Innovative Financial Mechanisms to Fund Watershed Restoration

Not enough funding programs exist to pay for an optimal level of watershed restoration. Because raising funds through traditional general appropriations processes is a well-documented process, this report explores various innovative funding mechanisms. These mechanisms differ according to whether liable parties exist that have caused or continue to cause the environmental damage that requires restoration. For those situations in which there are liable parties, many funding mechanisms exist:

• Cap-and-trade schemes;
• Mitigation banking;
• Taxes on damaging activities; and
• Increased bonding requirements.

For situations where no liable party exists, a variety funding mechanisms are available:

• Municipal bonds;
• Tax increment financing;
• Revenue bonds;
• Special governmental districts;
• Resort taxes;
• Access fees;
• Permit fees; and
• Surcharges on retail goods.

Another significant avenue of potential funding for watershed restoration is national climate change legislation. While the science and economics behind whether carbon offsets can fund watershed restoration is uncertain, great potential does exist to fund restoration through adaptation and mitigation monies.