Economic Benefits of Green Cities

This post is written by Caitlin Geary, Associate within the Finance and Economic Development Program, Center for Research and Innovation at the National League of Cities.

As energy and transportation costs rise, market demand for “green” grows and budget cuts continue to loom, communities are increasingly realizing the multiple benefits linking sustainability, cost savings and economic development.  From energy efficient strategies for buildings to increasing opportunities for recreation and tourism, cities are taking action and seeing returns on their sustainability investments.

To highlight the many economic benefits of sustainability and efforts of cities across the country the National League of Cities has recently released two new resources. Sustainable Connections: Linking Sustainability and Economic Development, highlights initiatives across four cities that are incorporating sustainability practices within their economic development plans. The report details how each city came to link these issues and the diversity of strategies used.

In a related publication, Sustainable Connections: Strategies to Support Local Economies, several actions typically associated with sustainability are discussed in terms of their potential for generating economic value such as cost savings or the attraction of outside investment.

A common theme throughout these resources is that while there are multiple options for cities to realize economic value through efforts linked to sustainability there is no one size fits all strategy and a city must think strategically in order to find success. Some cities have decided to revise entire economic development plans or strategies in order to include sustainability principles and some have merely tweaked a program because that’s what can work in that community.  But even a few slight changes can make a world of difference.

For example, The City of Cleveland, Ohio has traditionally offered discounts on city contracts to minority and women-owned businesses as a means for economic inclusion.  Recently the city has gone one step further and has begun providing businesses that participate in a local sustainable certification program with a 4 percent discount on city contract bids.

Expanding the opportunity for new businesses to participate in the certification program benefits both the city and businesses.  The city receives bids from additional companies, making the process more competitive and businesses benefit from cost savings and expanded business opportunities. By tweaking a relatively common small business incentive to incorporate a sustainability aspect Cleveland has discovered a creative and effective way to incentivize businesses to become more environmentally friendly.

Or consider Columbia, MO’s recent attempts to encourage businesses to reduce energy usage.  The city received a grant through the U.S. Environmental Protection Agency's program aimed to help cities create cost effective programs that reduce greenhouse gas emissions and improve energy efficiency.  The City Green program uses a scale that measures how much energy a business uses, based on type of establishment (i.e. restaurant, office spaces, banks, retail, etc.).  If a business is high on the scale, the city will then offer to pay for 50% of an energy audit to precisely determine energy usage and identify ways to increase efficiency thus diminishing overall consumption – and cost. Once complete, the City Green program will pay for repair costs up to a maximum of $12,500.

What makes this program unique is not only the impressive financial incentives to participate but the way the city goes about informing businesses of their inefficiency. Columbia has found a way to convince businesses to make more energy efficient choices by revealing how they fair compared to direct competitors.  No business owner would be complacent with knowing his or her competitor is saving money because of simple actions that they could also be taking advantage of such as installing more energy efficient appliances or LED light bulbs.

In Boulder, Colo., city officials have adapted the Flexible Rebate Program, which provides tax rebates to qualified businesses, to include more stringent eligibility requirements.  The new requirements stipulate that businesses who wish to receive benefits under this program must be in compliance with at least 11 Community Sustainability Guidelines. Compliance may be demonstrated with an existing policy or program and businesses are able to choose which guidelines to agree to. Community Sustainability Guidelines cover a range of actions such as energy performance assessments, environmental purchasing policies, commute to work programs, and waste reduction policies, among others.

In expanding the Flexible Rebate Program, Boulder is adapting a common economic development tool to encourage business retention and expansion while furthering the sustainability goals of the city.  And while the program has only recently been adapted to include the Community Sustainability Guidelines, in 2009, the City of Boulder estimates that the Flexible Rebate Program resulted in a $28.89 net-present-value gain for every one dollar invested in rebate incentives. In adding new companies who are able to participate, the city will surely see even greater returns.

Additional examples of city efforts and experiences are highlighted in Sustainable Connections: Linking Sustainability and Economic Development and Sustainable Connections: Strategies to Support Local Economies, both can be found on NLCs Sustainability Program webpage, www.nlc.org/sustainability