibility assessment from NRCS.

In NRCS’s efforts to define its role in ecosystem 

services, the agency’s past requests for proposals for the 

Conservation Innovation Grants Program have included 

market-based incentives and credit trading programs. A 

number of grants have been funded to explore different 

methods. For example, the American Forest Foundation 

and the U.S. Endowment for Forests and Communities 

received grants to develop an innovative, self-sustaining, 

and replicable market-based model that facilitates 

transactions between ecosystem services buyers and 

sellers to protect and enhance watershed services. These 

grants concluded in 2012 and their final reports will 

provide valuable information about what worked and did 

not work in several watershed efforts to enhance water 

quality through a market approach.

As ecosystem service markets develop in the future, 

NRCS will continue to better define the agency’s role. For 

example, with the water quality trading opportunities that 

the above innovation grants are analyzing, NRCS staffs 

could potentially provide support by:

 Explaining the benefits and costs of participating in 

these markets to potential participants, along with 

other available incentives as a part of the conservation 

planning process;

 Becoming familiar with technical standards and 

documentation requirements that, in the future, may 

be incorporated in the conservation plan baseline 

information and potential quantification of impacts of 

each alternative; and

 Developing tools for measuring baseline information 

and the potential effect(s) of alternatives that could be 

used for credits.

NRCS looks forward to working with farmers, ranchers, 

and forest owners and those ecosystem service market 

developers in solving some of our nation’s most critical 

environmental issues through these new markets.

| Bruce Wight, USDA NRCS (Retired)
 68 WRI.org

Investors/Beneficiaries

Investors are typically water resource beneficiaries with a clear interest in natural infrastructure 

investments that produce the critical watershed 

services they rely on. Beneficiaries can be water 

utilities (representing ratepayers), private businesses, or government agencies (representing 

taxpayers). These entities invest in natural infrastructure through an implementer or directly with 

landowners, and are the primary source of ongoing 

investment in that infrastructure. Investments 

are made to secure cost reductions or cost avoidance over traditional solutions, and/or to secure 

public relations benefits associated with watershed 

investment. Funding for investment typically comes 

from internal budgets and rate structures for water 

resource protection, regulatory compliance, or corporate social responsibility. These investments can 

often be matched with external funding sources.

Suppliers

Suppliers are the landowners who supply watershed 

services by conserving or restoring ecosystem functions on their land. They enter into paid agreements 

with either an implementer or directly with a utility, 

land trust, commercial firm, or agency with the intent 

of implementing some form of natural infrastructure 

to generate critical watershed services. Participation in natural infrastructure programs can provide 

supplemental income streams to these largely rural 

landowners, helping to preserve working lands and 

rural livelihoods. Participation can also require 

changes in land management practices or restrictions 

on land use like conservation easements. Sections 4.2 

and 4.3 discuss private landowners as sellers in more 

detail. Public landowners can also provide supply. 

For example, Part 3 details a partnership between the 

Denver Water Board and the USDA Forest Service, 

which manages Denver’s headwaters.

Local Conveners & Advocates

Local Conveners & Advocates are typically non-profit 

organizations that serve as the face of an initiative on 

the ground. They champion natural infrastructure 

locally by leveraging long-term relationships and 

region-specific expertise. Local Conveners raise the 

local profile of natural infrastructure initiatives, convene stakeholders, highlight successes, and “connect 

the dots.” They also lead initiatives long after the first 

wave of grant funding. These actors are critical “glue” 

for natural infrastructure programs and the constellation of actors involved. For these actors, mobilizing 

investment in natural infrastructure from beneficiaries can be a strategic means to leverage their traditional resources in support of their mission, which 

may include objectives like ecosystem conservation, 

economic development, rural livelihoods, or water 

resource protection.

Agencies

Agencies are responsible for enforcing compliance 

with environmental statutes like the Safe Drinking 

Water Act, the Clean Water Act, and others. Natural 

infrastructure initiatives can represent opportunities for regulated entities to achieve compliance 

more cost-effectively. Where a natural infrastructure initiative is intended to achieve regulatory 

compliance, the regulating agency needs to be at the 

table to ensure the investments will “fit the bill.”

Agencies can also seek to facilitate investments in 

natural infrastructure as part of their mission—

whether to promote water resource protection, 

clean and safe drinking water, or the economic 

viability of rural livelihoods. For example, the 

USDA NRCS (Box 17), various programs within 

the EPA (Box 18) and USDA Forest Service, and 

state and county forest, water, and health programs 

(Boxes 19 and 20) all seek to facilitate natural infrastructure investments. These entities can provide 

critical financial and technical support, and connect stakeholders to other important actors. They 

have also engaged in research, tools development, 

and policy formation activities to support natural 

infrastructure investments. For these agencies, 

the integration of natural infrastructure into water 

management efforts can be an effective means to 

advance their objectives and mission.

Implementers/Transaction Brokers

Intermediary organizations—whether the local convener or another entity—can serve as critical implementers in a natural infrastructure program. They can 

provide upfront funds to establish agreements with 

local landowners, aggregate dispersed and disparate 

landowners into a single supplier block, and serve as 

the hands-on implementer of natural infrastructure 

investments. The implementer role is critical as investors like public water utilities, well versed in the installation and maintenance of built infrastructure, often 
Natural Infrastructure 69

BOX 18 | ENVIRONMENTAL PROTECTION AGENCY (EPA) 

Protecting drinking water sources usually requires the 

combined efforts of many partners such as public water 

systems, communities, resource managers, and the public.

EPA supports a “multi-barrier” approach to protecting 

public water supplies. This approach includes technical 

and managerial barriers that help prevent contamination at 

the source, enhance treatment, and ensure a safe supply of 

drinking water for consumers. One of the most important 

tools to achieve this is protecting the land around the water 

supply. EPA recommends that land trusts, community 

groups, or others should work cooperatively with local 

water suppliers to identify properties that qualify for 

funding or offer their expertise in negotiating acquisitions 

from willing sellers. Such partnerships can complement 

the ongoing work of organizations to preserve parts of a 

watershed or ground water area for other purposes.

Although the drinking water industry does not commonly 

use the term payment for watershed services, it has long 

been recognized that purchased land or conservation 

easements can serve as a protection zone near the drinking 

water source. Source water protection and multi-barrier 

approaches to water treatment have been practiced for 

more than a century by many of our nation’s surface water 

suppliers. Although the land conservation movement of the 

21st century has provided the drinking water supply industry 

with some clever terminology, these practices have been 

voluntarily exercised by water suppliers for generations. 

EPA Region 1 is currently working with water suppliers 

in the New England region to promote the importance 

of protecting water supplies through sustainable land 

management. Specifically, the City of Manchester, New 

Hampshire’s water supplier (Manchester Water Works) 

and EPA Region 1 have partnered to establish a forum for 

helping New England surface water suppliers address the 

myriad challenges they face. 

Many New England water supplies began acquiring fee 

ownership of raw land throughout their watersheds as an 

early method of water treatment. Protecting the source 

through maintenance of a forested buffer around lakes, 

rivers, streams, and wetlands is still a priority to many 

water suppliers.

The land management of these properties comes with 

many costs and many challenges. Unfortunately, growing 

populations and demand for recreation near urban areas 

have caused additional pressure on the land around 

surface water supplies. Many of these properties are in 

close proximity to urban areas where the drinking water 

is distributed. 

These challenges of land management are dealt with in a 

variety of ways and have their shares of successes and 

failures. A committee of surface water suppliers from each 

New England state was formed to discuss these processes 

for watershed management. The committee is identified 

as the New England Watershed MANagers (NEWMAN) 

Collaborative. The NEWMAN Collaborative consists 

of representatives from 15 New England surface water 

systems from six states. These utilities collectively provide 

water for 4 million people.

The Collaborative is working to address the specific 

challenges faced by surface water suppliers and what 

assistance can be provided to other utilities. The 

specific topics being addressed by the collaborative are 

forestry, recreational access, land management, and land 

acquisition. The water utilities have expressed a need to 

benchmark themselves with their peers to better educate 

their customers and the water boards that manage them. 

As a result, the Collaborative has decided to develop a 

NEWMAN Directory. This directory will be a resource 

guide for surface water supply watershed managers in New 

England. It will also provide both aggregate data on the 

four issues identified above. Lastly, it will provide a tool 

to enable water suppliers to seek out water systems with 

similar characteristics to their own to assist in researching 

management options. The directory will be the results of 

a survey of all New England surface water suppliers. The 

directory will summarize information received from all 

participating New England surface water suppliers.

| Kira Jacobs, EPA Region 1
 70 WRI.org

BOX 19 | STATE DRINKING WATER PROGRAMS

Working at the state level, Maine’s Drinking Water Program 

(Maine DWP) works to remove barriers to coalition 

building, and to facilitate the incorporation of natural 

infrastructure into local planning and development. We 

use small grants and loans to encourage water systems 

to work with local communities and conservation groups 

to help maintain and restore working forests and wellmanaged agriculture in their source protection areas. We 

also actively participate in allied efforts that foster natural 

infrastructure, like the Kennebec Woodland Partnership 

and Forest Works. 

Public water systems in Maine and the Maine DWP (and 

its predecessors) have engaged in source protection 

through the maintenance of healthy watersheds and 

well-managed aquifers for the last century, at least. For 

most of that time, water systems either purchased land or 

worked with legislative bodies to restrict activities around 

their sources. With a few notable exceptions—like Bangor, 

which has a small watershed that it has been able to 

acquire in its entirety—most systems need partners and 

some level of voluntary cooperation to provide sustainable 

and affordable water. 

Maine had a dozen systems with filtration waivers 

resulting from strong watershed protection. Nine systems 

still maintain waivers, and two that have installed filtration 

still depend on watershed protection to minimize their 

treatment (both use microfiltration, which requires very 

low turbidity). For several of these systems, as well as 

many systems with filtration, continued collaboration with 

groups in a large watershed is the most cost-effective way 

to deliver safe and secure drinking water. 

In 2003, the DWP and the public water systems completed 

risk assessments for their water sources. We found that 

the biggest risk to safe and secure drinking water is future 

development near water sources. As Maine’s population 

dispersed from town centers to the country in the last 

thirty years, much of that development encroached on 

water supply areas. Neither water systems nor the 

DWP have the tools or authority to manage land use 

and development, short of buying land. 

Once the assessment results sank in, we increased 

our efforts to find allies who could help us and water 

systems ensure safe and secure drinking water for 

future generations. We looked for entities with common 

interests in clean water and in land uses that help 

generate clean water. Issues like compact development, 

forest fragmentation, and quality of place resonate with 

entities that have historically not worked with water 

systems. Similarly, few water systems would historically 

have considered working with land trusts and other 

“conservation” organizations. Developing alliances like 

this is a long process, and almost a decade later, we are 

still working on it. 

Since source protection is a voluntary, incentive-based 

program, much of our state-level work is focused on 

finding partners with resources and common cause with 

water systems. We have used the national Source Water 

Collaborative (SWC) as a tool to engage local affiliates 

of national groups. For example, the State Farm Service 

Agency, an SWC member, connected DWP with the USDA 

NRCS. Our EPA regional contact (active in SWC), was 

key to uncovering synergies with NRCS. This national 

perspective helps local affiliates to move forward. 

Working with EPA Region I, we have been able to engage 

other federal agencies at the state and local level in work 

involving sustainable forestry. The USDA Forest Service 

and NRCS—and their state and county partners—have 

found drinking water protection to be a good motivation 

to advance sustainable forestry. The DWP serves as a 

“bridge” between water system needs and priorities and 

nationally-driven programs. Similarly, local districts have 

landowner relationships that help to make progress on 

the ground.

| Andy Tolman, Maine CDC Drinking Water Program
Natural Infrastructure 71

lack the capacity and expertise to directly implement 

natural infrastructure projects. In addition, in some 

setups the implementers are also responsible should 

the arrangement fail. In this way, implementers can 

aggregate risk, helping to facilitate participation by 

risk-averse investors or landowners. Implementers typically generate revenue through “sale” of the 

watershed services generated. Some secure upfront 

financing from private lenders.

Philanthropies/Private Capital

Philanthropic organizations and even private 

lenders can play a critical role by providing upfront 

capital to establish natural infrastructure projects. 

Philanthropies have a particularly important role to 

play in the scoping and design stages, while private 

lenders more typically provide capital for implementation. These institutions provide capital in the 

form of grants, loans, and investments.

Mainstreamers

Mainstreamers are typically non-profit organizations that promote the natural infrastructure 

approach as a viable policy and operational complement to built infrastructure. They raise the profile 

and mainstream the approach and provide access 

to regional and national-level organizations. They 

also connect disparate efforts to create consistencies, scale efforts, and achieve institutionalization. 

Mainstreamers typically operate with grant funding and philanthropic donations. Ultimately their 

involvement relates to their core mission. Examples 

include the World Resources Institute, Earth 

Economics, The Conservation Fund, The Nature 

Conservancy, The Trust for Public Land, Forest 

Trends, and sometimes academics.

Academics & Modelers

Academics and modelers (for-profit or non-profit) 

create the quantification methods for the investment program. In coordination with stakeholders, 

quantification method developers provide the 

scientific link, models (Section 2.4), and credibility between conservation practices, conditions, 

and watershed services outcomes. These entities 

typically charge fees for services offered, or in some 

cases operate with grant funding for academic 

purposes. For academics, quantification tool development for natural infrastructure investment is an 

opportunity to put research into action.

“Partnerships are 

critical. Effective source 

water protection typically 

requires a collaborative 

effort among a variety of 

stakeholders—at federal, 

state, and local levels—

as well as a shared 

recognition of the value 

of the resource needing 

protection. No one 

agency or organization 

has all of the authorities 

it needs to make onthe-ground progress 

in protecting sources 

of drinking water, 

including with innovative 

approaches like natural 

infrastructure.” 

-Jim Taft, ASDWA
 72 WRI.org

Tool Developers

In large-scale programs, infrastructure developers 

create the software, online platforms, and other tools 

used to facilitate investments in natural infrastructure. Examples include the Markit Registry and 

the Willamette Partnership’s Ecosystem Crediting 

Platform. These tools help with calculation, tracking, 

verification, and monitoring of natural infrastructure 

investments over time while providing transparency 

and public outreach. Much of the early infrastructure 

has been developed with the support federal grant 

programs such as USDA Conservation Innovation 

Grants. Technology developers typically charge fees 

for services and products offered.

BOX 20 | STATE FORESTRY AGENCIES

The Washington State Department of Natural Resources 

(DNR) is exploring payment for watershed services 

(PWS) as a form of financial incentives to help retain 

working forest lands at risk of conversion to non-forest 

uses. DNR’s current focus is facilitating a transaction 

demonstration project in the forested Puget Sound basin, 

to test whether current demand drivers and seller interest, 

along with available stakeholder and institutional support, 

is sufficient to generate one or more real transactions 

involving water utilities as buyers. The intent is to use 

this test as a deliberate learning opportunity aimed at 

broader application of the PWS concept. The specific PWS 

transaction most likely to be concluded involves a midsized city water department, using city authorization and 

capital funding to acquire less-than-fee property interests 

in rural, rural-residential, and resource lands within a 

new wellfield protection zone above a drinking water 

aquifer. The demonstration project is helping to focus and 

implement the city’s acquisition strategy.

DNR’s involvement in this initiative is based on several 

factors: 1) Widely acknowledged risk of accelerated 

conversion of working forest land to non-forest land uses 

in suburbanizing areas of the Puget Sound watershed; 2) 

Recognition, among stakeholders of Washington State’s 

rigorous forest practices regulatory program (administered 

by DNR), that additional increments of resource protection 

aimed at biodiversity conservation are more likely to be 

achieved in a timely way through incentive tools than by 

additional regulations; and 3) Legislative direction to DNR 

to explore forest landowner incentive mechanisms with a 

focus on ecosystem service market opportunities. DNR has 

been coordinating stakeholder discussions of transactional 

incentives for forest landowners based on carbon storage, 

watershed services, and biodiversity conservation.

DNR’s specific role in the PWS demonstration project, 

as the state forestry agency, has been to help organize 

interested organizations in two pilot watersheds, in order 

to create a potential market opportunity for large and small 

private commercial forest landowners. DNR has reached 

out to water utilities as potential buyers of watershed 

services, facilitated connections between local watershed 

groups and regional and national PWS experts, and 

facilitated the convening of large multi-interest gatherings 

in partnership with the Northwest Environmental Forum at 

the University of Washington’s College of the Environment. 

In addition, DNR applied for and received a National 

Estuary Program grant, which is being used to provide 

analytical services, including metric development and 

economic analysis, for the watershed pilots. DNR is also 

helping to coordinate local watershed groups’ projectrelated interactions with other state and federal agencies, 

such as the state drinking water agency.

Washington DNR has a broad mission, including 

managing over five million acres of state-owned trust 

lands, aquatic lands, and natural areas, regulating 

forest practices, protecting forest lands from loss due to 

catastrophic wildfire, and providing technical services to 

forest landowners. Working with partners to retain working 

forest lands at risk of conversion is a core element of the 

agency’s five-year strategic plan. Information about the 

PWS demonstration project can be found at: http://www.

dnr.wa.gov/ResearchScience/Topics/ForestResearch/

Pages/forest_watershed_service_markets.aspx.

| Craig Partridge, Washington State Department of Natural Resources
Natural Infrastructure 73

Protocol Developers

In large-scale natural infrastructure programs—

particularly those that function as a market with 

the trading of “credits”—protocols are needed to 

establish the “rules of the game,” in consultation 

with stakeholders. These rules outline the specific 

operations of a natural infrastructure initiative 

(landowner eligibility, service areas, additionality, etc.). Protocol developers ensure the natural 

infrastructure investment process is science-based, 

credible, transparent, and verifiable—and secure 

the commitment of all major stakeholders. Increasingly, protocols are being modified and adapted 

to local context as opposed to being created from 

scratch each time. Protocol developers typically 

charge fees for services offered, or in some cases 

are partners on a larger grant to establish a natural 

infrastructure program. Many of these organizations are interested in providing consistency to 

efforts across geographies, which is critical for the 

institutionalization of integrated natural and built 

infrastructure approaches to water management.

Market Administrators

In programs that function like a market, administrators are important to conduct market operations. 

They assist in the training of verifiers, document 

retention, third party validation and verification of 

natural infrastructure, and updating of protocols. In 

credit-based programs, administrators also ensure 

credit registration either “in-house” or through a 

third party. The administrator role requires continuous stakeholder engagement and facilitation. 

Market administrators typically charge fees for 

services offered, or in some cases are partners on 

a larger grant to establish a natural infrastructure 

program. These entities also operate in pursuit of 

place-based missions advanced by well-functioning 

natural infrastructure programs.

Section 4.2: Engaging Landowners

| Michael G. Sorice, Department of Forest Resources & Environmental 

Conservation, Virginia Tech

Critical to successfully securing the desired supply 

of watershed services is achieving a sufficient level 

of private landowner participation. Natural infrastructure programs can incentivize participation 

either through financial subsidies or through the 

creation of a market for watershed services. In addition to the inducement being offered, landowners 

consider how the conservation program is designed 

and administered as part of their participation decision (Sorice et al. 2011). That is, private landowner 

participation is a function of the both social and 

economic costs of obtaining the subsidy or participating in a market. 

This leads to questions about how to design conservation programs that achieve sufficient landowner 

participation to benefit the entire watershed. 

Financial incentives by themselves do generate 

participation, but perhaps not at the critical levels 

necessary for successful landscape-scale conservation outcomes. Further, incentives may have hidden 

costs (Sandel 2012). For example, the supply of the 

desired behavior often ends when the incentive is 

no longer available. Under certain conditions, such 

as when people are motivated by ethical, altruistic, 

or civic considerations, financial incentives can 

actually undermine an effort to build participation. 

Consequently, it is worthwhile to consider factors 

other than financial inducements that influence 

landowner decisions.

Landowners are highly independent, value their 

autonomy, and generally engage in agriculture or 

forestry because it is a way of life as well as an economic enterprise. Incentive programs can impose 

additional costs on landowners when, for example, 

they are administered in a way that is perceived by 

the landowner as controlling. In a survey examining potential participation in an incentive-based 

conservation program for at-risk species (Sorice 

et al. 2013), about one third of private landowners 

surveyed were predicted to participate in a program 

that had a long-term commitment and a moderate 

financial incentive, but that gave landowners no say 

in land management decision making. Predicted 

participation increased to about 60 percent when a 

high financial incentive was offered, and increased 

further to about 80 percent with a high financial 

incentive and a program structure that allowed 

landowners to share in land management decisions.

Increasing the desirability of conservation programs can be achieved by focusing on program 

structure and on the process used to create the program. First, providing landowners with a program 

that contains options and allows landowners some 

flexibility are ways to make them feel less like they 

are being controlled (DeCaro and Stokes 2008). 
 74 WRI.org

Further recognizing and valuing the local knowledge of landowners, respecting their sense of pride, 

and providing positive feedback on their progress is 

important to recognizing landowners’ competence. 

Programs that are able to create a sense of community—a sense that landowners are part of a larger 

group of like-minded landowners—may increase 

a landowner’s desire to join the group and adhere 

to the formal and informal rules of the group 

(Van Vugt 2009).

Second, changing the process by which an incentive 

program is created may lead to enhanced participation (Brown 2009). In contrast to the top-down 

approach where the organization or agency creates 

the program and then deploys it into the community, a landowner-centered approach recognizes 

both the social and the ecological complexity inherent in a region by creating programs that are customized to the needs of the landowners in an area. 

The organization enters communities to understand 

the landowners themselves, identify constraints 

and opportunities that are specific to the group of 

landowners, uncover needs they may not even know 

they have, and test new ideas. Solutions constructed 

from the bottom up, with direct landowner involvement, lead to greater buy-in. Landowners in the 

area may feel that the program is designed by them 

and therefore feel more vested in the program’s 

success. The program puts the landowner first, 

leveraging local expertise, and thus is more likely 

to be structured and delivered in a way that supports landowners’ basic needs for competence 

and autonomy.

Creating a market to induce private landowners to 

supply watershed services can certainly be successful. However, the reasons landowners engage 

in some markets and not others may be related to 

noneconomic factors. Designing programs that support landowner autonomy, that recognize expertise, 

and that create a sense of community can lead to 

market-based incentive programs that provide a 

sustained supply of watershed services.

Section 4.3: Recommendations 

for Landowner Engagement 

| Daniel Cantor, Colm Fay, Matthew Harrison, Emily Levine, 

and Chris Zwicke, University of Michigan School of Natural 

Resources and Environment

This section highlights findings from an examination of landowner engagement in the Sebago Lake 

watershed in Maine. Recommendations are based 

on a systematic review of existing incentive programs and the literature on landowner preferences, 

as well as interviews with natural infrastructure 

program administrators throughout the United 

States and stakeholders in Southeast Maine. The 

full report can be found here: http://hdl.handle.

net/2027.42/90874.

Scaling up natural infrastructure investment programs will take more than the simple replication of 

successful models. Landowners have complex and 

varied reasons for owning land and for engaging 

in conservation practices. Combining an understanding of these varied reasons with outreach and 

engagement strategies that encourage the adoption 

of innovations will enable natural infrastructure 

program managers to make the right investments 

with the right participants at the right time. The 

recommendations below are based on an extensive 

review of existing literature and interviews with 

individuals from conservation organizations, state 

forestry and water quality agencies, and managers 

of natural infrastructure incentive programs from 

across the US. These recommendations provide a 

broad framework, emphasizing social and institutional factors, to help program managers accelerate 

landowner engagement and, ultimately, participation in natural infrastructure programs. 

Recommendations

The recommendations below are categorized in 

terms of Landowner Segmentation, Targeting and 

Positioning, Scheme Attributes and Administration, and Outreach Channels and Tactics. Further 

description of and support for these recommendations can found in the full report.
Natural Infrastructure 75

1. Landowner Segmentation: trends and 

implications of landowner demographics, 

values, attitudes, interests, and land 

management behavior

 a. Gather watershed-specific data. Because 

landowner characteristics vary significantly both within and across watersheds, 

assessing the motivations and attitudes of 

landowners in the specific watershed(s) of 

concern can yield more actionable segmentation insights than relying on proxy data 

from national or regional studies. 

 b. Segment landowners based on generational characteristics. Variables such as 

landowner age and method of land acquisition (e.g., inheritance vs. purchase) can be 

indicative of future changes in landowner 

characteristics, land use decision making, and parcelization pressures that will 

influence the transfer of land from current 

owners over the next 20 years.

 c. Identify early adopters with a high propensity to engage and contribute. Landowners 

who have higher incomes and education, 

awareness of conservation practices, or 

prior participation in conservation programs, are more likely to participate in 

natural infrastructure programs.

2. Targeting and Positioning: prioritizing and 

messaging to landowner segments

 a. Build landowner awareness, interest, and 

participation in distinct stages. The factors 

that pique landowner interest in natural 

infrastructure programs often differ from 

those that convince them to participate. A 

three-stage messaging approach can create an escalating level of commitment to 

watershed protection: i) raising awareness 

through general education; ii) communicating wider program benefits to generate 

interest; and iii) co-creating key program 

features to encourage participation. 

 b. Bring landowners together with the 

watershed service buyer to discuss program design. Rather than a perfunctory 

stakeholder engagement process, early 

and ongoing dialogue between landowners 

and the ‘buyer’ of the desired conservation 

outcomes can enhance trust and uncover 

opportunities for integrative solutions.

 c. Prioritize influential landowners, not just 

parcels that have biophysical importance. 

While some watershed parcels are important from a biophysical perspective, natural 

infrastructure program priorities should 

also take into account the social influence of individual landowners within the 

community. Particularly during the pilot 

phase of a program, enrolling influential 

landowners who are willing to champion 

the program among their peers can be 

more critical to the long-term success of 

the program than making the largest shortterm environmental impact.

3. Program Attributes and Administration: landowner preferences regarding major aspects of a 

natural infrastructure program 

 a. Offer a portfolio of incentive types or 

a flexible menu of options to expand participation. Landowner preferences vary. 

A combination of incentive types (e.g., 

technical and educational assistance 

alongside financial payments) or choice 

of options (e.g., conservation easement 

vs. term easement) can engage a broader 

group of landowners and lead to more 

efficient investments in the desired 

behavior change. 

 b. Administer the program via an intermediary organization to mitigate mistrust. 

Federal government and regulatory agencies may in some cases be mistrusted by 

landowners. Having an intermediary organization with pre-existing local relationships administer the natural infrastructure 

program can provide a layer of insulation 

for landowners even when governmental 

entities are still involved as funders. 
 76 WRI.org

Regardless, explicit statements in program 

literature about who is allowed access to 

the land and for what reasons can alleviate 

concerns about government restrictions 

and scrutiny.

 c. Consider creating a dedicated standalone institution if critical mass is needed. 

When a specific threshold of enrolled 

land is needed to preclude a major investment in built infrastructure, a dedicated 

stand-alone institution can be more effective than a loose partnership in coordinating the interactions of the many partners 

and landowners.

 d. Create streamlined application processes 

and eligibility criteria to reduce transaction 

costs. In particular, programs that decouple the application process and eligibility 

criteria from existing federal incentive programs can reduce two significant barriers 

to entry for landowners: time and cost. 

4. Outreach Channels and Tactics: means and 

methods for reaching and recruiting landowners in a natural infrastructure program

 a. Identify quick wins by sourcing participants through partners landowners trust. 

Asking partner organizations, such as conservation or levy districts, for the names 

of influential landowners, or landowners 

already engaged in conservation programs, 

can be one of the most efficient ways to 

identify likely participants in a natural 

infrastructure program.

 b. Supplement with broad outreach tactics, 

then tailor the message later. Initial 

outreach should be generalized: holding 

informational workshops, attending fairs, 

and producing educational material drives 

interest in conservation practices and 

raises awareness of environmental issues 

among landowners. Customized messaging should wait until after individuals have 

demonstrated interest.

 c. Experiment with encouraging landownerto-landowner referrals. Peer-to-peer 

referrals are one of the most powerful 

mechanisms for expanding participation in 

natural infrastructure programs, but most 

programs have not formally encouraged or 

compensated landowners for these referrals. Whether such interventions impact 

referral effectiveness should be empirically 

tested as part of a pilot.

 d. Provide tools that enable peer-to-peer 

influence. An online platform that engages 

landowners in sharing their successes and 

creates two-way dialogue will help outreach to both resident landowners and the 

growing absentee landowner population. 

However, such tools may not be suitable to 

every demographic.

These strategies are critical to obtaining broad-based 

landowner trust and participation, which in turn 

is an essential element of the broader stakeholder 

engagement and collaborative processes needed for 

natural infrastructure efforts to be successful.
Natural Infrastructure 77

Chapter 5: Natural 

Infrastructure Finance

Introduction

Finance mechanisms for built infrastructure are 

relatively well established for utilities. Rates have 

traditionally funded operating costs, and municipal bonds have provided finance for large capital 

expenses like treatment plants. However, when 

these financing mechanisms were conceived over 

100 years ago, they were geared toward the production of pipes, dams, and other built infrastructure 

that was in short supply at that time. While a handful of utilities today are able to make substantial 

and deliberate investments in natural infrastructure 

through their operating and capital budgets, many 

utilities rely on opportunistic funding sources 

like grants. As utilities increasingly identify the 

economic benefits of natural infrastructure, there 

is a need to harness robust finance mechanisms 

for these investments, and on a meaningful scale. 

This chapter describes both existing and emerging 

finance mechanisms for natural infrastructure, and 

identifies opportunities for utilities, government 

agencies, non-profits, and others to drive greater 

investment toward natural infrastructure, provided 

the economic case is made.

A long list of public, private, and hybrid public/

private finance mechanisms are available to get dollars on the ground to restore, enhance, protect, and 

manage natural infrastructure for water resources 

(see Box 22 for resources related to the U.S. South). 

Some of these mechanisms are creative revenue 

generators, while others are creative means to channel existing funds toward natural infrastructure—

and some are both. Available finance mechanisms 

can vary considerably in terms of effectiveness in 

raising meaningful funds and in how those funds 

are directed toward high-impact natural infrastructure investments. Mechanisms also vary in terms of 

the distribution of the financial burden, perceived 

equity, and political palatability.

The choice of finance mechanism is intimately 

related to the political factors at play in a watershed. Economic analyses can show a “willingness 

to pay” in a strict economic sense for the services 

provided by natural infrastructure, and can identify 

beneficiaries of those services. But the question of 

who should pay remains a political one. For example, should the burden fall on ratepayers, or taxpayers, or just the major beneficiaries? How should 

the cost of large-scale investments be distributed 

KEY TAKE-AWAYS

1. Investment in natural infrastructure must be 

large-scale and sustained to be meaningful. A 

long list of finance mechanisms is available 

to get dollars on the ground (Section 5.1). 

Assess options with an eye toward securing 

“anchor funding” as well as a broader “funder 

quilt.” Consider both political viability and 

fundraising potential in your watershed. 

2. Accounting standards are a major challenge 

to financing natural infrastructure with traditional mechanisms. Stay apprised of efforts 

to modify standards to incorporate “natural 

capital” (Section 5.2).

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases
 78 WRI.org

between generations? Regardless of who benefits, 

whose responsibility is source water protection? 

What about the beneficiaries of ancillary services 

of natural infrastructure, such as carbon sequestration, air quality, biodiversity, and recreation? Or 

other water-related benefits like flood control that 

come in tandem with source water protection?

Ultimately, while the role of water utilities and 

the ratepayers they represent is critical, utilities in 

some cases may be unable to provide the full funding needed to secure natural infrastructure. One 

water resource professional noted, “Our utility’s 

charter, mission, funding mechanisms, and history 

all serve to question why ratepayer funds should 

be directed to anything beyond our core services. 

We are asked this question almost daily and until 

we have a way of including inherent values that 

come with natural infrastructure—e.g., air quality, 

habitat, and increased property values—we will 

forge an uphill climb. As I’m fond of saying, if this 

were easy, we’d all have been doing it long ago.” 

Given statutory restrictions on the use of ratepayer 

funds, it is often critical to develop a funder “quilt” 

(Ernst 2004) that includes finance mechanisms that 

leverage beneficiaries of major ancillary benefits 

to watershed protection—for example, states and 

municipalities, land trusts, and hunting and recreation associations.

The primary challenge is to select a suite of finance 

mechanisms that are capable of gaining the necessary political support for adoption, while also 

generating sufficient funds for meaningful and 

sustained investment in natural infrastructure 

over the long term (Box 21). Some water utilities 

have successfully adopted rate increases or user 

surcharges to finance natural infrastructure, in part 

with the assistance of effective ratepayer communication tools, but this is generally done with 

much caution. The City of Santa Fe, for example, 

is considering just a small increase, and only after 

the program and its public communication efforts 

have had about five years to convince its ratepayers 

of the need. Other utilities have, for now, drawn on 

existing funds already earmarked for source water 

protection in order to avoid raising rates—or to 

wait for a more politically opportune time to do so. 

Still others, like Phoenix, Arizona, and Ashland, 

Oregon, limit user contributions to voluntary opt-in 

programs (Carpe Diem West 2010). Stakeholders 

BOX 21 | SECURING LONG-TERM 

FINANCING

Many natural infrastructure programs begin with grant 

funding for program scoping and design. To ensure an 

impact, however, a more sustainable source of financing 

must be secured. Early-stage efforts can be used to 

demonstrate viability and return on investment to 

potential long-term funders.

In the Everglades, for example, a six year pilot to 

establish payments to cattle ranchers to provide either 

water retention or nutrient removal services began 

with a USDA Conservation Innovation Grant. In 2011, 

the initiative successfully culminated in the South 

Florida Water Management District (SFWMD)—the 

Florida agency responsible for improving water quality, 

maintaining flood control and water supply, and 

restoring the Everglades—becoming the buyer of these 

watershed services. In the first solicitation, the SFWMD 

entered into eight contracts for water retention services. 

This represents a roughly $7 million investment for 

securing on average 4,800 acre-feet of water retention 

per year over the ten year life of the contract. A second 

solicitation was released in the summer of 2012. The 

program will be funded jointly through taxes imposed 

by the SFWMD and appropriations made by the 

Florida state legislature, ensuring the commitment and 

resources to scale the program over time.

Key factors of success included a collaborative approach 

that tapped the expertise of ranchers, environmental 

groups, state and federal agencies, and research 

scientists; the early identification and inclusion of 

an intended “buyer” of the watershed services in 

program development efforts; and the experience 

and “ground-truthing” afforded by working through 

regulatory, construction, operations and maintenance, 

and documentation issues on eight pilot projects before 

bringing the program to scale.

More information on the initiative can be found 

at http://www.fresp.org/.

| Sarah Lynch, Director for Agriculture, 

World Wildlife Fund
Natural Infrastructure 79

in other watersheds have successfully appealed to 

private business interests to secure financing for 

natural infrastructure. Many more watersheds have 

relied on politically non-contentious, voluntary 

donations through more traditional channels. 

This chapter provides a broad overview of available 

finance mechanisms, and close-up looks at several 

efforts in particular, detailing the advantages and 

challenges. Watershed stakeholders across the country can use the information here to begin to scope 

finance options that are right for their watersheds.

Section 5.1: Overview of Finance Mechanisms 

| Katherine Garvey, Vermont Law School 

| James Mulligan, Green Community Ventures 

| Rowan Schmidt, Earth Economics

In the United States, investments in natural infrastructure typically take one or more of three forms: 

land acquisitions, conservation easements, or 

enhanced land management practices.

Land Acquisitions

Purchasing land outright is an effective means to 

permanently secure the watershed services that land 

provides. However, it is typically costly. Consequently, 

easements and payments for restoration and management have emerged as lower-cost strategies to secure 

natural infrastructure within a watershed.

Easements

A conservation easement creates a legally enforceable land preservation agreement between a 

landowner and a government agency or land trust. 

The easement outlines specific restrictions on land 

use, typically barring development and commercial 

or industrial uses. As such, easements can be used 

both to protect ecosystems and to protect farms, 

ranches, and the rural way of life. However, unlike 

with land acquisitions, the landowner retains title 

to the property. As a result, conservation easements 

can be substantially less costly than acquisitions 

while achieving similar conservation outcomes. 

Additionally, easements are sometimes donated, 

and those donations are tax-deductible (land can be 

acquired outright by donation as well, with similar 

tax benefits for the donor). Furthermore, in some 

states easement donors can sell their tax credits on 

the secondary market—a feature that allows even 

low-income donors to reap the full benefits of the 

tax deduction. On the other hand, negotiating easements with landowners can be exceedingly difficult 

and time-intensive given the opportunity costs and 

other considerations involved for landowners. 

Land Management Activities

Many utilities and municipalities own land that 

provides critical watershed services like drinking water filtration. For example, the City of 

Seattle, Washington, began acquiring Cedar River 

Watershed in the late 19th century, and now owns 

90,000 acres. The city regularly invests in management activities on its own land (e.g., logging road 

removal) to maintain watershed services.

In other cases, land is owned privately or by another 

government agency, but the utility (or other beneficiary) would like to encourage the use of land 

management practices that are beneficial for water 

resources—such as restoration and maintenance 

of riparian buffers and wetlands, or implementation of forestry best management practices (BMPs). 

While easements can be a viable solution that allows 

landowners to retain property title, they can substantially and permanently encumber land and, among 

other things, reduce the land’s market value. In some 

cases, landowners may be unwilling to enter into 

such permanent agreements. Consequently, shorter 

term arrangements have emerged where landowners 

receive payments as compensation for various land 

BOX 22 | CONSERVATION INCENTIVES 

IN THE U.S. SOUTH

The World Resources Institute created a series of issue 

briefs that explore incentives for ensuring that southern 

U.S. forests continue to supply the ecosystem services 

that people depend upon, including water, timber, 

recreation, and other benefits. The issue briefs cover 

a variety of incentives, markets, and practices, with 

focuses on easements, forest carbon offsets, property 

tax incentives, and public ballot measures.

The series can be found at: 

http://www.seesouthernforests.org/issue-brief 
 80 WRI.org

FINANCE 

MECHANISM

TYPICAL REVENUE ALLOCATION

TYPICAL USER 

OF FINANCE 

MECHANISM

POTENTIAL SCALE 

LAND OF INVESTMENT

ACQUISITION EASEMENTS

LAND 

MANAGEMENT 

ACTIVITIES

Direct Investment by Governments and Utilities

Rates X X X Utility Med

Municipal bonds 

(revenue-backed) X X Utility High 

Municipal bonds 

(general obligation) X X X Government High

Rates surcharges X X X Utility Med 

Earmarked Proceeds X X X Government Low-High

Development impact fees X X X Government Low

Reverse auction X X X Government Low

State revolving funds X X X Utility Med

Farm bill programs X Government Med

Water Infrastructure 

Finance and Innovation 

Authority

TBD TBD TBD Utility High

Private investment 

capital X X Utility, Government Low

Indirect Investment by Governments and Utilities

Property tax incentives X Government Med

Voluntary Donations by Individuals and the Private Sector

Voluntary surcharge X X X Private sector, 

NGO, Utility Low

Online crowdsource 

platforms X X X NGO Low

Auction X X X NGO Low-Med

Corporate sponsorship X X X Utility Low

Market-based Mechanisms

Nutrient trading No additional revenue Government, NGO Med

Mitigation banking No additional revenue Government Low-Med

Tradable development 

rights No additional revenue Government Med

Forest banking No additional revenue Private sector Low

Carbon market X X X Utility, 

Government, NGO Low-Med

Certification and 

labeling programs X Private sector, 

Government Low

Table 7 | Summary of Natural Infrastructure Finance Mechanisms
Natural Infrastructure 81

management activities. These payments typically 

provide compensation for the costs and lost revenue 

associated with the management activities, plus a 

return. The supplemental revenue stream to the 

landowner not only secures management activities, 

it can also help ensure the profitability of the current 

land use (e.g., working forest).

Acquisitions, easements, or land management 

activities can be funded through a variety of channels (Figure 11): direct investment by governments 

or water utilities; indirect investment through 

policies like property tax incentives; voluntary 

donations by individuals, corporations, or philanthropies; or payments through market-based 

trading schemes, often motivated by regulatory 

requirements on private businesses. 

With each of these channels of funding, the specific 

finance mechanism can vary (see Table 7 for a summary). For municipal governments, natural infrastructure investments are most often funded using 

earmarked proceeds, development impact fees, and 

bonds. While many utilities have some portion of 

their budget dedicated to source water protection, 

existing budget capacity is generally supplemented 

with additional funding mechanisms. Utilities can 

turn to rate increases in the form of user surcharges, or invest in some kinds of natural infrastructure (such as conservation easements) with 

revenue bond proceeds.15 Both governments and 

utilities can leverage investments with funding from 

Farm Bill programs, turn to state revolving funds 

for low-interest loans or to private investment capital for upfront finance, and use reverse auctions to 

find competitive bids from “sellers.” Finally, efforts 

to raise voluntary donations can employ a variety of 

strategies, including voluntary surcharges, auctions, 

and online crowdsourcing platforms. These efforts 

can also be assisted with government policies like 

property tax incentives.

Direct Investment by Governments and Utilities

To protect watershed services, the government or 

local utilities can make direct payments on behalf of 

taxpayers or ratepayers. Funds for these payments 

can be raised through bonds, rate or tax increases, 

or from existing government or utility budgets. 

Rate Increases or Surcharges are the prices 

assigned by a utility for providing services, such 

as drinking water, or stormwater management. 

Rate structures can vary, but most drinking water 

rates contain a base rate, a volumetric rate (based 

on usage), or some combination of the two. Rates 

are the primary funding mechanism for utilities 

to recover the cost of providing services to users. 

This typically includes constructing and operating built drinking water infrastructure like pipes, 

dams, pump stations, and treatment facilities, as 

well as covering staff, rent, debt service, and other 

costs. Many utilities dedicate some portion of their 

rates to source water protection and natural infrastructure. A notable example, the City of Portland, 

Oregon, committed approximately $93 million of 

investment into the Bull Run Watershed’s health 

over the next 50 years to meet the goals of its HCP 

(Portland Water Bureau 2008).16

Rate surcharges are fees on water utility ratepayers, 

either on the basis of water usage or with a fixed 

fee per customer. In Raleigh, North Carolina, for 

example, users pay one penny per hundred gallons 

of water used. The surcharge raises $1.8 million 

annually for investments in the upstream natural 

infrastructure that protects water quality in the 

city’s reservoirs (Riechers 2012).

Figure 11 | Watershed Investors by Sector - 

Bilateral and Fund Arrangements, 

United States

Source: Bennett et al. 2012.

17%

21%

7% 21%

3%

17%

7%

7% FEDERAL

STATE

MUNICIPAL COUNTRY

HYDROELECTRIC 

OPERATOR

WATER 

USERS

CIVIL/NGO

VOLUNTARY USER 

DONATIONS
 82 WRI.org

User fees for natural infrastructure finance have 

also been implemented in Little Rock, Arkansas; 

Santa Fe, New Mexico; Denver, Colorado; San 

Antonio, Texas; and Salt Lake City, Utah. Additionally, Eugene, Oregon, is considering instituting 

a user surcharge in future years to fund natural 

infrastructure programs (The Institute for Natural 

Resources 2012). Average fees per household per 

month are typically around fifty cents—a dollar 

and fifty cents in the case of Salt Lake City. The 

U.S. Endowment and Earth Economics developed 

a Watershed Protection Database17 with a growing 

list of utilities known to be using rates surcharges to 

fund natural infrastructure investments.

Straight rate increases and user surcharges can be 

a difficult political decision for the boards of public 

water utilities—particularly against a familiar backdrop of already-increasing rates in many watersheds 

to deal with rising regulatory costs and deteriorating 

built infrastructure. However, even small surcharges 

or rate increases can raise substantial funds, depending on the ratepayer base. Box 23 discusses a tool to 

communicate this dynamic to ratepayers. Finance 

Case 1 describes the user surcharges that a drinking 

water utility in Washington State has implemented 

for watershed protection.

Municipal Bonds are a relatively low-cost mechanism for utilities and state and local governments to 

borrow money for capital expenses. In general, the 

term “Municipal Bonds” refers to either “Revenue 

Bonds,” which are secured by a utility’s future rate 

revenues, or “General Obligation Bonds,” which are 

backed by the full faith and credit of a government 

and its future tax revenue.18

Revenue bonds have traditionally been issued by 

utilities to finance large capital expenditures, such as 

treatment plants and water delivery infrastructure. 

In contrast, day-to-day operating costs of a utility, 

including debt service on municipal bonds, are typically funded by rate revenues. Revenue bonds can 

be used for natural infrastructure to the extent that 

utilities can include natural infrastructure projects 

on their capital budgets (or “capitalize” them). The 

advantage of capitalization is the ability to borrow 

money for (usually significant) natural infrastructure 

investments upfront through the municipal bond 

market, and pay off the loan over time, which is how 

utilities finance major built infrastructure projects. 

FINANCE CASE 1 | USER SURCHARGES

As the primary source of revenue for water utilities, 

water rates have traditionally included a single base 

rate, or volumetric charges. Some utilities now include 

user surcharges in their rates structures to create more 

dependable revenue streams for their investments 

in natural infrastructure. User surcharges are also 

a convenient means to communicate the value and 

magnitude of the utility’s investments in natural 

infrastructure to ratepayers and other stakeholders. 

The City of Bellingham, Washington, is one utility that 

includes such user surcharges. In 2001, Bellingham’s 

municipal utility implemented a system of “watershed 

rates” to fund land acquisition and preservation 

measures in the Lake Whatcom Watershed, the source 

of Bellingham’s drinking water. Activities funded by 

the rates include identification, cleanup, long-term 

maintenance, and restoration of utility-owned land. The 

watershed rates are also used as a communication tool, 

to help ratepayers understand the role of natural systems 

in filtering pollutants and distributing nutrients more 

cost effectively than traditional built infrastructure. 

The watershed rate for unmetered customers is $12 per 

month. The watershed rate for metered customers is the 

sum of a $5 per month base rate plus a volume rate of 

64 cents per 100 cubic feet of water used. The base and 

volume rate total for metered customers is expected to 

be analogous to the fixed rate for unmetered customers. 

Rates are all increased by 50 percent for customers 

outside the City. Before it was implemented, the fee 

structure and Acquisition Program went through a public 

process, including a public hearing before City Council. 

The fee has received little opposition from ratepayers 

and a recent fee increase passed unanimously in the City 

Council. According to Clare Fogelsong, Environment 

Resources Manager for the City of Bellingham, 

this success has been thanks to “...proactive 

communication with our ratepayers, to make it clear that 

protecting source water is protecting the community. 

In the long run it is cheaper to protect our source water 

now, rather than pay for problems in the future.”

| Joanna Kraft and Rowan Schmidt, Earth Economics
Natural Infrastructure 83

For example, some utilities consider riparian easements to be “intangible” capital assets, so they are 

able to capitalize the land indirectly. However, 

beyond easements, justifying natural infrastructure 

on a capital budget remains difficult under current 

accounting standards (Section 5.2).

General Obligation Bonds have traditionally been 

used to fund public projects such as bridges, airports, and schools. Each year, many communities 

also propose and vote on bond measures for natural 

infrastructure like parks, open spaces and watershed 

protection. During elections in November 2012, 57 

bond measures were proposed to fund parks and 

land conservation, and 81 percent of these were 

approved, raising approximately “...$767 million to 

support the protection of water quality, new parks 

and natural areas, and working farms and ranches” 

(Trust for Public Land 2012). Among the bond 

measures, Polk County, Iowa, passed an $18 million bond for the protection of watersheds, wildlife 

habitat, and natural areas. The Trust for Public Land 

tracks conservation bond measures through its Land 

Vote database, available at www.landvote.org.

Ballot measures have been effectively used in the 

past to secure large-scale bond financing for natural 

infrastructure. Voters in 23 states have approved 

65 of 78 state conservation finance measures on 

the ballot since 1988—an 83 percent success rate. 

Together, the approved measures will generate 

more than $28 billion for parks, trails, and the 

protection of natural areas, farmland, and water 

resources. For example, in November 2012, Maine 

voters approved a $5 million bond to support the 

Land for Maine Future program. Voters in Maine 

have approved five such bond measures since 1999 

to secure public access to natural areas for recreation, to conserve important habitats and watersheds, to preserve Maine’s farming traditions, and 

to protect the state’s natural infrastructure (Wendy 

Muzzy, pers. comm. June 13, 2013). In 2009, voters 

in New Jersey approved a measure to authorize 

a bond issue for $400 million to fund a variety of 

open space, water supply and floodplain protection, 

and farmland preservation initiatives. The open 

spaces initiative Green Acres has leveraged public 

and private groups to protect almost 640,000 acres 

of open space to date (New Jersey Department of 

Environmental Protection 2013).

BOX 23 | RATEPAYER COMMUNICATION 

TOOL: DASHBOARD FOR 

REVENUE GENERATION

The University of North Carolina Environmental Finance 

Center (EFC) is providing project assistance to the 

Conservation Trust for North Carolina in its work on the 

Upper Neuse Clean Water Initiative (UNCWI) through 

a grant provided by the U.S. Endowment for Forestry 

& Communities. UNCWI seeks to protect upstream 

lands as critical nature infrastructure for the long-term 

health of drinking water supplies in the basin—from 

groundwater to streams to reservoirs. This initiative is 

profiled more fully as a case study in Part 3.

A major goal of UNCWI is to establish funding streams from 

water resource programs within the local municipalities. 

Toward this end, the EFC is working with UNCWI to build 

a funding scenario model for the entire Upper Neuse River 

Basin, including Raleigh. The “Dashboard for Capacity for 

Watershed Protection Investment” (beta) is an interactive 

tool designed for water utility managers and other water 

resource managers to use in considering options for 

generating local funds for watershed protection. The tool is 

populated with data on the number of ratepayers (residential 

and commercial), the base rate, and the volumetric rate for 

various fees such as water, wastewater, and stormwater. 

The dashboard allows the user to use a “slider” to study the 

impact of incremental additions to the base or volumetric 

rates and see how much revenue can be generated for 

watershed protection. It also includes other watershed 

funding scenarios based on property tax bills instead of 

the utility bill. The model shows funds generated by these 

options can be used as a match for grants that require a 

cost-share. Alternatively, the funds can be used to amortize 

a loan, since the tool demonstrates to lenders how the funds 

will be generated for loan repayment.

In the instance of Raleigh, the Dashboard demonstrated that 

a penny per hundred gallons would generate approximately 

$1.8M per year for natural infrastructure. The Dashboard 

goes on to show how the increased fee will affect the average 

bill for residential and commercial consumers. In the 

Raleigh example, average residential users will pay an extra 

$0.40 per month, and representative commercial users will 

pay an extra $2.46 per month. This information helped to 

make the case for Raleigh’s decision to shift to supporting 

UNCWI with a dedicated bill surcharge rather than a less 

reliable impact fee. The model was also used by neighboring 

Durham to support a similar but more modest utility 

watershed contribution program. In both cases, the model 

demonstrated how a small increase to the water bill could 

generate meaningful revenues for natural infrastructure.

| Jeff Hughes, Environmental Finance Center, 

University of North Carolina
 84 WRI.org

Earmarked Proceeds are funds set aside to 

support direct payments for a particular purpose. 

Voters and legislators can designate a certain percentage of revenues to be dedicated for a particular 

project. Conservation license plates, a donation on 

a state income tax form, and dedicated portions 

of fees from hunting permits or licenses are common examples of earmarked funds for conservation projects. For example, Maine residents pay a 

$20 upfront fee and a $15 annual renewal fee for 

a specially marked conservation license plate. Of 

the $20, $8.40 is dedicated to the Maine Bureau 

of Parks & Lands, $5.60 to the Maine Department 

of Inland Fisheries and Wildlife (MDIFW), and 

the remaining $6 to the Maine Bureau of Motor 

Vehicles. Funds generated for MDIFW are used in 

part to protect riparian habitats and large blocks 

of forest and grasslands—natural infrastructure 

with substantial benefits for water resources. These 

funds are also used to secure match from various 

federal programs. Between program inception in 

1995 and 2005, the license plates have generated an 

average of almost $490,000 for MDIFW annually 

(State of Maine 2004).

Development impact fees are one-time charges 

applied to new developments. Their goal is typically 

to raise revenue for the construction or expansion 

of capital facilities located outside the boundaries 

of the new development that benefit the new development. Impact fees are assessed and dedicated 

principally for the provision of additional water and 

sewer systems, roads, schools, and libraries, but can 

be used for conservation and have been used in this 

manner in the past (James et al. 1991). For example, 

the Commonwealth of Pennsylvania in 2012 created an impact fee on natural gas wells drilled in the 

state. The fee generated more than $204 million in 

2012 alone, of which roughly $25 million has been 

earmarked for conservation initiatives including 

watershed restoration and protection (Elliot 2013). 

Reverse auctions are auctions in which the roles 

of buyers and sellers are reversed. Sellers bid for 

business, and prices typically decrease over time. 

A reverse auction is typically used in a market 

with multiple sellers and one buyer. In the case 

of watershed services, for example, landowners 

might bid to supply environmental outcomes at the 

lowest cost, and bids can be structured in terms of 

the environmental outcome such as cost per pound 

of phosphorous removed (Selman et al. 2007). A 

benefit of reverse auctions to governments and 

utilities (or any large buyer) is that sellers selfidentify and compete for investments. The World 

Resources Institute, the Pennsylvania Environmental Council, and other partners demonstrated the 

reverse auction phosphorous removal projects on 

farms in the Conestoga watershed. Supported by 

WRI’s NutrientNet modeling tool, which estimated 

parcel-specific phosphorus runoff reduction potential associated with various changes in practices, the 

reverse auction in 2006 funded seven projects for 

an estimated 80,787 pounds of phosphorus reduction at a total cost of $292,635 (Selman et al. 2007).

State Revolving Funds. Clean Water State 

Revolving Funds (CWSRF) have provided more 

than $5 billion annually in recent years for water 

quality protection projects, including nonpoint 

source pollution control and watershed and estuary management. These funds provide low-interest 

loans for these projects (over 30,000 loans to date, 

worth over $89 billion; EPA 2012). In 2006, for 

example, The Conservation Fund borrowed $25 

million from the California CWSRF to help finance 

the acquisition of approximately 16,000 acres of 

redwood forest in Mendocino, California (Allen 

2013). The Drinking Water State Revolving Fund is 

similar, but focused on making funds available to 

drinking water systems to finance (typically built) 

infrastructure improvements.19 See Box 24.

An analysis by the Trust for Public Land found 

low demand for land conservation using CWSRF, 

primarily due to lack of awareness, a preference for 

grant money, a burdensome application process, 

mismatches with the “culture” of a particular state’s 

program, and other context-specific challenges 

(Stangel 2013). 

Farm Bill Programs. A number of Farm Bill 

conservation programs, such as the Conservation 

Reserve Program or the Environmental Quality 

Incentive Program, provide technical and financial 

resources to landowners for restoration and conservation of farms, ranches, forests, and wetlands. 

These programs can be leveraged by utilities for 

natural infrastructure investments (USDA NRCS 

2012). For example, under the Farm Bill’s Cooperative Conservation Partnership Initiative (CCPI), 

entities including state and local units of govern-
Natural Infrastructure 85

ment with a history of working cooperatively with 

producers can enter into multi-year agreements 

with NRCS to help enhance conservation outcomes 

on agricultural lands and private nonindustrial 

forest lands. The program leverages resources of 

various Federal government programs to implement natural resource conservation practices.20

See Box 24.

A Water Infrastructure Finance and Innovation Authority (WIFIA) is an emerging topic of 

discussion gaining traction in the water industry. 

Modeled on the successful Transportation Infrastructure Finance and Innovation Authority, a 

WIFIA would be a federal entity capable of providing 

loans to utilities and government agencies to finance 

water infrastructure projects. Potential advantages of 

a WIFIA include the ability to lend money for large 

projects above the capacity of State Revolving Funds. 

Because the loans would be secured at Treasury 

rates, the cost of borrowing is likely to be much lower 

compared with borrowing on the municipal bond 

market (about $32 million in savings for a $100 

million loan over 30 years—assuming a 5.4 percent 

rate for municipal bonds and a 4.04 percent rate 

for a WIFIA loan). It is not yet clear what percentage of a typical WIFIA loan would be available for 

natural infrastructure, but it may provide a substantial finance mechanism in the future. Legislation 

for WIFIA was introduced to the U.S. Congress in 

November 2012 and again in February 2013 with the 

support of the American Water Works Association, 

Association of Metropolitan Water Agencies and 

the Water Environment Federation (AWWA 2012). 

The draft legislation would provide loans generally 

$20 million or larger and would encourage the use 

of natural infrastructure.21 However, it is unclear 

whether Congress would remove funding for the 

state revolving funds in order to fund WIFIA. Such 

a possibility has led to some level of controversy 

surrounding the WIFIA proposal, and its legislative 

prospects remain unclear.

Private Investment Capital. Mobilizing public funds for a large-scale natural infrastructure 

investment program can be politically difficult, as 

discussed above. Moreover, utilities and municipalities often prefer to pay for outcomes, rather than 

risk failure of conservation investments to produce 

needed benefits for water resources. To address 

these issues, private investment capital can be used 

to finance upfront conservation investments and 

absorb some of the risk. While this mechanism is not 

a form of direct expenditure by governments or utilities, it can be used to facilitate these direct expenditures by fronting the cost and absorbing risk. 

In the Pacific Northwest, The Freshwater Trust 

employs this innovative model. The non-profit 

organization raises private capital, uses the capital 

to “lease” land from landowners and plant riparian 

trees, and then sells in-stream temperature reductions to wastewater facilities that face regulatory 

BOX 24 | LEVERAGING REVOLVING 

FUNDS AND FARM BILL 

PROGRAMS

From a practical standpoint, it is important to consider 

how existing resources can be leveraged and brought to 

bear on this challenge. Both the Clean Water and Safe 

Drinking Water SRFs have featured a requirement that 

20 percent of the funds be used for green infrastructure 

from fiscal year 2009 through 2012—reflecting a 

recognition by Congress of the importance and value of 

environmentally sound approaches. However, the green 

component of the Safe Drinking Water SRF has primarily 

been used for procuring energy efficient equipment (e.g., 

pumps), putting in place water metering to promote 

water conservation for communities without meters, 

and leak reduction—rather than conserving the natural 

ecosystems that regulate and filter water.

The green infrastructure portion of the Clean Water SRF 

has been used in a variety of ways that protect drinking 

water quality and quantity. These have included a variety 

of innovative projects, such as on-site stormwater 

collection and treatment systems as well reclaimed water 

treatment facilities to preserve scarce water resources. 

The Conservation Title of the Farm Bill also provides a 

number of programs, incentives, and sources of funding 

for various best management practices that can prevent 

nutrients, herbicides, pesticides, and microbiological 

pollutants from contaminating sources of drinking water. 

These include the Water Quality Incentives Program and 

the Conservation Innovation Grants program. There is 

also a variety of other federal, state, and local sources of 

funding that can be used. 

| Jim Taft, Executive Director, Association of State 

Drinking Water Administrators; Co-Chair, Source 

Water Collaborative
 86 WRI.org

requirements. The water utility pays directly for 

the outcome of interest. The Freshwater Trust both 

covers upfront financing and absorbs all of the 

risk—and is compensated accordingly.22

Indirect Investment by Governments and Utilities

Governments can incentivize natural infrastructure 

through the tax code. While these policies are not 

direct expenditures, some of them come at a cost in 

the form of lost tax revenue (commonly referred to 

as “tax expenditures”). Others, such as taxes on sale 

for development, can be revenue generators.

Property Tax Incentives. In addition to tax 

deductions for conservation easements, states use 

property tax laws to give special treatment to landowners who keep their land undeveloped. These 

laws tax undeveloped land at its current use, rather 

than its potential highest and best use. For example 

in Maine, “permanently protected open space,” 

and “forever wild open space,” garner additional 

30 percent and 70 percent property tax reductions, 

respectively (36 M.R.S.A. § 1106-A (2)). Other 

incentives include taxes on land sale proceeds 

intended to deter sale for development, and the 

use of the federal New Market Tax Credit Program 

to finance protection of environmentally sensitive 

lands (Levitt 2005).23

Voluntary Donations by Individuals 

and the Private Sector

Voluntary donations are politically non-contentious. However, the approach can also struggle 

to raise sufficient funds for meaningful natural 

FINANCE CASE 2 | NATURAL INFRASTRUCTURE AUCTION

In 2010, the White River Partnership (WRP) and its 

partners piloted a natural infrastructure auction (termed a 

“Landscape Auction”) in Vermont’s White River Watershed 

to help conserve ecological, historical, and social values 

that are provided from privately owned agricultural and 

forest lands. 

At a natural infrastructure auction, individuals, groups, 

and businesses make a bid for the natural infrastructure 

offered—ranging from simple items like riparian 

restoration activities to more complex aggregates of 

ecosystem services such as the water retention capacity 

of forests, the protection of land-based carbon sinks, the 

conservation of habitat for fish or wildlife, or the restoration 

of degraded natural areas such as wetlands. These funds 

are then used to enter into contracts with agricultural 

and forest landowners to retain those particular natural 

infrastructure elements for at least ten years.

At the “White River Landscape Auction,” held on August 

14, 2010, nine private landowners, the Green Mountain 

National Forest, and the WRP offered projects. The auction 

raised $20,000 for a diverse set of 30 projects, ranging 

from $25 to $7,500 each. “Community bids”—the pooling 

of resources from a group of individuals in order to “adopt” 

a natural infrastructure element collectively—were effective 

at engaging individuals with small giving capacities.

For example, community bids organized prior to the live 

auction event by the White River Partnership and Vermont 

Law School raised $4,500 and $2,400, respectively.

Lessons Learned

 Adequate time, funding, and organizational capacity 

are needed to develop and administer the auction. This 

project was challenged by a short turnaround period 

(about seven months) and project funds did not include 

dollars for WRP staff.

 Auction items must be priced to match the capacity of 

attending buyers and should be linked to a compelling 

story and watershed health.

 Demand is critical. The auction model is geared to tap 

into a large non-profit partner’s established fundraising 

network with corporations and major individual donors. 

In contrast, the WRP’s fundraising network consists of 

local individuals and businesses with limited giving 

capacities. Larger Vermont and New Hampshire-based 

businesses participated in the auction, but primarily 

supported it through in-kind donations.

| Mary Russ, Executive Director, White River Partnership
Natural Infrastructure 87

infrastructure investments. Increasingly innovative 

approaches to soliciting voluntary donations have 

emerged in recent years. Among them are natural 

infrastructure auctions and online “crowdsource” 

platforms. These approaches are detailed as finance 

cases below.

When the financing of a conservation project 

depends on voluntary contributions, the financing 

is typically achieved through diverse sources of support. Donors may include individuals, foundations, 

businesses, and corporate interests. Businesses 

and corporate interests that depend on watershed 

services to be profitable may make “donations” 

for natural infrastructure in order to manage their 

water-related risks. 

Voluntary donations are often influenced by state 

assistance, whether through tax relief or direct support through grants. For example, in Marlboro, Vermont, the Hogback Mountain Conservation Association raised over $900,000 in private donations 

from individuals and foundations to conserve 600 

acres on Hogback Mountain. These donations were 

matched by $450,000 in state and federal funds 

from a Vermont Watershed Grant, and a $50,000 

appropriation from the Town of Marlboro (Hogback 

Mountain Conservation Association 2008).

A voluntary surcharge is a small fee that a business adds to a customer’s bill. The fee is given to a 

dedicated non-profit. The customer has the option 

to decline the charge voluntarily (Clark 2007). 

A voluntary surcharge program both generates 

income and can be an effective vehicle for conservation awareness. The primary disadvantage is the 

effort needed to set up the program. Most effective 

voluntary surcharge programs tend to be in popular 

tourist destinations and have been led by at least 

one prominent businessperson capable of selling 

the program to others (Clark 2007). Since both the 

adoption of the voluntary surcharge by businesses 

and its payment by customers are voluntary, this 

mechanism tends to be politically non-contentious; 

however, its fundraising capacity is limited. For 

example, 1% for the Tetons—a local chapter of 

1% for the Planet—collects funds raised from 80 

participating businesses that place a 1 percent 

voluntary surcharge on their customers. The program raised $327,000 over its first three years for 

27 different environmental sustainability projects 

(One Percent for the Tetons n.d.). This amount is 

fairly small relative to investment needs for typical, 

robust natural infrastructure programs.

Auctions. Whereas a reverse auction is used in a 

market with one large buyer, the standard auction 

mechanism can be used to aid conservation groups 

and landowners in attracting funding from multiple 

donors. The auction functions as a broker between 

conservation groups, landowners, and financiers, 

creating a financial link between those who take 

care of the landscape and those who enjoy it. Auctions are specifically tailored to place-based needs 

and scales by focusing on geographic locale regions, 

areas, or communities where “buyers” have specific 

interests. And they have educational and community cohesiveness benefits by connecting local 

citizens directly with the often difficult to grasp 

concept of ecosystem services. Auctions been tried 

in Vermont and in the Netherlands with success, 

although funds raised to date with this mechanism 

are typically small relative to needs for natural 

infrastructure. See Finance Case 2.

Online Crowdsource Platforms are online websites that enable individuals and others to browse 

profiles of natural infrastructure projects and make 

direct “investments” (typically donations) in projects 

of their choosing. The mechanism can streamline 

fundraising efforts focused on voluntary donations 

and access prospective donors who may not typically 

give to traditional land trusts or other organizations 

that typically spearhead ecosystem conservation 

efforts. Crowdsource platforms have been enormously effective in financing creative projects (e.g., 

kickstarter.com) and international microfinance 

projects (e.g., kiva.org). See Finance Case 3.

Corporate Sponsorship may be an option when 

local businesses would like to associate their brand 

with the utility’s stewardship or realize their product depends on investing in the local environment. 

The Eugene Water and Electric Board in Oregon 

is exploring partnerships with local breweries in 

Eugene to create a “sustainable beer” label. By 

paying a percentage of their revenue into the utility’s watershed protection fund, the breweries can 

position themselves as socially and environmentally 

responsible businesses, which may in turn attract 

more customers or justify a premium price (The 

Institute of Natural Resources 2012).
 88 WRI.org

Market-Based Mechanisms

We use the term “market-based mechanisms” 

here to broadly refer to those mechanisms that 

leverage economic markets in one way or another 

for conservation. Some of these mechanisms are 

quasi-markets created for a conservation purpose—

for example, to enable regulated entities to achieve 

regulatory compliance (for example, under the 

Clean Water Act or Endangered Species Act) more 

cost-effectively by purchasing “credits” or “offsets” 

that represent a conservation action of interest. 

Other mechanisms carve conservation funding 

out of existing markets (e.g., forest certification 

to secure premium prices for sustainable timber 

within existing timber markets). 

Nutrient trading, for example, allows one player 

to meet nutrient reduction requirements by acquiring nutrient reduction credits from another player 

within the same watershed. Credits are generated 

FINANCE CASE 3 | ONLINE CROWDSOURCE PLATFORM

Clean Water Future is an online marketplace designed 

to “crowdsource” investments (donations) in projects 

proposed by local forest landowners to protect and 

enhance natural services. For landowners and nonprofit organizations, the tool is an alternative fundraising 

opportunity, independent of foundations, state and federal 

agencies, and other traditional funding streams. For site 

visitors, on the other hand, Clean Water Future is a place 

to learn about on-the-ground conservation efforts and to 

make direct investments in services such as clean water, 

flood protection, habitat, and recreation.

Clean Water Future recruits and posts a variety of specific 

water-related conservation projects on its website. 

Projects are sponsored and implemented by non-profit 

conservation organizations working with the landowners 

in question. The management strategies implemented by 

landowners, with the assistance of these organizations, 

enhance natural services that benefit others. Site visitors 

can read about the projects and see the remaining funds 

each project needs to be implemented.

This type of funding platform encourages creativity in the 

submission of projects from sponsors with diverse needs 

and conservation perspectives. Unlike traditional grants, 

this funding source allows for quick, direct feedback on the 

merits of a proposed project among the funder audience. 

And the platform may be effective in reaching those wouldbe donors who prefer to give to specific projects (and put 

their names on those projects through social media) than 

to an environmental organization through more traditional 

avenues. At least one listed project in the site’s first six 

months brought new donors and new members to a 

project sponsor organization. 

Building an effective visitor base takes time and effort. 

Google Analytics shows that the site had 2,804 visits from 

1,756 people in the site’s first six months since launch 

in 2011. During this time, Clean Water Future posted 14 

projects with a combined cost of $87,609. Approximately 

$22,000 in investments has been made through the site, 

with the Conservation Innovation Grant contributing an 

additional $11,000 in match as an incentive. These early 

investment rates would need to improve over time to justify 

estimated annual operating costs ($80,000–$120,000). 

Earned income from fees on projects would be low during 

the first year, gradually increasing year-by-year and in time 

covering expenses. On-site advertising revenue would 

improve cash flow; however, we have not looked into this 

avenue of income. 

Our intention was to reach investors far beyond the areas 

tapped by the local non-profit conservation organizations. 

However, the preponderance of investments in the first 

six months came from the local base. Initially we intended 

to market through web links from other sites, word-ofmouth, and press releases. However, these avenues have 

not been sufficient.

In addition to the tax credit incentive for donating to a nonprofit organization, we tested various rewards to incentivize 

investments. The marketing team created several rewards 

to investors and tried them out on the website. Although 

the effect is still unclear, the use of tangible gifts or rewards 

has been successful in other crowdsourcing sites such as 

Kickstarter.com. Other sites use the loan model (investors 

get their money back). Ultimately, while Clean Water Future 

offers many of the benefits of an online crowdsourcing 

platform, it is still an avenue for donations.

| Wayne Barstad, Dartmouth College
Natural Infrastructure 89

when a player reduces nutrient loadings to a greater 

extent than is required.24 These programs are typically developed to comply with TMDLs under the 

Clean Water Act. Credit “producers” can be nonpoint sources—that is, forests, farms, or ranches 

that produce credits by undertaking conservation 

actions (various forms of natural infrastructure) in 

order to reduce nutrient runoff. In Chesapeake Bay, 

for example, wastewater treatment plants can meet 

the pollution limits of their operating permits by 

purchasing credits from farmers who employ land 

management practices to enhance water quality. 

These transactions provide financing to landowners to implement those conservation practices for 

natural infrastructure.25 In this way, nutrient trading can generate substantial funds for investment in 

natural infrastructure. 

Mitigation banking is another market-based 

mechanism whereby natural infrastructure is protected through sale of credits to polluters or developers by those who have undertaken a conservation 

action to offset the impact (e.g., loss of wetland or 

habitat), and ideally provide a net conservation 

benefit. An example is wetland mitigation banking, 

or banking for threatened or endangered species 

(referred to as “conservation banking”). There is a 

large body of literature on the mitigation banking 

approach. For example, The Conservation Fund, 

EPA, and the National Mitigation Banking Association each have websites dedicated to the subject. 

Tradable (or Transferable) Development 

Rights (TDR) allows property owners who want 

to increase development rights on their land to pay 

for that right in a trade with a property owner who 

agrees not to develop land somewhere else. A typical 

case is the rural landowner who sells his or her right 

to develop (by creating an easement) to an urban 

developer who would like to increase the square 

footage, height, or number of units beyond that 

allowed by zoning restrictions. The TDR program in 

King County in Washington State, for example, has 

protected over 141,392 acres of rural and resource 

lands since the year 2000 (King County 2012). The 

benefit of TDR is to channel development away from 

the more healthy rural areas of a watershed to the 

already urbanized portions of the watershed, thereby 

protecting source waters.26 Note that TDR programs 

can only be successful where there is a true scarcity 

of development rights.

FINANCE CASE 4 | CALIFORNIA’S 

EMISSIONS TRADING PROGRAM

The Global Warming Solutions Act of 2006 (AB 32) 

sets the State of California’s 2020 emissions reductions 

goals into law, and directs the California Air Resources 

Board (ARB) to take a number of measures toward this 

end. One of the state’s key programs for achieving its 

emissions reductions goals is the Greenhouse Gas 

Cap-and-Trade program, to be implemented in several 

phases, beginning in 2013. The Cap-and-Trade program 

will be the world’s second largest carbon market, and it 

creates a real finance opportunity for many water utility 

natural infrastructure projects across the United States.

The Compliance Offset Program and 

Natural Infrastructure Finance Opportunities

Utilities that plan to undertake restoration projects 

may be eligible to enroll in the Compliance Offset 

Program, which would enable them to sell “offset 

credits“ to regulated emitters (such as cement factories) 

that are not able to meet their emissions cap through 

other requirements. One ARB offset credit represents 

the equivalent of one metric ton of carbon dioxide 

sequestered or not emitted. Up to eight percent of an 

emitter’s compliance obligation can be met through 

offsets, and only projects in the United States that 

belong to an ARB-approved “compliance offset protocol“ 

can apply for offsets.

Currently, four compliance offset protocols have been 

released, of which two are relevant to water utility natural 

infrastructure projects: U.S. Forestry and Urban Forestry. 

These protocols define requirements for creating carbon 

offsets through tree-planting programs, and provide 

guidelines for how to create and sell offsets, including 

eligibility rules, methods for quantifying GHG removal, 

and offset reporting procedures. Due to a predicted 

shortfall in offset credits in future years, regulators are 

also considering the inclusion of a protocol that would 

reward utilities and governments able to verify “avoided 

deforestation” (London Green Financial 2012).

Even at a price of just $10, carbon offsets represent a 

$4.6 billion market, creating a significant opportunity for 

natural infrastructure finance (Evolution Markets 2010). 

In early 2013, allowances sold for $13.62. As the market 

develops, the State of California expects offset credits to 

sell for around $21 (Environmental Defense Fund 2012). 

More information on California’s Compliance Offset 

Program is available at http://www.arb.ca.gov/cc/

capandtrade/offsets/offsets.htm.

| Christoph Weissbart and Rowan Schmidt, 

Earth Economics
 90 WRI.org

FINANCE CASE 5 | CLEAR WATER CARBON FUND—CARBON FINANCE FOR CLEAN WATER

The joint carbon-water model is also in use in the 

Northeast, where the Manomet Center for Conservation 

Sciences has developed the Clear Water Carbon Fund 

(CWCF)—an innovative, market-based program designed 

to bring together community partners to restore forests 

along riverbanks. CWCF plants trees on behalf of 

individuals and businesses that seek to protect their local 

water resources and mitigate carbon emissions. CWCF 

utilizes the concept of a voluntary carbon offset market 

to increase the capacity of existing community-based 

organizations to protect clean water. Manomet successfully 

piloted this program in two watersheds in Maine and 

Vermont in 2011. 

The CWCF allows individuals and businesses to invest 

in reforestation of stream and river banks. These trees (1) 

protect and maintain clean water and wildlife habitat, (2) 

sequester carbon over time, and (3) help sustain natural 

resources that are the foundation of local economies and 

communities. In 2011, CWCF raised enough funds to plant 

nearly 2 acres of trees within riparian areas in Maine’s 

Sebago Lake and Vermont’s White River watersheds. As 

these 600+ native trees grow, they will absorb and store 

over 200,000 pounds (90 metric tons) of carbon from the 

atmosphere, keep water clean, create wildlife habitat, and 

help maintain the quality of life and economic health of 

local communities.

The slogan for the CWCF is: “Plant trees. Protect water. 

Buy local.” This simple statement summarizes the 

multiple benefits of the CWCF. Over a 40-year period, 

each tree planted removes 330 pounds of carbon from the 

atmosphere and provides verifiable benefits to clean water 

and wildlife habitat. Making a contribution to the CWCF 

allows customers to take action on reducing their carbon 

emissions to fight climate change and at the same time 

invest funds in their community to help protect clean water 

and wildlife habitat.

The key problem the CWCF strives to solve is lack of 

sufficient resources of community and watershed groups 

to keep water clean and fight climate change locally. The 

CWCF was developed to bring resources to communitybased watershed groups, increase their capacity to plant 

trees along riverbanks to restore riparian areas, and 

engage a greater range of businesses and community 

members on water quality issues. The CWCF is focused 

on restoring riparian areas because the science shows 

a clear link between forested riparian areas and the 

maintenance of clean water. The benefits that healthy 

riparian areas can provide are wide-ranging, including 

clean and safe drinking water, habitat for fish and wildlife, 

and recreational opportunities that are critical for a 

community’s economy and quality of life. 

The CWCF also has a goal of supporting communitybased watershed stewardship. The CWCF partners with 

local groups that have direct experience working with 

local stakeholders to promote and implement watershed 

enhancement projects in their communities. The “sale” 

of trees to businesses and individuals who are interested 

in reducing their carbon footprint provides a new funding 

stream for water quality protection projects and allows 

local organizations to engage a much broader audience 

than their traditional donor base.

CWCF has been successful in soliciting on-line 

contributions by many individuals. This strategy has been 

effective during gift-giving seasons where individuals can 

make contribution as “gifts” for others. However, this is 

a labor-intensive approach and only will be viable as a 

complement to an approach that engages local institutions 

or businesses. The costs of the program are high at a 

small scale of operation (e.g., planting fewer than 10 acres 

per year), which presents a challenge for self-sufficiency 

if the donations are to cover overhead and operating 

costs. The program is currently supplemented by external 

grant funding to these expenses. Third party verification 

of carbon offsets generated by the program is also 

prohibitively expensive at a small scale. Until the program 

gets to sufficient scale, “second-party” monitoring 

and transparency will need to be sufficient to convey 

confidence to the donors that the plantings represent 

additional carbon stored on the landscape.

| Ethel Wilkerson and John Gunn, Manomet Center for Conservation Sciences
Natural Infrastructure 91

Forest banking is another form of banking to 

finance watershed services. Often, forestry operations suffer from the burden of irregular cash flow. 

To minimize this burden and allow for successful 

preservation of sustainable forestry options, landowners may deposit land in a forest bank. The collective harvest of all participating landowners allows 

each landowner to receive a dividend each year 

instead of once every 10–20 years (Gilges 2000).

Carbon markets also provide market-based 

opportunities for natural infrastructure financing. 

Forest-based natural infrastructure in particular 

provides not only water resource benefits, but also 

carbon storage benefits. Selling carbon credits 

generated from forested watershed conservation 

efforts can be an excellent leverage opportunity. See 

Finance Cases 4 and 5. 

Certification and labeling programs are 

market-based mechanisms to finance natural 

infrastructure. These programs leverage consumer 

preference for sustainable goods (and willingness to 

pay more for these goods). The increased demand or 

premium price paid in markets for products like sustainable timber provides incentives for landowners to 

use sustainable practices—and compensation to do so. 

At the time of publication, the World Resources 

Institute is investigating the extent to which one 

such certification standard—the Sustainable Forestry Initiative (SFI) Standard—promotes verifiable 

implementation of forestry practices that provide 

critical watershed services for downstream users. 

The research examines:

1. The effectiveness and related documentation of 

SFI certification in promoting implementation 

of forestry practices in accordance with state 

law and BMPs for water quality;

2. The extent to which state law and BMPs 

adequately address water quality; and

3. The effectiveness and related documentation of 

SFI certification in promoting implementation 

of forestry practices that go above and beyond 

state law and BMPs for water quality. 
 92 WRI.org

Section 5.2: Accounting Standards and their 

Implications for Finance 

| David Cosman, Rowan Schmidt, Jennifer Harrison-Cox, and David 

Batker, Earth Economics

This section details a critical finance roadblock 

faced by public water utilities—accounting standards that do not treat natural infrastructure as a 

capital asset for the water supply and other critical 

services it provides. As we discuss, several public 

utilities have created the Watershed Economics 

Workgroup to address this roadblock. 

In 1889, the City of Seattle established a public 

drinking water system (now called Seattle Public 

Utilities or SPU) and began acquisition of the 

forested Cedar River Watershed to provide and 

filter the community’s water. This was a radical and 

expensive idea at the time. Had the City’s leaders 

required a threshold rate of return on investment, it 

would likely never have justified this unusual project. However, the city’s goal was not to maximize 

“net present value,” but to provide safe and reliable 

drinking water for the people of Seattle for the foreseeable future. Today, Seattle owns, protects, and 

manages the entire 90,000-acre Cedar Watershed 

for drinking water.

Seattle’s investment proved to be worthwhile. 

Today, SPU would have to pay an upfront cost of 

$200 million to build a filtration plant to filter the 

city’s water supply with annual operating and maintenance costs of $3.6 million per year if the forest 

did not do this job (Batker et al. 2010). Of course, 

after a century it would likely have been the third or 

fourth filtration plant to be built. Protection of the 

Cedar Watershed will continue to play an important 

role in avoiding the need for a filtration plant, along 

with other factors such as EPA regulations.

The SPU case study illustrates three important points: 

1. Natural infrastructure tends to provide benefits 

over a very long period of time (centuries or 

longer), whereas manmade capital provides 

benefits in the near term (years to decades). 

2. Natural infrastructure appreciates in value 

over a long period of time due, in part, to 

increased scarcity, whereas built capital depreciates relatively rapidly.

3. Investments in natural infrastructure with the 

goal of sustainability can be far better investments over the long term than investments 

with shorter, but less sustainable benefit flows.

The value of the forested Cedar River watershed for 

SPU and the City of Seattle is clear. 

The Accounting Gap Dilemma

From both an economic and ecological standpoint, 

however, a fundamental dilemma is faced by SPU, 

New York City, and other watershed-filtered water 

utilities in the form of an accounting omission. The 

accounting standards to which SPU must adhere 

are set by the Governmental Accounting Standards 

Board (GASB), responsible for state and local 

government standards in the United States. The 

problem is that the watershed, which provides and 

protects the purity of the water supply, is intuitively 

one of the utility’s greatest assets, yet it does not 

register as an economic asset in the utility’s financial books beyond the historical cost of acquiring 

the land. Facilities, pipes, vehicles, buildings, roads, 

computers, copy machines, fences, and pencils all 

count as assets. If SPU had to install a $200 million 

filtration plant, it would count as an asset on their 
Natural Infrastructure 93

books. The value of the forested watershed that 

meets the same filtration need does not count.

Why is this a problem? Consider one big advantage of a valued capital asset: you can invest in 

it. If SPU needed to construct a filtration plant, 

they could borrow money through the issue of 

municipal bonds, invest in the plant, and pay back 

the loans. In addition, since a filtration plant is 

an acknowledged capital asset, a sufficient budget 

for maintenance and operations is justified. Thus, 

one problem with not recognizing the watershed 

as an economic asset is that the utility cannot 

have a capital improvement project to accomplish 

needed maintenance and restoration. That is, it 

cannot borrow money against that asset to pay for 

improvements. In addition, because the utility’s 

largest asset—the watershed—is not measured as an 

economic asset beyond the (relatively low) historical cost of the raw land plus the timber value of 

the trees, the operations and management budget 

does not have the same financial justification and 

therefore risks being inadequate. 

A couple of interesting ironies of current accounting 

practice are worth mentioning. First, if a watershed 

becomes polluted, clean-up costs must be immediately recognized as an expense and recorded 

as a liability on the utility’s financial statements, 

and the GASB provides clear guidance on how to 

account for these costs. However, simply having a 

pristine watershed is not shown on the statements 

beyond the (typically) very low historical costs of 

purchasing the watershed. Second, if an old logging 

road in the watershed needs to be decommissioned 

to prevent sediment and runoff from entering the 

reservoir and degrading water quality, the utility’s 

assets will take a write-down. The road is counted 

as an asset because it was originally an “improvement” to the watershed, although in reality it is an 

economic liability. 

The mission of water utilities is to manage renewable 

natural resources. Proper management and security 

of water supply is not only vital for providing clean, 

safe drinking water: It affects the utility’s bottom line 

and prospects of continuing to borrow money for 

general capital improvement. A recent analysis by 

Ceres and Water Asset Management concluded that 

many water and power utilities in water-stressed 

regions, which rely on a predictable water supply 

to repay their debts on the municipal bond market, 

may in the future find it more expensive to borrow 

money, if water scarcity risks should ever be reflected 

in the pricing or disclosure of the bonds they issue 

(Leurig 2010). The utilities that best protect their 

natural infrastructure and secure sustainable water 

supplies may have a distinct advantage.

Healthy watersheds can also reduce a utility’s 

exposure to risk. Following the devastation of 

Hurricane Sandy along the East Coast in November 

2012, for example, it was noted that while much of 

New York City’s public infrastructure was crippled, 

“...in most cases drinking water quality is not one 

of [the problems].” Boil orders were in place for 

many other communities due to contamination 

of groundwater supplies, but New Yorkers could 

continue to drink straight from the tap, thanks to 

ample reservoirs in the Catskills Watershed “...

located away from the city that are not groundwater 

based” (Appleton et al. 2012). 

Implications for Natural Infrastructure Finance

Updated accounting standards will better equip 

utilities and other agencies to understand the full 

spectrum of built and natural infrastructure investment options at their disposal for source water 

protection and could enable substantially increased 

financing for natural infrastructure. New accounting frameworks will support existing finance 

mechanisms for natural infrastructure, described 

in Section 5.1, and will open up new streams of 

revenue. Examples of impacts may include:

1. Municipal bonds. When natural infrastructure is reflected in utility financial statements, 

municipal bond ratings agencies and bond 

investors will begin to perceive its importance 

for providing utility services and supporting 

the utility’s future revenue streams (i.e., used 

to repay bonds), as well as managing risk from 

events like hurricanes and drought. Thus, utilities that make significant investments in natural 

infrastructure may be in a position to improve 

their bond rating and lower their cost of borrowing. Over the lifetime of a large 30-year 

bond, even a small difference in interest rate 

can translate to millions of dollars in savings.
 94 WRI.org

2. Rates. Currently some utilities dedicate a 

portion of their rates to natural infrastructure, often in the form of a rates surcharge, as 

described in Section 5.1. Allowing utilities to 

reflect the value of their natural infrastructure 

investments in their financial statements (i.e., 

as capital assets) may justify widespread adoption of new rates structures, which include a 

natural infrastructure component, creating a 

robust funding stream for natural infrastructure investments. Water rates are also a convenient means of educating rate payers and policy 

makers on the magnitude and importance of a 

utility’s natural infrastructure investments. 

3. Asset management and budgeting.

Recognizing natural infrastructure as a capital 

asset would support utilities in developing 

more integrated asset management approaches, 

where both natural and built infrastructure are 

considered an integral part of the utility’s overall system. Also, including natural infrastructure in a utility’s capital budget (often called a 

“Capital Improvement Program”) ensures it is 

assigned a sufficient ongoing operations and 

maintenance budget. To better understand this 

dynamic, Duke University and Earth Economics are leading a research project with three 

utilities to develop hypothetical frameworks for 

including natural infrastructure on financial 

statements, and evaluate the impact of this 

inclusion on each utility’s overall capital investment plans and priorities.

Finding Solutions and Taking Action

GASB accounting rules could be broadened from 

their sole focus on historical cost accounting and 

manmade assets. Because accounting rules have 

been developed for built capital, which depreciates, they are historical-cost-based—meaning the 

value of the watershed is the original amount paid 

for the land (in the case of SPU, most acquisitions 

were made in the 1800s and early 1900s). Modifying these rules for ecological assets would enable a 

water utility to adequately account for investing in 

its greatest asset: the watershed itself.

Alternatively, the value of the ecosystem services 

delivered by the watershed could, for example, 

be estimated by considering how the functions of 

the watershed would be replaced to provide clean 

water by other means. This estimation can take into 

account the construction and maintenance costs of 

filtration plants, plus the costs of obtaining water 

from another source, such as desalinization or 

groundwater pumping. 

However, while it is clear that our accounting and 

economic measures could do a better job of capturing the value of natural capital, a number of technical and institutional challenges remain. For example, methods for valuation of natural infrastructure 

are still developing, and must deal with the many 

complexities of ecosystems. GASB would likely be 

unwilling to set a standard in an area that does not 

have a clear consensus. Also, the concept of “value” 

is not the same in economics and accounting, as the 

disciplines have developed for different purposes. 

In the case of government accounting, assets are 

generally recorded at their historical cost value. 

At the same time, accountants recognize the need 

to provide transparent, accurate, and up-to-date 

information on the state of an agency’s cash and 

non-cash assets. This has led to the introduction of 

concepts such as depreciation.

Several public water utilities from the United States 

and Canada—including New York, San Francisco, 

Seattle, Tacoma, Portland, Vancouver, BC, and Victoria, BC—have embarked on a path to explore and 

articulate the need for updated accounting rules 

that include natural capital. A forum, the Watershed Economics Workgroup, has been formed with 

the mission to propose and justify changes to GASB 

rules, examine rate structures, review asset management plans, and identify funding mechanisms 

for watershed management activities. This information should also help water customers understand 

the value that their watershed’s ecosystem services 

bring to the local and regional economy. These utilities are sharing case studies and best practices and 

creating an informed and action-oriented agenda 

to evaluate and, where necessary, upgrade outdated 

economic tools.

Provided the GASB does consider new accounting standards for natural infrastructure, any rule 

change would take a number of years to become 

implemented. However, a utility or agency can 

take a number of immediate steps to support this 

process and shape the development of new funding 

mechanisms for natural infrastructure:
Natural Infrastructure 95

1. Join the Discussion. Contact Earth Economics and stay abreast of developments in 

funding mechanisms for utilities, as well as 

valuation methods and GASB standards for 

natural infrastructure.

2. Endorse Earth Economics’ technical 

inquiry, which encourages GASB to undertake 

a formal exploration of natural infrastructure 

accounting. This effort brings together water 

utilities and local governments with an interest 

in adding natural infrastructure accounting 

to the GASB research agenda. The technical 

inquiry is available for download on Earth 

Economics’ website.28

3. Educate users of financial reports 

(policymakers, ratepayers, investors and 

auditors) about the value of natural infrastructure assets and investments. A lot of useful 

information can be included in the sections of a 

utility’s financial reports that are unaudited or 

less strictly audited. For example:

 a. In the Transmittal Letter of a utility’s 

financial report, language can be included 

about the natural resources and natural 

infrastructure a utility depends upon for 

providing services. San Francisco took this 

step in their 2011 Comprehensive Annual 

Financial Report. A template based on this 

language is available here:

 b. Quantify the value of natural infrastructure 

in the supplementary section of financial 

reports. Earth Economics is currently 

working alongside Duke University and 

three partner utilities to pilot test accounting methods for natural infrastructure with 

the goal of eventually developing industry 

standards and informing the GASB’s 

process. More information on this project 

is available at the Water Environment 

Research Foundation (WERF).29

4. Use water rates to communicate and 

invest in natural infrastructure. Rates 

structures can be modified to break out a 

“natural capital” component, showing customers what proportion of their rates are being 

invested back into the utility’s watersheds. A 

number of utilities have already implemented 

separate rates for natural infrastructure, 

sometimes called “Watershed Rates” or 

“Watershed Protection Fees.” In 2012 the U.S. 

Endowment for Forestry and Communities 

and Earth Economics created a “watershed 

database” and accompanying factsheet with 

more information on these rates structures, 

shown in Table 8 below. 

5. Stay up to date through the new source 

water coordinator—Tracy Mehan—a position 

jointly funded by AWWA and the U.S. 

Endowment for Forestry & Communities.
 96 WRI.org

PROGRAM NAME 

(LOCATION)

NUMBER 

OF USERS FEE AMOUNT

AVERAGE 

FEE PER 

HOUSEHOLD

% OF 

AVERAGE 

BILL

RATE 

DESIGN

Aurora Water (Aurora, CO) 300,000 No fee. Included in 

city budget. N/A N/A N/A

Bull Run Watershed Habitat 

Conservation Plan (Portland, OR) 900,000

No fee. Included 

in city and USFS 

budget.

N/A N/A N/A

Cedar River Watershed Habitat 

Conservation Plan (Seattle, WA) 1,400,000 No fee. Part of utility budget. N/A N/A N/A

Central Arkansas Water 

Watershed Management Program 

(Little Rock, AK)

400,000

$0.45 per month 

per 5/8” or 3/4” 

equivalent meter.

$0.45 per 

month +1.1% Fixed Fee

Common Waters Partnership 

(Upper Delaware Watershed) 15,000,000 Pending. N/A N/A N/A

Conserve to Enhance (Tuscon, AZ) 535,000 No fee. Voluntary 

checkbox on bill. N/A N/A N/A

Crooked River/ Portland Water 

District Payment for Ecosystem 

Services (Portland, ME)

200,000 No fee. Grant funded. N/A N/A N/A

Forest to Faucets (Denver, CO) 1,300,000 $0.04 per 1,000 

gallons.

$0.33 per 

bill +1% Volumetric Rate

Green River Watershed 

Management Plan (Tacoma, WA) 300,000

No fee. Included 

in Tacoma Water 

budget.

N/A N/A N/A

Lake Whatcom Watershed Land 

Acquisition and Preservation 

Program (Bellingham, WA)

88,000 $5 per month + $0.64 

per CCF N/A N/A

Base rate + 

volumetric 

rate

McKenzie Watershed Drinking 

Water Source Protection Plan 

(Eugene, OR)

200,000 To be determined. N/A N/A N/A

Salt Lake City Watershed 

Management Plan 

(Salt Lake City, UT)

400,000 $1.50 per meter per 

month.

$1.50 per 

month. +3.75% Fixed Fee

San Antonio Source 

Water Protection Program 

(San Antonio, TX)

1,300,000

1/8-cent sales tax 

over five years (2005 

- 2010).

N/A N/A N/A

Upper Neuse Clean Water 

Initiative (Raleigh, NC) 600,000 $0.0748 per CCF. $0.40 per 

month +1% Volumetric 

Rate

Water Source Protection Program 

(Santa Fe, NM) 32,000 $0.13 per 1,000 

gallons per month.

$0.65 per 

month +1.6% Volumetric 

Rate

Watershed and Environmental 

Improvement Program (San 

Francisco, CA)

2,500,000

No fee. Included in 

San Francisco PUC 

budget.

N/A N/A N/A

Watershed Management (Los 

Angeles, CA) 666,000 Included in Los Angeles DWP budget. N/A N/A N/A

Table 8 | Summary of Utility Watershed Management Programs in the U.S.
Natural Infrastructure 97

PROGRAM NAME 

(LOCATION)

SEPARATE 

FEE ON BILL?

REVENUE 

GENERATION

YEAR OF 

INTRODUCTION

HOW WAS 

THE PROGRAM 

ADOPTED

Aurora Water (Aurora, CO) N $500,000 over two 

years

2011 City Council

Bull Run Watershed Habitat 

Conservation Plan (Portland, OR) N $500,000 per year 2007

Congress (1996 Bull 

Run Management 

Act)

Cedar River Watershed Habitat 

Conservation Plan (Seattle, WA) N > $50m over 20 years

N/A City Council

Central Arkansas Water 

Watershed Management Program 

(Little Rock, AK)

Y $1m (approx) per 

year

2009 Utility Board of 

Commisioners

Common Waters Partnership 

(Upper Delaware Watershed) N/A N/A Pending Common Waters Fund

Conserve to Enhance (Tuscon, AZ) N/A N/A 2012 Non-profit

Crooked River/ Portland Water 

District Payment for Ecosystem 

Services (Portland, ME)

N/A N/A 2009

Manomet Center for 

Conservation 

Sciences

Forest to Faucets (Denver, CO) N/A $3.3m per year 

over 5 years

2012-

2013

Utility and USFS 

partnership

Green River Watershed 

Management Plan (Tacoma, WA) N N/A 2006 Utility

Lake Whatcom Watershed Land 

Acquisition and Preservation 

Program (Bellingham, WA)

Y $25.3m since 2001 2001 City Council

McKenzie Watershed Drinking 

Water Source Protection Plan 

(Eugene, OR)

N $200,000 - 

$250,000 per year 2013 Utility

Salt Lake City Watershed 

Management Plan 

(Salt Lake City, UT)

N $1.5m per year 1988 City Council

San Antonio Source 

Water Protection Program 

(San Antonio, TX)

N $45m (2005), 

$90m cap (2010)

2005, 

2010 Voters

Upper Neuse Clean Water 

Initiative (Raleigh, NC) Y $1.8m per year 2011 City Council

Water Source Protection Program 

(Santa Fe, NM) N $200,000 per year N/A City Council

Watershed and Environmental 

Improvement Program (San 

Francisco, CA)

N $50m over 10 

years

2005 Utility

Watershed Management (Los 

Angeles, CA) N N/A N/A Utility and City 

Council

Table 8 | Summary of Utility Watershed Management Programs in the U.S. (cont.)

Source: Earth Economics & U.S. Endowment 2012." and go to references section for my comment there on addition

Natural Infrastructure 99

Part 3

CASE STUDIES

Introduction 

In previous sections, we examined factors 

affecting adoption of the natural infrastructure approach—the business case, underlying 

science, and distribution of opportunity—and 

two components essential to early stage design 

and implementation efforts (players and 

finance mechanisms). Part 3 offers a look at 

natural infrastructure investment efforts in six 

states across the country. Five are forest-based 

efforts for drinking water in Maine, Oregon, 

North Carolina, Colorado, and Washington. 

An additional case is presented—a natural 

stream corridor stormwater control program 

on Staten Island, New York. These six cases 

were chosen from the long list of active natural 

infrastructure projects nationwide to illustrate the flexibility of the approach to costeffectively provide a variety of services across 

geographic, ecological, and political contexts. 

These cases also bring several common 

themes to light. They highlight the importance of well-rounded partnerships, a 

foundational understanding of how natural 

infrastructure elements relate to the water 

resources issues of the watershed, the critical 

role played by champions, the need to communicate effectively with ratepayers, and the 

challenge of justifying natural infrastructure 

investments in internal budgeting processes.

These cases were written by the people who 

played key roles in the development and implementation of natural infrastructure programs in 

their watersheds—including staff in water utilities and their partners in conservation organization and universities. In addition to illustrating 

key themes, the cases are intended to stimulate 

further communication and networking among 

current and would-be champions around 

natural infrastructure. Table 9 below provides a 

birds-eye view of a sample of other source water 

protection programs across the United States.

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases
 100 WRI.org

NAME LOCATION TOTAL

INVESTMENTS

ACRES 

PROTECTED FUNDING SOURCE

Carroll County GA $11,840,455 1,876 Voter-approved sales tax increase

Catskills (New York City) NY $1,500,000,000 1,262,076 City, state, and federal funds

Cedar River and Tolt River Watersheds 

(Seattle)

WA $82,000,000 100,498 Habitat Conservation Plan budget, 

utility budget

Conservation Reserve Enhancement 

Program (Tulsa)

OK $234,515 5,809 City, state, and federal funds

Edwards Aquifer (San Antonio) TX $128,000,000 96,989 Voter-approved sales tax increase

Lambert Creek (Saint Paul) MN - - State and federal grants

Minnesota Clean Water Fund 

(Statewide)

MN $201,960,000 - Voter-approved sales tax increase

Mountain Island Lake (CharlotteMecklenburg County)NC $35,000,000 6,005 State and county government grants, 

foundation support, bond issue, 

dedicated fee on water bills

National Forest System Lands, Rocky 

Mountain Region (Denver)

CO $16,500,000 33,001 Water bill increase; Funds matched 

by US Forest Service

Nonpoint Source Implementation Grants National $3,416,000,000 - Federal funds

Quabbin-Wachusetts (Metro Boston) MA $130,846,485 73,526 State budget allocations, bond 

funds, ratepayer fees

Salt Lake City UT - 23,969 Water user fees

San Francisco CA $50,000,000 - Bond funds and operating budget 

allocation

Table 9 | A Sample of Active Source Water Protection Programs, United States 

Source: Bennett et al. 2012.
Natural Infrastructure 101

Case 1: Denver Water—Wildfire 

Risk Management for Source Water

| Denver Water

Background

Denver Water is Colorado’s oldest and largest water 

utility, serving 1.3 million people in Denver and 

many surrounding suburbs—nearly a quarter of all 

Coloradans. Established in 1918, the utility is a public agency funded by water rates and new tap fees, 

not taxes. As Denver Water’s collection and delivery 

infrastructure receives water from snowpack and 

streams on U.S. Forest Service lands, we directly 

depend on healthy forests and watersheds.

Almost all of its water comes from mountain snowmelt and Denver is the first major user in line for 

that water. Denver Water’s collection system covers about 4,000 square miles, or 2.5 million acres, 

and extends into more than eight counties. Denver 

Water’s primary water sources are the South Platte 

River, Blue River, Williams Fork River, and Fraser 

River watersheds. It also uses water from the South 

Boulder Creek, Ralston Creek, and Bear Creek watersheds. Colorado’s forests are critical to the water 

supply for tens of millions of Americans, billions of 

dollars of agricultural production, and vast economic 

activity, from California to the Mississippi River.

Risk Drivers

Increasing incidence of insect infestations and 

wildfires that can cause sedimentation impacts on 

reservoirs and other water infrastructure has highlighted the need to take aggressive steps to protect 

forest health. Fire risk in Colorado is exacerbated 

by insect infestation. The mountain pine beetles 

have affected 3 million acres of land in Colorado 

since the first sign of outbreak in 1996. The heart 

of the epidemic in Colorado and Wyoming contains 

the headwaters for rivers that supply water to 13 

Western states.

The 1996 Buffalo Creek Fire burned 11,900 acres. 

In 2002, the Hayman Fire—the largest wildfire in 

Colorado’s history—charred another 138,000 acres 

of land. The combination of these two fires, followed by significant rainstorms, resulted in more 

than 1 million cubic yards of sediment accumulating 

in Strontia Springs Reservoir. Prior to the wildfires, 

the reservoir had approximately 250,000 cubic 

yards of sediment, which had been accumulating 

since 1983 when the dam was completed. Increased 

sediment creates operational challenges, causes 

water quality issues, and clogs treatment plants.

CASE AT A GLANCE

Players & Stakeholders: Public utility, USDA 

Forest Service.

Issue of Concern: Pest infestation, wildfire, flooding, and associated sedimentation

Natural Infrastructure Investment: Primarily fuel 

reduction and reforestation treatments in “zones of 

concern,” although agreement also enables more 

conventional sediment-reducing activities related 

to forest roads and culverts. Goal to restore 38,000 

acres of National Forest land over five years.

Built Infrastructure Tradeoff: Lower risk of catastrophic wildfire means lower likelihood of substantial built infrastructure costs (dredging, variable 

treatment costs) associated with sedimentation.

Funding Scale & Mechanism: Total costs of $33 

million paid for by Forest Service and public utility 

based on 50-50 cost share. Utility funds come 

from ratepayers. Rates not explicitly increased for 

project—instead, rates are tied to costs for capital 

infrastructure and operating expenses. Large costs 

due to past fires have factored into current rates. 

Average residential household will pay a total of 

$27 over five year period to cover costs.

Business Case Made: No explicit, detailed costbenefit analysis conducted; however, the utility 

incurred $26 million in costs in the wake of two 

devastating fires in 1996 and 2002. Fire suppression costs were another $47 million, the Forest 

Service has spent another $37 million on post-fire 

restoration and stabilization, and private insured 

property losses were an additional $38.7 million.

Regulatory Factors: Not primarily driven 

by regulation.

Suppliers: USDA Forest Service—

National Forest lands
 102 WRI.org

Hayman Fire caused $42 million in suppression 

costs for state and federal agencies, and another 

$37 million for restoration and stabilization efforts 

by the Forest Service. Denver Water itself spent $26 

million in the aftermath of the fires. The Hayman 

Fire also led to a loss of 600 structures, including 132 residences. Total insured private property 

losses were estimated at $38.7 million. Losses to 

wildlife habitat, aesthetics, tourism, and recreation 

were also substantial. 

The Buffalo Creek Fire was the first time Denver 

Water experienced the devastation that can be 

caused by fire followed closely by flood. The aftermath of this fire prompted a forest treatment and 

revegetation relationship between Denver Water 

and the Colorado State Forest Service. Forest 

treatments, such as thinning, clearing, and creating 

fuel breaks, influence how quickly and intensely a 

wildfire can burn. Treatments can slow the spread 

of a fire, allowing firefighters to stop a fire before it 

reaches homes, power lines, or valuable watersheds. 

Smaller, less severe fires also reduce the amount of 

soil erosion and other impacts to the watershed. 

When the Hayman Fire occurred, Denver Water 

was better prepared. The Hayman Fire is still the 

largest in Colorado history, but it had less impact to 

Denver Water than it might have had were it not for 

the lessons of the Buffalo Creek Fire. The utility’s 

forest treatment efforts after the Buffalo Creek Fire 

saved its facilities during the Hayman Fire. Denver 

Water also installed upstream monitoring to allow 

it to anticipate water treatment issues and take 

appropriate action as necessary, and built sediment 

control structures in drainage areas (like straw bale 

dams and log sediment traps) to slow runoff into 

Cheesman Reservoir after the Hayman Fire. The 

utility expects to see sediment as a result of the 

Hayman Fire for years to come.

Restoration efforts will help the forests become 

more resilient to future insect and disease epidemics, 

reduce wildfire risks for communities, and lessen 

the impact from fire on habitat for fish and wildlife. 

More resilient forests also will be more adaptive to 

the impacts of a changing climate.

“There is a direct 

connection between 

healthy forests and 

sustainable supplies 

of clean water. Denver 

Water has spent more 

than $26 million in 

the aftermath of the 

Buffalo Creek and 

Hayman fires. Through 

this partnership, we 

are investing in the 

future by keeping our 

watershed healthy rather 

than paying for impacts 

from a catastrophic fire 

in the future.”

-Jim Lochhead, 

CEO, Denver Water 
Natural Infrastructure 103

From Forests to Faucets Partnership

Denver Water and the USDA Forest Service have a 

shared interest in improving forest and watershed 

conditions to protect source water, as well as to continue providing other public benefits, such as wildlife 

habitat and recreation opportunities. The USDA 

Forest Service administers more than 14.5 million 

acres of National Forest System lands in Colorado, 

and nearly 90 percent of these lands are located in 

watersheds that contribute to public water supplies.

Denver Water and the USDA Forest Service signed a 

Memorandum of Understanding on August 25, 2010, 

initiating the work to accelerate mutual efforts to 

improve forest and watershed conditions. Through 

this partnership, Denver Water plans to match the 

Forest Service’s $16.5 million investment, totaling 

$33 million, toward forest treatment and watershed 

protection projects over a five-year period in priority 

watersheds critical to Denver Water’s source water. 

The focus is on reducing the risk and severity of 

wildfires, although the agreement also makes possible more conventional sediment-reducing projects 

related to roads and culverts.

Denver Water’s and the Forest Service’s planning 

processes and is becoming a model for similar 

partnerships in Colorado. 

The work will take place in the Upper South Platte 

River, South Platte River Headwaters, St. Vrain 

River, Colorado River Headwaters, and Blue River 

watersheds on Forest Service lands. These watersheds are the primary water supply source areas 

for Denver Water’s customers. The collaborative 

effort addresses “zones of concern,” or areas at risk 

of wildfire hazard, flooding, debris, and soil erosion 

within large watersheds. The process of identifying 

zones of concern was developed by Front Range 

water providers in cooperation with the state and 

federal agencies through a standardized methodology in 2009 (Front Range Watershed Protection 

Data Refinement Work Group 2009).

The first contract, Indian Creek Task Order, was 

awarded in January 2011 for treatment of 677 acres. 

Work was completed in April 2012. The treatment 

types for this project included mastication (400 

acres) and product removal (277 acres).

A second contract was issued in July 2011 for hand 

thinning of 866 acres along the South Platte River 

from Willow Bend downstream to Eagle Rock. The 

contractors completed the project in October 2011. 

The treatment type for this project included hand 

thinning, with lop and scatter slash treatment.

Two recently initiated projects of the Denver Water 

partnership are underway on the White River 

National Forest on the Dillon Ranger District near 

Breckenridge, Colorado. Cary Green, the east zone 

timber management assistant, noted, “The partnerBOX 25 | PROGRAM-IN-THE-MAKING: 

NORTHERN COLORADO 

FRONT RANGE

The upper portion of La Cache Poudre River Watershed, 

drinking water supply for Fort Collins and Greeley, 

Colorado, is largely in public ownership as national 

forest. However, sedimentation risks associated with 

wildfire present major water quality challenges to 

the City of Fort Collins. The fires in summer 2012 

caused the Poudre to turn black with ash, forcing Fort 

Collins to shut down its intake for more than 100 days, 

relying instead on its reservoir, which fills from water 

largely piped from the western side of the Continental 

Divide (from the Colorado River Basin). Fort Collins 

plans to spend up to $24 million on sedimentation 

stabilization alone in the aftermath of the High Park fire 

(Gertig 2013). For Fort Collins and Greeley, a natural 

infrastructure approach to fire risk management (i.e., fuel 

reduction) could be a cost-effective risk management 

strategy. At the same time, the utility also maintains the 

critical built infrastructure capability to blend water from 

its reservoir and from the Poudre, and treat accordingly, 

in the event of major wildfires like those of 2012.

In the wake of the 2012 fires, the water utilities and a 

consortium of Fort Collins breweries began working 

with natural infrastructure experts, including the World 

Resources Institute, and a group of stakeholders 

facilitated by the Colorado Conservation Exchange. 

The beginning components of the effort include a 

preliminary economic analysis to identify the potential 

economic benefits and financial returns of fuel 

reduction, as well as a number of other measures on 

forestland (e.g., road decommissioning), on ranchland, 

and in ex-urban areas within the watershed.

| James Mulligan, Green Community Ventures
 104 WRI.org

ship is hugely beneficial to cost-sharing vegetative 

treatments in the Blue River Watershed. Together, 

we are able to improve forest health, forest vegetative diversity, and achieve substantial fuels reduction in and around high priority watersheds.”

Most of the restoration work in areas affected by 

the mountain pine beetle outbreak will utilize clearcutting. Clear-cutting lodgepole pine is the best 

management practice for the vegetative type that 

most closely mimics its natural regeneration pattern. After the dead and dying trees are removed, 

slash (limbs, needles and tops of trees) are left on 

the ground to provide micro-sites for seedlings 

and the next generation of forest to establish itself. 

This practice further helps to prevent soil erosion. 

In recently harvested areas, seedlings have already 

begun to establish themselves at a rate between 300 

and 1,800 seedlings per acre.

To date, more than 2,700 acres have been treated 

in the Blue River watershed zones of concern in 

and around the Dillon Reservoir. Another 2,000 

acres are partially complete, prepped for contract, 

or set to be completed in 2013. As the USDA Forest 

Service looks ahead as an agency, with water health 

as one of its top priorities, the partnership between 

Denver Water and the USDA Forest Service in 

Colorado serves as a prime example of how partnerships for restoration work should be accomplished 

in the future.

In future years, forest thinning and other wildfire 

fuels reduction work will take place around, and 

upstream of, Denver Water’s Strontia Springs, 

Gross, Antero, Eleven Mile Canyon, and Cheesman 

reservoirs, and near the town of Winter Park. All of 

this work will reduce the risk of wildfires upstream 

of Denver Water’s reservoirs and other water 

delivery infrastructure.

By investing in wildfire risk management in its 

watersheds, Denver Water is working strategically 

to protect its source water and reservoirs from the 

costly impacts of sedimentation. By partnering with 

the USDA Forest Service, Denver Water shares the 

cost of forest treatments and accelerates wildfire 

fuels reduction work on the ground. The partnership is now serving as a model for other cities in the 

Intermountain West (see, e.g., Box 25).

Case 2: Upper Neuse River Basin, 

North Carolina 

| Lisa Creasman, Conservation Trust of North Carolina (Current 

Affiliation: The Nature Conservancy)

CASE AT A GLANCE

Players & Stakeholders: Land trusts, multiple 

public water utilities and other local government 

departments, conservation organizations, landowners, academia, USDA NRCS

Issue of Concern: Declining water quality in local 

reservoirs due to population growth and development (also periodic drought and flood issues).

Natural Infrastructure Investment: Land 

acquisition, conservation easements, and forestry 

best management practices and sustainable 

management, including buffer and field reforestation, stream crossing stabilization, and removal 

of exotic species. Focus on riparian buffers, 

floodplains, and wetlands.

Built Infrastructure Tradeoff: Improved source 

water quality avoids higher costs of treatment at 

existing filtration plants; potentially relieves Clean 

Water Act pressure on sources of water quality 

degradation like septic tanks and point sources.

Funding Scale & Mechanism: $7.5 million 

raised since 2005 by Raleigh through “nutrient 

impact fees”—one-time fees collected from new 

hook-ups to the water and sewer system. An 

additional $1.8 million per year from a permanent 

watershed protection fee on the Raleigh public 

water bill (1 penny per 100 gallons). Additional 

funds were delivered from increased water rates in 

nearby Durham, North Carolina.

Business Case Made: No explicit, detailed 

cost-benefit analysis conducted; however, a revenue 

“dashboard” used to communicate the substantial 

fundraising impact of small increases in water rates.

Regulatory Factors: In part motivated by TMDL 

placed on local reservoir under Clean Water Act.

Suppliers: Upstream private forest landowners. 

Status at Publication: Ongoing implementation.
Natural Infrastructure 105

Background

The Upper Neuse Clean Water Initiative (the Initiative) was founded in 2005 to help protect drinking 

water supplies through strategic upstream land conservation. The geographic focus of the Initiative’s 

efforts, the Upper Neuse River Basin, is located in 

the north-central region of North Carolina known 

as the Piedmont. The Basin provides a ripe setting 

for optimizing the relationship between forests 

and downstream water quality—over 50 percent of 

the Basin is forested (56 percent) and nine drinking water supply reservoirs are located within its 

boundaries. Both water quality and water quantity 

issues have begun to surface. Falls Lake, the City 

of Raleigh’s drinking water reservoir, was added to 

the Clean Water Act 303(d) list of impaired waters 

in 2008. In the same year, the region suffered from 

a drought resulting in government-imposed water 

use restrictions and fears of emergency measures. 

Two years later, the area suffered flooding that 

closed roads, schools, and forced evacuations in 

several low-lying areas. 

These issues promise to continue without a natural infrastructure response. Overlapping with the 

“Research Triangle,” the Basin is one of the fastest 

growing regions in the country with a population 

predicted to increase by 50 percent by 2050. Even 

with the economic downturn, the region continues 

to experience development pressure and forests are 

vulnerable as landowners consider their options 

financially. The opportunity exists to target conservation of the most critical forested areas through 

sustainable forestry management and conservation 

easements—thereby providing landowners with 

a source of income while attending to the critical 

issue of water quality protection.

The Initiative

In response to growing population and declining 

water quality, the Initiative developed a GIS-based 

conservation plan to guide the investment of public 

and private dollars into priority land parcels—primarily focused on riparian buffers, floodplains, 

and wetlands. The Initiative is led by the Conservation Trust for NC (CTNC) and six additional land 

conservation groups working in the Basin. Working 

together, land trusts, landowners, municipalities, 

and other government agencies have used voluntary 

measures to protect over 6,000 priority acres along 

63 miles of stream in the Basin.

The Initiative has approached funding for natural 

infrastructure by tying it to the provision of ecosystem services on a case-by-case or opportunityby-opportunity basis, rather than creating a more 

complex overall trading program or establishing 

a watershed-wide “market.” Working through 

champions and other strategic leverage points, 

the Initiative has worked with the City of Raleigh 
 106 WRI.org

to secure allocations of $7.5M since 2005 to help 

address the declining water quality in Falls Lake. 

These funds initially came from the city’s “nutrient 

impact fees”—one-time fees collected from new 

hook-ups to the water and sewer system—and are 

primarily used for land acquisition or conservation 

easements on priority lands. Then, before leaving 

office at the end of 2011, Raleigh’s Mayor Meeker 

established a permanent watershed protection fee 

on the public water bill (1 penny per 100 gallons) 

that will provide approximately $1.8M per year for 

the Initiative and strategic land conservation. 

Also, in nearby Durham, the city voted in 2011 to 

increase water rates to help fund land protection 

projects upstream of its two water supply reservoirs. Durham and Raleigh manage their watershed 

funds differently. While Raleigh supports the 

Initiative, Durham allocates its funds to an internal 

department that is acquiring lands around the city’s 

two water supply reservoirs, with some guidance 

from the Initiative on priority sites. 

Concurrent with the evolution of new means of 

financing for land conservation, the land trust’s 

methods for conserving the land and its ecosystem 

services has been expanding beyond the traditional 

as well. While the majority of the projects that 

have been completed have involved conservation 

easements or fee acquisitions, the land trusts used 

a grant from the U.S. Endowment for Forestry & 

Communities and USDA NRCS to develop a working forest landowner program that involves different outreach methods and landowner strategies. 

In addition to funding the development of tools, 

the grant is paying for the development of forest 

stewardship plans and the implementation of sustainable forest practices on privately owned timberlands, in addition to working forest easements. 

Working with landowners to promote active forest 

management is a relatively new arena for the local 

land trusts. Finding landowners who are interested 

and poised to take advantage of the grant’s funding 

has required building much stronger partnerships 

with the state’s forest service agency and NRCS. The 

program is emphasizing forestry best management 

practices and sustainable management, including buffer and field reforestation, stream crossing 

stabilization and removal of exotics. The project has 

required land trusts to operate out of their comfort 

zone, beyond “permanent” projects, to projects that 

invest in ecosystem service values by basically making payments to landowners to develop and implement sustainable timber practices with limited 

requirements of the landowner. 

Factors of Success

Three key factors have contributed to the Initiative’s success thus far:

1. Access to a champion in a position of influence. 

The leadership provided by Charles Meeker, 

the City of Raleigh’s mayor at the time of the 

program’s inception, was instrumental to the 

Initiative’s successful establishment. In Mayor 

Meeker, the Initiative had a champion in a 

position of influence who appreciated the relationship between land conservation and water 

resource protection without drilling down into 

too much minutiae. The mayor and city council allocated substantial funds to watershed 

protection, and the mayor’s legacy—the $1.8M 

per year watershed protection fee—will ensure 

financial viability into the future.

2. A tool to communicate the affordability of 

natural infrastructure to municipalities. The 

Initiative worked with the University of North 

Finding landowners 

that are interested 

and poised to take 

advantage of the grant’s 

funding has required 

building much stronger 

partnerships with the 

state’s forest service 

agency and the NRCS.
Natural Infrastructure 107

Carolina’s Environmental Finance Center to 

develop a set of tools that could be used by 

municipalities and others to develop scenarios 

for generating revenue for watershed protection efforts. The primary interactive tool, 

termed a “dashboard,” is profiled earlier in the 

finance chapter. The information this tool generated helped to make the case for the Raleigh 

and Durham rate increases, demonstrating that 

a small increase to the water bill could generate 

meaningful revenues for watershed protection 

without burdening ratepayers.

3. A science-based conservation plan and parcel 

prioritization. Using best-available scientific 

data and methodologies is critical to making 

a credible case to funders and partners. The 

Initiative endeavored to ensure the credibility 

of its analysis every step of the way. While the 

local municipalities have supported funding 

for land conservation in the absence of specific 

measurable costs and benefits, there have been 

inquiries by public utilities staff (where the 

fee is administered) about developing some 

measures of success beyond the general science 

recognizing the relationship of riparian buffers and water quality. In response, CTNC is 

creating a science-based and user-friendly tool 

that will calculate quantitative estimates of the 

nutrient loading and sedimentation avoided 

by not developing a site according to a typical 

build-out scenario for the parcel. 

The Initiative has accomplished a great deal of land 

conservation, and has worked with new partners 

to develop non-traditional funding sources. Since 

the project’s inception in December 2005, the land 

trusts have closed 63 projects protecting 6,170 

acres and almost 63 miles of stream buffers. The 

land value conserved totals over $60M, and of that, 

landowners have donated 38 percent. Still, the 

partners recognize the need to continue to grow the 

relationship between ecosystem service beneficiaries and producers—looking not only at the potential to expand the program to include additional 

beneficiaries of the land conservation work, particularly businesses dependent on clean water, but 

also the marketing of additional ecosystem services 

beyond water quality.

Case 3: Sebago Lake, Portland Water 

District (Maine) 

| Paul Hunt, Environmental Manager, Portland Water District

CASE AT A GLANCE

Players & Stakeholders: Public utility, USDA 

NRCS, state drinking water agency, conservation 

organizations, landowners. 

Issue of Concern: Projected land use change 

due to population growth and development, and 

associated risks of declining water quality in a 

generally healthy watershed.

Natural Infrastructure Investment:

Land acquisition, conservation easements.

Built Infrastructure Tradeoff: Maintained 

source water quality avoids loss of filtration 

avoidance waiver and associated costs of a 

new filtration plant.

Funding Scale & Mechanism: About $175,000 

annually in public utility funds. Additional funds 

spent on efforts like development inspections and 

septic tank permitting. Utility uses some funds as 

seed or gap funding to leverage larger conservation deals involving local land trusts.

Business Case Made: Explicit cost-benefit 

analysis conducted, comparing costs of robust 

watershed protection program with costs incurred 

if utility loses its filtration avoidance waiver; 

however, particularly given regulatory uncertainty related to the waiver, PWD and partners are 

preparing to explore the business case related to 

variable treatment costs.

Regulatory Factors: Need to maintain filtration 

avoidance waiver and prevent capital, operations, 

and maintenance costs of a filtration facility, as 

well as variable costs of treatment.

Suppliers: Private landowners—primarily in the 

lower watershed near water intakes, but also in 

upper watershed (about 1 to 2 percent of utility’s 

annual expenditures). 

Status at Publication: Ongoing implementation, 

escalated in 2013.
 108 WRI.org

Background

The Portland Water District utilizes Sebago Lake, 

Maine’s deepest and second largest lake, to provide 

drinking water to 200,000 Maine residents. Sebago 

Lake is an ideal water supply—deep, cold, low in 

nutrients and surrounded by mostly forested land—

with one major exception: The watershed is almost 

entirely privately owned and is thus susceptible to 

future development. Moreover, the lake is one of 

Maine’s most popular recreation resources and is 

just a 30 minute drive from Portland, the center of 

the state’s population. 

The District currently holds a filtration avoidance 

waiver issued by EPA under the Safe Drinking 

Water Act (SDWA). While the District was engaged 

in source water protection decades before the 

SDWA was written, everything the District does is 

inextricably linked to the waiver both because the 

request for the waiver included a series of commitments to watershed protection, and because the 

District’s annual budget for its watershed control 

program is justified in part by the need to maintain 

the waiver. Initial scoping analysis suggests that 

installation of membrane filtration would cost the 

District between $50 million and $75 million, plus 

an additional $2.5–$3.5 million in operations and 

maintenance costs. Still, even without the waiver, 

PWD’s guiding principle is to enjoy similar water 

quality decades from now. Accordingly, the utility is 

dedicated to protecting the watershed and follow a 

“no regrets” approach—investing in the watershed 

because it is good for water quality, regardless of 

whether the utility ultimately needs to filter the 

water. Maintaining a healthy watershed can also 

reduce variable treatment costs for the utility.

The Initiative

Because the watershed is owned by many and the 

lake is a focus of human development and recreation activity, the District’s watershed control 

program is multi-faceted, including: education 

and outreach, land and water security, watershed 

and lake water quality monitoring, and land use 

management. The total annual cost of this program 

exceeds $1 million per year, about 5 percent of the 

total water receipts.

The last of these program elements—land use 

management—represents the District’s annual 

investment in natural infrastructure. These are the 

programs and actions undertaken to avoid or minimize the impact of watershed land use on water 

quality. In addition to key components like development inspections and septic system permitting, the 

program focuses on land acquisition surrounding 

the lake and conservation easements in the upper 

parts of the watershed.

Historically, PWD overwhelmingly focused its 

financial resources on acquisition, while funds for 

conservation in the upper reaches of the watershed 

have comprised just a sliver of source water protection expenditures. PWD typically engages in conservation easement deals that have been arranged by 

a local land trust and that need a small infusion of 

additional funds to go through. While 1,500 acres 

have been conserved in the upper watershed in this 

manner, PWD has contributed less than 1 percent 

of the funds. 

However, in early 2013, the board voted unanimously to scale up conservation easements component of PWD’s efforts. The new policy permits PWD 

to fund up to 25 percent of the conservation value 

of easement transactions in the watershed. In general, the closer the parcel is to water and the greater 

the importance of the hydrologic features that will 

be conserved, the higher percentage PWD will fund. 

Two weeks after the policy change, the board was 

presented with a $50,000 easement proposal (as 

much as PWD had spent on easements over the 

previous five years). The Board passed the proposal 

unanimously, hoping the deal would trigger additional landowners to come forward. According to 

one local land trust staffer, “this changes our world 

in a huge way as you might imagine—providing the 

potential for profound and lasting impact thanks to 

the determination of PWD staff and the combined 

work of so many partners.”

Challenges

In some cases, doing watershed protection work 

involves taking the opportunity to do things that 

you know are good things—such as revegetating 

an eroding embankment—without an easily referenced metric for how many such erosion issues 

exist overall, how big a priority is a particular issue 

relative to others, what percent of nutrient input to 

the lake the project would reduce, and ultimately 

whether spending money on this natural infra-
Natural Infrastructure 109

structure project might save at least as much in 

built infrastructure expenditures. PWD’s watershed 

protection work proceeds in a more opportunistic 

manner: We have this money, we have a willing 

landowner, we know that if we correct this it will 

mitigate a problem and maybe draw some attention 

that will attract another potential landowner—so 

let’s do it. PWD has confidently forged its new easement policy based on a qualitative understanding of 

the benefits of natural infrastructure in the Sebago 

Lake watershed. Meanwhile, the World Resources 

Institute produced a preliminary analysis (Section 

1.2; Box 26) focused on the costs associated with 

securing confidence in PWD’s ability to maintain 

its filtration waiver. Work is ongoing with partners 

to flesh out specific quantitative returns—including 

those associated with variable treatment costs—

which would enable the District to operate more 

strategically in its watershed protection work.

Case 4: Eugene Water & Electric 

Board (EWEB)

| Drew Bennett, Oregon State University Department of Geography 

| Sally Duncan, OSU Policy Analysis Lab (OPAL), School of 

Public Policy, Oregon State University 

| Sue Lurie, Institute for Natural Resources, Oregon State University 

| Karl Morgenstern and Nancy Toth, Eugene Water & Electric Board 

| Hillary Fishler, Oregon State University Department of Public Policy

BOX 26 | NORTHERN FORESTS 

CONSERVATION 

INNOVATION GRANT

In 2009, six project partners including the American 

Forest Foundation, the World Resources Institute, and 

the Manomet Center for Conservation Sciences were 

awarded a Conservation Innovation Grant from USDA 

NRCS. The project partners set out to create a pathway 

for the Portland Water District to leverage its early efforts 

into a larger scale, full-fledged watershed investment 

program by putting together all of the critical pieces 

discussed in this guide. The project began by identifying 

the “hotspot” characteristics of the Sebago Lake 

watershed, and proceeded to prioritize landowners 

and parcels for investment, assess the business case 

using a preliminary green-gray analysis, engage with 

key stakeholders like landowners and land trusts, and 

put together innovative finance mechanisms like the 

Clear Water Carbon Fund. 

After three years and a long list of lessons learned, 

obstacles still remain. However, due to the efforts of 

CIG partners, the Portland Water District has a sense 

of the potential cost-effectiveness of various natural 

infrastructure options and a spatially explicit roadmap 

for investment to protect source water quality. CIG 

partners look forward to continuing their work with the 

Portland Water District toward scaled implementation.

CASE AT A GLANCE

Players & Stakeholders: Public utility, 

conservation organizations, academia, local 

soil and water conservation district.

Issue of Concern: Declining water quality in generally healthy watershed, due in part to residential 

development in riparian areas.

Natural infrastructure Investment: Payment 

to landowners for maintenance of riparian buffers 

within an identified stewardship boundary.

Built Infrastructure Tradeoff: Maintaining 

source water quality avoids higher treatment 

costs at the utility’s existing filtration plant.

Funding Scale & Mechanism: Initial funding of $200,000–$250,000 annually expected to 

come from existing public utility funds already 

earmarked for source water protection; possibility 

of increase in funds over time and implementation 

of a watershed protection fee to cover costs.

Business Case Made: Ecosystem service valuation study by Earth Economics, demonstrating 

value of riparian buffers (including public benefits) 

of $1,031 to $6,713 per acre per year. Additionally, 

utility has general understanding of relationships 

between source water quality and treatment costs; 

however, a full cost-benefit study on treatment 

costs was not conducted. 

Regulatory Factors: Not driven by regulation.

Suppliers: Riparian landowners—primarily 

residential, small woodlot owners, and small 

agriculture. 

Status at Publication: Under development—

program not yet active.
 110 WRI.org

Background

The Eugene Water & Electric Board (EWEB) is the 

largest customer-owned utility in Oregon. EWEB 

currently provides drinking water to over 50,000 

customers, and electricity to nearly 87,000 consumers in Eugene and nearby areas (EWEB 2013). 

EWEB’s service area is approximately 235.6 square 

miles. In 1927, it shifted from the Willamette to 

the McKenzie River as its drinking water source. 

The McKenzie River, Eugene’s sole water source, 

has long been known for its excellent water quality. 

EWEB continues to expand its already broad set of 

source protection programs—from a demonstration 

farm and forest to acquisitions and easements—to 

ensure the river’s ongoing high quality.

A recent land-use and development trends analysis 

by the Community Planning Workshop at the University of Oregon identified a continuing trend of 

residential development along the McKenzie River. 

Such development has potential negative impacts 

on water quality due to increased areas of impervious surface, the removal of riparian vegetation, 

increased yard chemical inputs, and the flooding or 

leaking of septic systems, among other concerns. 

Although Lane County implemented a 50-foot 

riparian setback requirement in 1992, the Community Planning Workshop report documented 

multiple examples of the issuance of conditional 

use permits to allow development within 50 feet of 

the river (CPW 2009). Additionally, development 

along the river is typically not contained to just 

structures, but also includes clearing of native vegetation to enhance river views and establish lawns 

that reach to the river’s edge. Although individual 

actions often do not have serious impacts to the 

watershed, the collective actions of hundreds of 

landowners can have detrimental consequences to 

downstream water quality. 

In response, county officials attempted to implement a new riparian setback ordinance of 200 feet. 

When the county dropped the effort in the face of 

resistance from local residents (Cooper 2010), the 

EWEB source water program decided to pursue 

a different option—a voluntary, incentive-based 

approach. Such an approach would reward landowners for good stewardship of their land and for 

the adoption of management practices that benefit 

water quality, flood protection, and fish and wildlife habitat. In the current political and economic 

climate, an incentive-based approach appeared to 

be more feasible and socially acceptable.

How It Works

EWEB envisions the development of an investment mechanism, called the “Voluntary Incentives 

Program (VIP),” that would make annual dividend 

payments to landowners who maintain riparian 

buffers within an identified stewardship boundary 

encompassing riparian forests and floodplains. 

Initially, the fund is expected to be roughly 
Natural Infrastructure 111

$200,000–$250,000 annually. Dividend payments 

and technical assistance to landowners would be 

a direct function of available funding, number of 

acres located within the VIP boundary, and number 

of acres enrolled in the program. Financing will 

come from a variety of sources but may be initially 

endowed through existing source water funds 

(under existing rate structure) or another utility 

funding mechanism. Additional possible financing sources other than EWEB include corporate 

sponsorship, a voter-approved bond measure, state 

lottery funds, development impact fees, and state 

and federal mitigation programs. 

The numerous benefits provided by riparian buffers 

for water quality, treatment costs, and wildlife make 

these investments a logical initial focus for the VIP 

and will allow partners to address multiple objectives at the same time. A valuation study by Earth 

Economics, contracted by EWEB, determined that 

riparian buffers represent a value range of $1,031 to 

$6,713 per acre per year (Schmidt & Batker 2012).

While a cost-benefit analysis focused on treatment costs has not yet been conducted, the utility 

understands the general value of riparian buffers 

for water quality and its ratepayers support investments for water quality protection. Consequently, 

a cost-benefit analysis has not been cited as a 

prerequisite to moving forward. In a survey of 399 

EWEB customers, 71 percent of respondents were 

definitely or probably willing to pay at least $0.50 

per month to protect water quality in the McKenzie 

Watershed, while only 17 percent were definitely or 

probably unwilling to pay the same amount. 

Participation in the VIP is open to private landowners, local governments, and non-profit organizations that own land within the designated boundary. Based on EWEB’s preliminary analysis, an 

estimated 6,500 acres of riparian and floodplain 

areas along the McKenzie and major tributaries 

are eligible to enroll—about 44 percent of which 

currently meet the forested threshold required in 

order to receive payments. EWEB’s approach is 

to reward good land stewards who maintain high 

quality riparian forest buffers to ensure that these 

landowners continue these practices. This differs from other programs, such as USDA NRCS’s 

Environmental Quality Incentives Program (EQIP), 

which offer incentives to landowners with degraded 

land to restore their properties to an improved 

condition. Instead, EWEB has chosen to reward 

landowners already implementing outstanding 

management practices, and to provide a high standard for other landowners to strive for. Landowners 

who do not currently qualify can use existing restoration programs, such as EQIP, to improve their 

properties to the point where they can participate in 

EWEB’s VIP.

At the time of publication, EWEB is working with 

an advisory committee made up of landowners to 

solicit landowner feedback on the proposed program. This effort will help to inform more targeted 

outreach efforts to engage and enroll eligible 

landowners. EWEB plans to pilot the program with 

8–10 willing landowner properties to inform final 

program design and implementation in 2014.

Partnerships

EWEB has been effective in building support and 

expanding its capacity for the initiative by involving 

in the planning several partner organizations with 

their own constituencies, connections, expertise, 
 112 WRI.org

and capacities—for example, local watershed councils and land trusts, the soil and water conservation 

district, resource conservation and development 

councils, the University of Oregon, Oregon State 

University, and others. The VIP will also rely upon 

a coalition of partners to provide critical infrastructure, without which successful implementation of 

the VIP is highly unlikely. Critical tasks include 

managing the fund, making payments to VIP 

participants, assessing the quality of enrolled land, 

negotiating agreements, monitoring properties and 

verifying compliance, and educating and communicating with the community.

Justification

EWEB’s source water program has run into some 

internal challenges in developing the VIP program, 

in particular a struggle for limited dollars in the 

face of other priorities such as aging infrastructure 

and engineered solutions. Many feel that investment in watershed protection can be small until the 

utility sees a problem, at which point it can ramp up 

funding. But because the utility’s planning horizon 

is 30–40 years, the utility identifies trends in urban 

growth and development pressures in floodplain 

and riparian areas that cause concern in the face of 

climate change impacts. Knowing that any sustainable solution cannot be built overnight, the utility 

feels the need to make sustained investments today 

as a way to manage future risks and avoid future 

treatment and other costs that would result from 

continued degradation of these natural systems 

that benefit us. 

Externally, EWEB has surveyed its customers and 

landowners to better understand their perspectives 

and to assist with framing EWEB’s message so that 

it better resonates with both sets of stakeholders. 

EWEB has worked hard to maintain consistent 

messaging around the value of protecting the natural capital the community relies on. This messaging 

and the relationships EWEB has developed with a 

diverse set of stakeholders have helped EWEB to 

justify its source water protection efforts.

Lessons Learned

Two core lessons have emerged from EWEB’s experience thus far. First, it’s all about relationships. 

This includes taking time and being patient to allow 

relationships to develop with farmers, landowners, 

partners, and others. The collaborative process for 

establishing the VIP has been about building trust 

and regular dialogue that allows partners to work 

together and coordinate all the various pieces in 

motion by multiple organizations.

Second, there is an important balance between 

leadership to move things forward while incorporating input and lessons learned over time, and also 

empowering others to take ownership or an active 

role in certain parts of the program. EWEB could 

not undertake such a project on its own. Thus, 

the VIP development process must be such that 

partners see alignment with their own missions. 

Engaging academia, including students, can also 

provide substantial value in developing the program concept and understanding the implications 

of implementation. Finally, partnerships can also 

create funding opportunities. Most of the source 

water grant applications written by EWEB include 

funding for project partners, playing on their 

strengths and expertise and ultimately strengthening the applications.

EWEB has been effective 

in building support 

and expanding its 

capacity for the initiative 

by involving in the 

planning several partner 

organizations with their 

own constituencies, 

connections, expertise, 

and capacities.
Natural Infrastructure 113

Case 5: Staten Island Bluebelt—

Natural Infrastructure for 

Stormwater Management 

| Albert F. Appleton, Former Commissioner of the New York City 

Department of Environmental Protection and Director of the 

New York City Water and Sewer System 

While this guide has focused on natural infrastructure in forested landscapes, largely for drinking 

water, other types of natural infrastructure can be 

used for other purposes. For example, the concept 

can be applied in urban settings, farms, and ranches 

for a range of watershed services, including not just 

water quality but also quantity, flow regulation, and 

temperature. An increasingly active area of investment is natural infrastructure for urban stormwater 

management—the topic of this case. 

Background

New York’s borough of Staten Island is a social and 

development outlier from the rest of the city and 

from the general image of New York as a high density collection of high rises. Prior to the completion 

of the Verrazano Bridge, between the Island and 

Brooklyn in 1964, finally creating a car link between 

Staten Island and the rest of the city, Staten Island 

had a population of only 150,000 and large tracts 

of undeveloped land. But the completion of the 

Verrazano touched off a development boom that 

continues today, and which has added an average 

of 8,000 people a year to the island’s population, 

bringing its population close to 500,000.

The Staten Island outwash plain was aggressively 

targeted by home developers in the 1970s and 

1980s. Lacking sanitary sewers, they used residential septic systems to provide sanitary services, 

despite the unsuitability for septic of a large area 

whose ground water levels were close to the surface. 

To obtain the necessary regulatory approvals, percolation tests were generally conducted in October, 

the month of the year when developers had found 

they obtained the most favorable results. The area 

also lacked proper storm sewers, a problem developers simply ignored. 

Unlike the rest of the city, the drainage plan for 

Staten Island called for separate storm sewers to 

avoid the problems of combined sewer overflows 

(CSOs) that plagued the rest of the City. But the 

pace of development in the land boom of the ’70s 

and ’80s outran the city’s financial and logistical 

ability to build both sanitary and storm water facilities. The result, as development disrupted the historic flow paths of the natural creek system of the 

area, was a reoccurring pattern of winter and spring 

floods washing through new developments sited 

in the path of traditional drainage patterns. The 

impact of these floods was compounded by the fact 

that the wet weather compromised poorly designed 

septic systems. The smell of sewage became a familiar feature of Staten Island’s freshwater wetlands. A 

growing public outcry against these conditions was 

directed at the city and its water and sewer agency, 

the New York City Department of Environmental 

Protection (DEP).

CASE AT A GLANCE

Players & Stakeholders: City environmental 

agency, urban residents, developers. 

Issue of Concern: Disruption of historic stream 

flow paths and associated reoccurring pattern of 

floods and compromised septic systems, due to 

development.

Natural Infrastructure Investment: Natural 

stream corridors in urban setting—400 acres of 

freshwater wetland and riparian stream habitat 

and almost 11 miles of stream corridor.

Built Infrastructure Tradeoff: Bluebelt avoided 

need for a traditional storm sewer system.

Funding Scale & Mechanism: Development restrictions—costs in the form of lost development 

and associated economic activity and tax revenue.

Business Case Made: Explicit cost-benefit 

analysis conducted, suggesting $30 million in 

net cost savings.

Regulatory Factors: None.

Suppliers: City, in the form of development 

restrictions.

Status at Publication: Implemented.
 114 WRI.org

Developing Natural Infrastructure

By 1990, the situation had reached a crisis point. 

Staten Island was in an uproar over residential 

flooding in newly developed neighborhoods. But 

the cost and time required to provide all of those 

neighborhoods with traditional storm sewers would 

have been prohibitive.27

Natural stream corridors have evolved their own 

flood attenuation features that tend to be far more 

sophisticated than human-designed floodwater 

infrastructure. Given the natural infrastructure 

values provided by natural stream corridors, preservation and integration with development might 

not only be a solution to the floodwater problem, 

it would also have the added advantage of preserving some of the island’s threatened natural stream 

habitats. In a deliberate echo of Staten Island’s 

publicly popular Greenbelt, the project was named 

the Staten Island Bluebelt. 

Cost-Benefit Analysis

After reviewing several possible stream corridors 

for an initial project, one was picked for an explicit 

cost benefit analysis. Projected costs included 

acquisition of privately owned land in the corridor 

and lost city revenues from land sales. Projected 

benefits were avoided infrastructure costs. Though 

these were originally envisioned as just avoiding 

the construction of traditional storm sewers, it soon 

became clear that a Bluebelt would also significantly reduce road and street construction within 

the corridor. The cost-benefit analysis was highly 

favorable, suggesting a net cost savings in the 

neighborhood of $30 million. There would also be 

the savings of avoided sewer maintenance costs, but 

it was assumed that these would be offset by maintenance costs of the natural habitat in the corridor. 

The other project benefit that emerged in the 

analysis was habitat preservation. In designing the 

corridor, it was assumed that corridor dimensions 

would be optimized to incorporate all possible 

natural flood attenuation features and to avoid 

development densities that would exacerbate the 

flood runoff. Doing so also maximized the integrity 

of the stream habitat. As a criterion for analysis, 

the streams were to be kept as a fully functioning 

wetland and riparian feature, not reduced to the 

status of an open drainage swale. These streams, a 

significant element of the historic natural habitat of 

Staten Island, would come to be preserved.

This proved to create another major project benefit. 

While opponents of the Bluebelt predicted widespread public opposition to development restrictions, the public in general realized the amenity of 

having a fully functioning native stream corridor 

brought to their neighborhoods and the positive 

impact it would have on their property values. 

Though the resulting boost in property tax revenues 

was not factored into the cost benefit analysis, the 

enthusiastic response the Bluebelt concept generated with the home owning public was clear, not 

only for its flood protection value, but also for its 

contribution to local quality of life. 

Politics of Adoption

With the results of this analysis in hand, DEP 

took the Bluebelt proposal to the Budget Bureau, 

City Hall, and the City Planning Commission for 

their blessing as the policy would cut across the 

concerns of all of these and other agencies such as 

the Department of Transportation. A number of 

objections were raised during the resulting review. 

Water infrastructure traditionalists protested it was 

unproven. What, they worried, if it failed. The DEP 

answer: nature has been managing floodwater sucNatural stream corridors 

have evolved their 

own flood attenuation 

features that tend to be 

far more sophisticated 

than human-designed 

flood infrastructure.
Natural Infrastructure 115

cessfully for a long time. City Planning and development interests argued that the city could not afford 

to forego valuable development. The DEP answer: 

Development that cost more than it would return 

to the city was not valuable and, if the city failed 

to handle development responsibly and solve the 

stormwater problem, it would discredit all development. As debate proceeded, it became clear that the 

Bluebelt approach was the only viable solution to 

Staten Island’s chronic flooding problems, giving the 

idea powerful momentum. In a last effort to derail 

the project, opponents tried to raise fear of lawsuits 

and political controversy, by raising the possibility of neighborhood children drowning in Bluebelt 

streams. To address this concern, DEP agreed to 

design additional criteria for addressing when a 

Bluebelt might be too dangerously attractive. Under 

these criteria, a small stretch of the trial corridor 

was agreed to be buried in a traditional stormwater 

sewer. After several months of this debate, the necessary signoffs were obtained and the first Bluebelt was 

formally created in the fall of 1990 to widespread 

public, political, and editorial approval. 

Results

Over the next three years, nine other stream corridors were identified and designed as Bluebelts. 

Though the Bluebelt took its fundamental shape 

by the end of 1993, since then nine more Staten 

Island stream corridors have been added for a 

total of 19 Bluebelt components draining about 

a third of Staten Island’s land area. The map at 

right sets out the location of all the Bluebelt corridors. The Bluebelt now includes about 400 acres 

of freshwater wetland and riparian stream habitat 

and almost 11 miles of stream corridor. It has successfully removed the scourge of regular flooding 

from southeastern Staten Island, while producing 

millions of dollars in net savings for the city largely 

by avoiding the costs of constructing storm water 

sewers. Successive mayoral administrations have 

left the Bluebelt system and the Bluebelt effort 

intact and those concepts of stream management 

have also been applied to wetland streams in northern Queens and the Bronx. The ultimate testimony 

to the success of the Bluebelt concept is that the 

Staten Island Bluebelt has now been incorporated 

as a part of the official drainage plan for Staten 

Island and the City of New York.

Bluebelt was an integrated solution with multiple 

benefits. It not only met an infrastructure need in 

the most cost-effective manner, it also preserved 

natural habitat, provided a neighborhood amenity, 

and encouraged better land use planning. These 

multiple benefits explain why the Staten Island 

public so enthusiastically embraced the Bluebelt 

and why, in the greater scheme of things, the Staten 

Island Bluebelt has joined with the Staten Island 

Greenbelt in being a fundamental feature of life on 

Staten Island.

The author would like to acknowledge the 

assistance of Dana Gumb, Director of Bluebelt 

Programs for the New York City Department of 

Environmental Protection in the preparation of 

this article.

Natural Infrastructure 117

CONCLUDING REMARKS

This guide provides the resources needed to 

foster meaningful dialogue with watershed 

decision makers and stakeholders around 

natural infrastructure options, to secure 

the participation of relevant stakeholders 

and adoption, and to begin early design and 

implementation steps on solid footing. While 

we hope the guide presents a persuasive 

case for considering natural infrastructure 

options, ultimately the effective messengers 

to decision makers and stakeholders are 

the staff within institutions like water utilities, municipalities, and private businesses. 

Consistently, behind successful natural 

infrastructure programs are the often-unsung 

source water coordinators, conservation 

staff, and sustainability officers creating real 

change in these institutions. This guide can 

be a resource for these champions as they 

work to gain traction for natural infrastructure in their watersheds.

The overarching message can be delineated 

in the eleven key take-aways below. This is 

the increasingly clear “story” of the integrated 

natural and built infrastructure approaches to 

securing clean and abundant water.

MAKING THE CASE

The Scientific Underpinnings

The Business Case

Identifying Opportunity

DESIGN AND IMPLEMENTATION

Natural Infrastructure Finance

Players at the Table

CASE STUDIES

Concluding Remarks

Cases
 118 WRI.org

Making the Case: Business Case, 

Underlying Science, and Opportunities

1. The scientific foundation is imperfect, 

but robust. The water-related functions of 

healthy forested landscapes are well established—maintaining healthy, forested landscapes and implementing best practices in 

forestry management are effective strategies 

for promoting source water quality and regulating flow.

2. Inherent variability poses challenges 

for quantification. While the science is 

robust, there is inherent variability across and 

within watersheds in the magnitude of water 

resources impact of a given land cover change 

or management practice.

3. Risks and uncertainty can be managed.

Despite residual scientific uncertainty, natural 

infrastructure options are actionable. Utilities and others should prioritize investments, 

monitor, and manage adaptively. 

4. The economic benefits can be substantial. High source water quality and well-regulated flow can reduce the capital and variable 

costs of providing clean and abundant water.

5. The financial case can be made. The case 

for natural infrastructure investment has been 

made in several watersheds nationwide.

6. Natural infrastructure investments are 

actionable despite uncertainty. While the 

strength of natural infrastructure economic 

analyses depends on the quality of the underlying science, conservative assumptions and 

careful sensitivity analyses can produce actionable results—albeit while tending to underestimate of the returns of natural infrastructure.

7. The opportunity is widespread. Watersheds across the country have opportunities 

to integrate natural infrastructure alongside 

critical built infrastructure. High source water 

quality can reduce capital and variable treatment costs, as well as dredging and other 

maintenance costs at reservoirs and intakes.

8. Local decision maker participation is 

critical for success. The success of the 

approach depends on the ability of natural 

infrastructure champions to make the case to 

key local decision makers and stakeholders 

and to articulate a vision of success. 

Design & Implementation

9. Cultivating partnerships is a key first 

step toward success. In each of the successful attempts to build robust programs for 

investment in natural infrastructure, an essential component has been collaboration among 

a variety of stakeholders and experts and the 

emergence of champions within stakeholder 

groups to push the program forward.

10. Landowner participation is essential in 

privately owned watersheds. Landowners 

are highly independent, value their autonomy, 

and generally engage in agriculture or forestry 

because it is a way of life as well as an economic enterprise. In addition to the financial 

inducement being offered, landowners consider how the program is designed and administered as part of their participation decision.

11. Investment must be large scale and 

sustained. A long list of public, private, and 

hybrid public/private finance mechanisms 

is available to get dollars on the ground to 

restore, enhance, protect, and manage natural 

infrastructure for water resources. The primary 

challenge is to select a finance mechanism (or 

combination of mechanisms) that is capable 

of gaining the necessary political support for 

adoption, while also generating sufficient funds 

for meaningful and sustained investment in 

natural infrastructure.

From experience to date with natural infrastructure, a suite of “action items” are evident for 

both watershed stakeholders and the broader 

community of practitioners working to scale up 

the approach nationwide.
Natural Infrastructure 119

Action items for water managers, conservationists, 

and other stakeholders at the local watershed level:

1. Assess the watershed for ecological condition 

and trends causing water-related issues tied to 

substantial current or projected costs;

2. Engage with key stakeholders and decision 

makers early and often to articulate a vision 

of success, expand capacity for program development and implementation through strategic 

partnerships and consultation with experts, 

and build on the lessons of past successes 

and failures;

3. Conduct necessary economic analyses to 

determine if natural infrastructure is the best 

approach and to make the case for financial 

investment;

4. Assess a broad array of finance mechanisms 

with an eye toward securing large-scale 

“anchor funding” as well as a broader “funder 

quilt” to ensure meaningful and sustained 

investment over the long term;

5. Prioritize investments across parcels and 

interventions (i.e., reforestation or forest best 

management practices), monitor outcomes, 

and adapt investments accordingly.

Action items for the broader community 

of practitioners:

1. Actively participate in the community of 

experts, facilitators, consultants, and “mobilizers” seeking to scale up integration of natural 

infrastructure into water management strategies, in order to leverage others’ efforts.

2. Assist in securing large-scale natural infrastructure funds such as bonds by ballot measure and natural infrastructure “set-asides” like 

the 20 percent green infrastructure requirement in the state revolving funds;

3. Expand research to quantify forest-to-water 

connections and improve the reliability and 

accessibility of watershed models;

4. Broaden accounting standards to enable operations and maintenance spending on natural 

infrastructure by public entities as part of 

normal business practices;

5. Build awareness among the water resource 

management industry, the urban planning 

field, ratepayers, and taxpayers of the importance of natural infrastructure as a cost-effective and beneficial element of an integrated 

solution to emerging water issues. 

Perhaps the two most important lessons from experience to date are the power of individuals and the 

importance of partnerships. Ultimately, the most 

effective messengers to decision makers and stakeholders affecting natural infrastructure decisions 

at the local level are influential individuals within 

their own institutions. Behind successful natural 

infrastructure programs are consistently the oftenunsung source water coordinators, conservation 

staff, and sustainability officers creating real change. 

These champions can be those in positions of 

power, but they need not be. A source water coordinator or manager in a public utility, a risk manager 

in a private business, or a water program manager 

in a state environmental agency can have immense 

impact within their respective institutions—many 

have been creating that impact for decades. These 

champions lead and inspire by offering fresh ideas 

and creativity where precedent might otherwise 

win the day—and by coming to the table with the 

evidence base to support those ideas. They identify 

likely challenges within their institutions and seek 

external support where appropriate to overcome 

those challenges.

In the source water context, these champions may 

need to help decision makers step outside the 

bounds of their primary roles and grow their competencies through institutional learning processes. 

Water utilities and municipalities that have been 

able to innovate in the face of the internal and 

external challenges they face recognize that bringing the natural infrastructure approach to scale will 

require institutional change in combination with a 

concerted effort to provide external cover by raising 

public awareness. 
 120 WRI.org

At the same time, successful cases have illustrated 

the importance of leveraging the resources, capacity, 

and political capital of a wide set of partners—including those who have not traditionally partnered with 

water utilities. The wide range of benefits offered by 

natural infrastructure—not just for water but also 

wildlife, recreation, climate, and rural economic 

development—offers a salient opportunity to build 

new coalitions across utilities, rural landowners, 

conservation groups, and private businesses. 

But the task is not easy. As one utility staffer put 

it, if this were so, we’d have been doing it at scale 

a long time ago. This guide can be a resource for 

these individual champions and their partners as 

they work to gain traction for investment in natural 

infrastructure in their watersheds.
Natural Infrastructure 121

TABLE OF ACRONYMS

APEX Agricultural Policy/Environmental eXtender

AWWA American Water Works Association

BEF Bonneville Environmental Foundation

BMP Best Management Practice

BOD Biochemical Oxygen Demand

CBA Cost-Benefit Analysis

CCPI Cooperative Conservation Partnership Initiative

CEA Cost-Effectiveness Analysis

CPI Conservation Priority Index

CSO Combined Sewer Overflow

CTNC Conservation Trust for North Carolina

CWA Clean Water Act

CWCF Clear Water Carbon Fund

EPA United States Environmental Protection Agency

EWEB Eugene Water & Electric Board

FEMA Federal Emergency Management Agency

GASB Government Accounting Standards Board

GGA Green-Gray Analysis

GHG Greenhouse Gas

GIS Geographic Information System

GWLF Generalized Watershed Loading Function

HCP Habitat Conservation Plan

HSPF Hydrological Simulation Program—FORTRAN

ICLUS Integrated Climate and Land Use Scenarios

InVEST Integrated Valuation of Environmental Services and 

Tradeoffs

MCL Maximum Contaminant Level

MDIFW Maine Department of Inland Fisheries & Wildlife

NEWMAN New England Watershed Managers

NHD National Hydrography Dataset

NWI National Wetland Inventory

NLCD National Land Cover Database

NOAA National Oceanic & Atmospheric Administration

NRCS Natural Resources Conservation Service

NTU Nephelometric Turbidity Unit

PWD Portland Water District

PWS Payment for Watershed Services

REMM Riparian Ecosystem Management Model

RIOS Resource Investment Optimization System

SDWA Safe Drinking Water Act

SFI Sustainable Forestry Initiative

SFWMD South Florida Water Management District

SPU Seattle Public Utilities

SRF State Revolving Fund

SWAT Soil & Water Assessment Tool

SWC Source Water Collaborative

TDR Tradable (or Transferable) Development Right

TMDL Total Maximum Daily Load

TOC Total Organic Carbon

USDA United States Department of Agriculture

VIP Voluntary Incentives Program

WBD Watershed Boundary Dataset

WEPP Water Erosion Prediction Project

WFMIS Watershed Forest Management Information System

WIFIA Water Infrastructure Finance & Investment Authority

WQS Water Quality Standards

WRI World Resources Institute

WRP White River Partnership
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Model (No. 00-06). BRC.

Winiecki, E. (2012). Economics and source water protection.

Wolman, G. (1967). A Cycle of Sedimentation and Erosion in 

Urban River Channels. Physical Geography, 49(2/4), 385–398.

Xuyong, L., Weller, D. E., & Jordan, T. E. (2010). Watershed 

Model Calibration Using Multi-Objective Optimization and 

Multi-Site Averaging. Journal of Hydrology, 390, 277–288.

Zhang, Y., & Barten, P. K. (2009). Watershed Forest 

Management Information System (WFMIS). Environmental 

Modeling and Software, 24(4), 569–575.
Natural Infrastructure 129

1. Non-market carbon-related benefits were calculated based on 

social cost estimates in Tol (2007). While they are treated as 

non-market benefits in the analysis, carbon benefits could be 

sold as credits with programs such as the Clear Water Carbon 

Fund (Finance Case 5 in Section 5.1), which would have the 

effect of offsetting natural infrastructure costs. However, some 

amount of transaction costs would be incurred to do so.

2. With respect to stormwater, see, e.g., American Society of 

Landscape Architects. Stormwater Case Studies. Available at: 

http://www.asla.org/stormwatercasestudies.aspx.

3. DEFINITION: Skid trails are paths left by heavy vehicles used 

in logging operations to pull cut trees from the cutting side to 

a landing (a process called “skidding”), where they are then 

loaded onto trucks.

4. Rough estimate gleaned from various sources on model performance, including model-specific reviews (e.g., Gassman et al. 

2007) and individual studies (such as Lee et al. 2000, Georgas 

et al. 2009, Singh et al. 2005). In practice, performance 

depends on a variety of factors and will vary substantially 

(e.g., see Van Liew et al. 2007). See Moriasi et al. (2007) or 

Donigian and Imhoff (2009) for an overview of approaches to 

watershed model performance evaluation.

5. Well-developed “support” can include updated user manuals, 

theoretical documentation, and online video tutorials; guides to 

modeling various landscape features; free regional- to globalscale input databases; accessory software for collating and formatting inputs, calibrating the model, visualizing outputs, and 

running post-processing analyses; and a model development 

team available to provide implementation support—among 

other forms of support (see swat.tamu.edu as an illustration).

6. DEFINITION: Hybrid modeling systems integrate highly specialized models for specific purposes with earlier, more comprehensive models that have broader capabilities (see, e.g., 

Saleh and Gallego 2007, Imhoff et al. 2010, Liu et al. 2007).

7. Note: listed characteristics ascribed to the three models include 

attributes of the original models themselves as well as updated 

and expanded model versions and the more comprehensive modeling systems and interfaces that have been built around them.

8. See, for example, for GWLF: Haith and Shoemaker 1987, Haith 

et al. 1992, Lee et al. 2000, Georgas et al. 2009, Xuyong et al. 

2010; SWAT: Gassman et al. 2007; HSPF: e.g., Singh et al. 

2005, Saleh and Du 2004 (monthly), Weston Solutions 2006 

(monthly), but see Im et al. 2003 (monthly).

9. See, e.g., Arnold et al. (2012)

10. See, for example, AQUA TERRA Consultants 2011.

11. See, for example, Gassman et al. 2007.

12. See, for example, Evans et al. 2008, Penn State 2012, and, e.g., 

Georgas et al. 2009.

13. Note: InVEST (not profiled for this chapter because it has 

undergone little formal validation in the literature) is specifically designed to compare alternative land cover scenarios and 

some management practices, and has the capacity to produce 

(limited) estimates of economic value of watershed services 

alongside biophysical outputs (Tallis et al. 2011). InVEST is hydrologically quite simple compared to SWAT or HSPF (far fewer 

features and processes represented), but it is highly spatially 

explicit (i.e., performs overland routing; Tallis et al. 2011). 

14. Synthesized and reproduced with permission of the U.S. 

ENDNOTES

Endowment for Forestry & Communities

15. Accounting and bond disclosure standards play an important 

role in determining (and typically limiting) the kinds of natural 

infrastructure in which utilities may invest. Section 2 expands 

further on this topic.

16. For information on rate setting, see for example AWWA 2012. 

For a national overview of water rates, see AWWA 2010.

17. Available at http://www.usendowment.org/watersheddatabase.html

18. For more information about how the municipal bond market 

works, visit the Municipal Securities Rulemaking Board website: http://www.msrb.org/Municipal-Bond-Market.aspx.

19. More information from the EPA about the Clean Water State 

Revolving Fund and Safe Drinking Water State Revolving Fund 

is available at: http://water.epa.gov/grants_funding/cwsrf/

cwsrf_index.cfm and http://water.epa.gov/grants_funding/

dwsrf/index.cfm, respectively.

20. More information about current Farm Bill conservation 

programs is available at: http://www.nrcs.usda.gov/wps/portal/

nrcs/main/national/programs/farmbill/

21. More information about the WIFIA concept and legislation is 

available at: http://www.awwa.org/legislation-regulation/issues/infrastructure-financing.aspx

22. More detail on this process is available on The Freshwater 

Trust’s website: http://www.wri.org/publication/paying-forenvironmental-performance-reverse-auctions

23. An informative overview of state and local tax incentives, 

including a report with guidance on creating incentives for 

conservation, is available on the Land Trust Alliance website: 

http://www.landtrustalliance.org/policy/tax-matters/campaigns/

state-tax-incentives 

24. For a good definition of nutrient trading, see Commonwealth 

of Pennsylvania, Nutrient Trading, available at http://www.

dep.state.pa.us/river/Nutrient%20Trading_files/Trading%20

Fact%20Sheet-%203900-FS-DEP4073.pdf.

25. http://insights.wri.org/news/2011/07/new-fact-sheet-helpschesapeake-bay-states-design-nutrient-trading-programs

26. An informative overview of TDR programs is available at http://

government.cce.cornell.edu/doc/html/Transfer%20of%20Development%20Rights%20Programs.htm

27. Due to its single family home development pattern, Staten 

Island produced a very low level of water and sewer tariff 

revenue, far below what would have been needed for a full 

program of storm sewer construction. Even existing programs 

of infrastructure and water management, including provision 

of some sanitary sewers, were costing DEP in 1990, far more 

than the $40 million in revenue Staten Island produced. Moreover, during the early 1990s, the water and sewer system faced 

a citywide political revolt against water and sewer rates that 

had grown in the 1980s at an average rate of 14 percent per 

year, due to poorly planned capital management programs and 

a series of new, construction-heavy environmental mandates.

28. The technical inquiry is available for download on Earth 

Economics’ website: http://www.eartheconomics.org/ and 

here, http://www.eartheconomics.org/FileLibrary/file/21st%20

Century%20Utility/Request%20to%20GASB%20for%20Natural%20Resources%20Reporting%202013%20-%20FINAL.pdf.

29. Water Environment Research Foundation’s website (WERF): 

www.werf.org.
 130 WRI.org

ACKNOWLEDGMENTS

The guide originated through a 2009 USDA Natural Resource Conservation Service (NRCS) Conservation Innovation Grant to work 

on developing Payment for Watershed Services (PWS) pilots in New 

England. The grant recipient was the American Forest Foundation, 

which worked with partners including the World Resources Institute, 

Manomet Center for Conservation Sciences, Hubbard Brook 

Research Foundation, Western Foothills Land Trust, and the White 

River Partnership. Funding and in-kind contributions for this guide 

came from USDA NRCS, American Forest Foundation, Blackstone 

Ranch Institute, Earth Economics, Sustainable Path Foundation, U.S. 

Endowment for Forestry & Communities, and the Spatial Informatics 

Group-Natural Assets Laboratory.

This guide would not be possible without the contributions and 

commitment of a diverse set of authors, ensuring the document 

reflects the perspectives of the various experts and stakeholder 

groups who need to be involved for natural infrastructure efforts to 

be successful:

William L. Allen III, The Conservation Fund

Albert F. Appleton, Former Commissioner of the New York City 

Department of Environmental Protection and Director of the New 

York City Water and Sewer System

Wayne Barstad, Dartmouth College

Paul Barten, University of Massachusetts

David Batker, Earth Economics

Drew Bennett, Oregon State University Department of Geography 

Daniel Cantor, University of Michigan School of Natural Resources 

& Environment

Bobby Cochran, Willamette Partnership

Corinne Cooley, Earth Economics

Chris Corbin, Lotic Water

David Cosman, Earth Economics

Lisa Creasman, The Nature Conservancy (formerly with Conservation Trust for North Carolina)

Denver Water Board

Bill Van Doren, South Central Connecticut Regional Water Authority

Sally Duncan, OSU Policy Analysis Lab (OPAL), School of Public 

Policy, Oregon State University 

Hillary Fishler, Oregon State University Department of Public Policy

Jade Freeman, PhD, Office of Groundwater and Drinking Water, EPA 

Colm Fay, University of Michigan School of Natural Resources & 

Environment

Todd Gartner, World Resources Institute

Katherine Garvey, Vermont Law School 

Erin Gray, World Resources Institute 

John Gunn, Spatial Informatics Group-Natural Assets Laboratory 

(formerly of Manomet Center for Conservation Sciences)

Matthew Harrison, University of Michigan School of Natural Resources & Environment

Jennifer Harrison-Cox, Earth Economics 

Kelley Hart, The Trust for Public Land

Jeff Hughes, Environmental Finance Center, University of North 

Carolina

Paul Hunt, Portland Water District

Kira Jacobs, EPA Region 1

Buck Kline, Virginia Department of Forestry

Joanna Kraft, Earth Economics

Emily Levine, University of Michigan School of Natural Resources & 

Environment

Sue Lurie, Institute for Natural Resources, Oregon State University

Sarah Lynch, World Wildlife Fund

Rebecca Madsen, USDA Forest Service (currently with Electric 

Power Research Institute)

Karl Morgenstern, Eugene Water & Electric Board

James Mulligan, Green Community Ventures

Craig Nicholson, University of Massachusetts

Craig Partridge, Washington State Department of Natural Resources 

(Retired)

Josh Rego, Green Community Ventures & University of Michigan 

School of Natural Resources & Environment

Mary Russ, White River Partnership

Carrie Sanneman, Willamette Partnership

Rowan Schmidt, Earth Economics

Jodi Schoenen, Portland State University 

Nikola Smith, USDA Forest Service

Michael G. Sorice, Department of Forest Resources & Environmental 

Conservation, Virginia Tech

Jim Taft, Association of State Drinking Water Administrators; CoChair, Source Water Collaborative

John Talberth, Ph.D., World Resources Institute 

Andy Tolman, Maine CDC Drinking Water Program

Nancy Toth, Eugene Water & Electric Board

John Tynan, Sustainnovate, LLC (formerly on the Board with Greenville Water System and currently with Central Arkansas Water)

Emily Weidner, USDA Forest Service

Christoph Weissbart, Earth Economics

Bruce Wight, USDA NRCS (Retired)

Ethel Wilkerson, Manomet Center for Conservation Sciences

Logan Yonavjak, World Resources Institute 

Chris Zwicke, University of Michigan School of Natural Resources & 

Environment
Natural Infrastructure 131

The editors are also grateful to the following colleagues and peers 

who provided critical reviews and other valuable contributions to 

this guide: William L. Allen III (The Conservation Fund), Nicholas 

Bianco (World Resources Institute), Zander Evans (Forest Guild), 

Rolf Gersonde (Seattle Public Utilities), Erin Gray (World Resources 

Institute), Jenn Harrison-Cox (Earth Economics), Kelley Hart (Trust 

for Public Land), Frances Irwin (Former Fellow, World Resources 

Institute), Tracy Mehan (Cadmus Group), Sean Senescall (Tacoma 

Water), Janet Senior (Portland Water Bureau), Tien Shiao (World 

Resources Institute), Maggie Skenderian (City of Portland Bureau of 

Environmental Services), Mary Snieckus (formerly with the American Forest Foundation), Peter Stangel (U.S. Endowment for Forestry 

& Communities), Jim Taft (Association of State Drinking Water 

Administrators; Source Water Collaborative), Abby Van Der Bogert 

(Duke University), and Richard Waite (World Resources Institute).

The publication process was helped along by WRI’s experienced

publications teams, particularly Janet Ranganathan, Hyacinth

Billings and Ashleigh Rich. We thank Leah Eaton Mitchell and Jeff

Mitchell for copy editing, Nick Price for layout, and Kelly Burgoyne 

for providing photos. We also thank Daniel Melling, Sarah Parsons, 

and Andrew Maddox for their media, outreach, and editing expertise. 

Finally, we thank WRI interns Amanda Egan, Sandra Elverud, Jonas 

Epstein, Brendan Hall, and Max Neale for their contributions.

This report is released in the name of the World Resources Institute 

and represents the perspectives and research of its editors and authors 

alone. It does not necessarily represent the views of WRI, its funders, 

the publication reviewers, or their affiliated organizations and agencies. 

ABOUT OUR PARTNERS

Green Community Ventures (GCV) is a close partner of the World 

Resources Institute. GCV is a non-profit organization dedicated to 

community-based sustainability.

Earth Economics is an independent, non-partisan non-profit dedicated to researching and applying the economic solutions of tomorrow, today. Since 1998, Earth Economics has been providing robust, 

science-based, ecologically sound economic analysis, policy recommendations and tools to positively transform regional, national 

and international economics, and asset accounting systems.

Manomet Center for Conservation Sciences is a non-profit and nonadvocacy organization with over 40 years of experience in scientific 

research and problem solving. Manomet’s mission is to conserve 

natural resources for the benefit of wildlife and human populations. 

Through research and collaboration, Manomet builds sciencebased, cooperative solutions to complex environmental problems.
 132 WRI.org

ABOUT THE EDITORS

Todd Gartner is a Senior Associate for the World Resources 

Institute’s Forests, Food, and Water Program. He runs WRI’s Nature 

for Water Campaign working with governments and businesses 

to invest in conserving and restoring forests, wetlands, and other 

ecosystems to secure freshwater supplies, reduce flood risks, and 

obtain other economic and social benefits. Todd assists with all 

facets of conservation program development including convening, 

facilitation, design, pilot operations, and scaling. Todd works closely 

with the Willamette Partnership in Oregon and with a broad range 

of stakeholders including policy makers, landowners, regulators, 

Fortune 500 companies, and local partners to achieve conservation 

objectives across the United States and abroad. Todd’s previous 

work included developing and running the Conservation Incentives 

program at the American Forest Foundation, field forestry work in 

New England, fire ecology and eco-tourism research in Botswana 

and India, business consulting for the USDA Forest Service and 

several years as a corporate financial consultant. Todd earned his 

Master of Forestry degree from the Yale School of Forestry and Environmental Studies and a Bachelor of Science in finance from University of Maryland’s Smith School of Business. He is also a Doris 

Duke Conservation Fellow, Switzer Environmental Fellow, Environmental Leadership Program Fellow, and Property and Environmental 

Research Center Fellow. Todd is based in Portland, Oregon, and is 

an avid hiker, rock climber, snowboarder and Baltimore Ravens fan.

Contact: tgartner@wri.org.

James Mulligan is the Executive Director at Green Community 

Ventures, a 501c3 non-profit and subgrantee to the World Resources 

Institute (WRI). In this capacity, James helps to manage WRI’s 

Nature for Water Campaign. His work focuses on integrating natural 

infrastructure into water management strategies among 

businesses, water utilities, and development agencies worldwide. 

Prior to his current role, James has worked with the Michigan 

Department of Natural Resources & Environment, the Great Lakes 

Commission, and Mathematica Policy Research. James holds a 

Master of Arts in natural resource economics and public finance, 

and a Master of Science in environmental policy from the University 

of Michigan. He lives in the Tahoe area of Nevada, where he is an 

avid skier and homebrewer.

PHOTO CREDITS 

Cover, Andrew Soundarajan; table of contents, Beachcottage 

Photography; pg. iv, Gabriel Amadeus; pg. vi, Christina Frain; pg. 6 

(left), cairn111; pg. 6 (right), Lizzys Life; pg. 8, 16, Mitchell Joyce; 

pg. 14, Eli Sagor; pg. 18, 62, chelsea bk; pg. 29 Chesapeake Bay 

Program; pg. 45, born1945; pg. 64, Nicholas A Tonelli; pg. 65, 

James Mulligan; pg. 76, USFS; pg. 91, 95 (left), 120, EPA; pg. 92, 

David Herrera; pg. 95 (right), Mark Udall; pg. 98, USDA; pg. 105, 

jerm1386; pg. 110 (left), Elvert Barnes; pg. 110 (right), rfduck; pg. 

111, Chris Phan; pg. 116, Michael Privorotsky.

Rowan Schmidt is a Research Analyst at Earth Economics, and 

leads the 21st Century Utility program with the goal of expanding 

water utility funding mechanisms for watershed health. Areas of 

the program include: providing accurate valuation of drinking water 

watersheds to inform utility investment decisions; updating national 

accounting standards to recognize watersheds that provide and 

filter water; enhancing bond disclosure standards to include watershed and natural capital conditions; and adjusting water utility 

rate structures to support natural capital investments. Rowan also 

works with colleagues at Earth Economics to advance the methods 

and applications of ecosystem service valuation in benefit-cost 

analysis, regional land use planning and other areas of policy 

making. Rowan is based in Tacoma, Washington, right next to 

the majestic Mt Rainier.

John Gunn became the Executive Director of the newly-launched 

Spatial Informatics Group – Natural Assets Laboratory (SIG-NAL) 

in November, 2012. Prior to SIG-NAL, John was a Senior Program 

Leader within the Natural Capital Initiative at the Manomet Center for 

Conservation Sciences. John has a Bachelor of Science in wildlife 

management from the University of Maine, a Master of Forest 

Science from the Yale School of Forestry and Environmental Studies, and a Ph.D. in biology from the University of New Brunswick 

studying the landscape ecology of forest songbirds. He has a broad 

background in sustainable forestry, including a position developing Forest Stewardship Council (FSC)-certified forest management 

systems for a large private landowner in Maine and extensive work 

on family forest and group certification issues throughout North 

America. John’s recent work has focused on developing the tools 

and science necessary to implement payments for ecosystem 

services programs (such as carbon sequestration and drinking water 

quality) involving forest landowners. John served as an Environmental Chamber representative on the FSC US Board of Directors 

from 2010-2013. John lives with his wife and daughter in Hebron, 

Maine, and plays banjo in a folk group in his spare time.
Natural Infrastructure 133

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