Financing Kidron/Wadi El Nar River Revitalization
Jul 09, 2013
Publisher: Milken Institute

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Download Hebrew version of Financing Kidron/Wadi El Nar River Revitalization
This report describes the contours of a potential financing plan for sewage infrastructure in the Kidron Valley -- one of the middle east's most culturally, historically, and environmentally pivotal resources for economic development. In 2010, the Kidron Basin Working Group proposed the Kidron Basin Master Plan, and in 2013, it completed the implementation plan for the basin. The proposed plan is a comprehensive, integrated infrastructure and economic / community plan for the redevelopment of the Kidron Basin from the Old City to the Dead Sea -- crossing between Israeli and Palestinian areas. One of the main elements of the master plan, and a precondition for sustainable development, is infrastructure finance to clean up the sewage flowing through the valley.

This financing plan is based on discussions with stakeholders and leaders throughout the region and on regional market conditions for project financing. Its elements are intended to be market-based, leveraged, and financially feasible and sustainable.

The proposed financing model suggests the creation of a special purpose vehicle to provide the sewage collection and treatment services on a contract basis with the Israeli and Palestinian water authorities, using a combination of bonds, private and social equity, and subordinated debt through the capital markets, international development loans and guarantees, and philanthropic impact investments. This project financing model is feasible based on the proposed capital structure, terms, and estimated market conditions.

Further, the new infrastructure will support the growth of tourism-related revenue in the greater Jerusalem region, serving the development of the Israeli and Palestinian communities. New and expanding businesses will produce incremental value-added taxes, real estate taxes, improvement taxes, use fees, and license fees, which broaden the case for feasibility.