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The best way to pay for smart cities? (No, we are NOT talking municipal bonds)

Submitted by jesse_berst on July 23, 2013

Our friends at are out with a timely reminder of a financing alternative that is seeing great success in Latin America. As author Anthony Flint points out, "the elephant in the room remains the question of financing. The fiscal situation is dire at the local, state and federal level, just at the time when new investments are needed for the support of the 21st-century city." 

If you are merely studying technical innovations, if you are failing to study financial innovations too, then you are missing the boat. And if you want to study financial innovations, you should start with value capture. -- Jesse Berst

A financing mechanism called "value capture" -- already well known in Latin America -- is gradually gaining more currency in North America as well. Investments in public infrastructure increase the value of nearby private land. Governments are increasingly finding ways to capture a piece of that increase as a way to pay for their projects.

Value capture is an umbrella name. In North America, the best-known flavors are tax-increment financing (TIF) and special investment districts, two methods that scored the highest when San Jose State University produced a framework for using value capture to fund public transit in 2012.

Value capture is becoming more popular in Latin America because urbanization is creating concerns about equity and affordable housing. Yes, value capture is often demonized by landowners who (not surprisingly) want to reserve all the upside for themselves. Even so, the approach is now being tested in several U.S. cities, according to the article, including Chicago, Dallas and San Francisco.

You can also learn more in the new report Implementing Value Capture in Latin America: Policies and Tools for Urban Development.


Jesse Berst is the founding Chairman of the Smart Cities Council. Click to subscribe to SmartCitiesNow, the weekly newsletter highlighting smart city trends, technologies and techniques.