As the world becomes increasingly urbanized, cities are having to make dramatic infrastructure improvements to support all of their new citizens. That’s costly, but cities have no choice but to find the funding. The New Cities Foundation says cities just need a new approach to securing it.
The foundation has just launched its Financing Urban Infrastructure Initiative to help cities transition to modern financing methods, which it says is vital to modernizing the cities themselves. The initiative is backed by Council Lead Partner Cisco and as well as Citi.
Old funding mechanisms aren’t up to the task
The group points to a study by McKinsey Global Institute that estimates the necessary infrastructure improvements needed around the world by 2030 could cost $57 trillion. The foundation adds that much of those improvements need to be made in cities that are growing at unprecedented rates -– and those aren’t cities that have expansive infrastructures today.
The challenge for cities is that the methods they use to secure funding today simply aren’t up to that task. The research shows that there just aren’t enough funds available from public and private-sector lenders.
But the good news for cities is that there is hope. Writing on the New Cities Foundation blog, Julie Kim, who is joining the group as a senior fellow to lead this initiative, says cities have to strive to become more financially independent.
“The money is there, but packaging bankable projects is difficult,” she writes. “It takes sophistication and financial knowledge to reach well-balanced financing structure, which require better education, networking and capacity building. This is one of the areas where the New Cities Foundation can play an important role.”
There are success stories
Kim says areas that have been successful have typically been granted more flexibility to band together with neighboring communities or different agencies – or both. Having an isolated mindset is a trap that more and more will prevent cities from moving forward.
One success is California’s Enhanced Infrastructure Financing District model, which she helped develop. Among other things, it allows agencies to collaborate even across sectors, including water, waste management and transportation.
Kim also points to a project she helped with in South Korea to turn a former Air Force base into what’s become a major economic incubator that has drawn more than $2 billion in outside investment. The project turned the base into a digital media zone, mixing technology, media and entertainment with education and residential land uses.
“Urban infrastructure projects should not be developed in isolation, but in conjunction with land development that helps to trigger economic growth,” she says.
These success stories will help form the base of the handbook the Financing Urban Infrastructure Initiative is working to develop. The handbook will feature innovative public and private financing models that cities can put to work.
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Developed for the Council by the Center for Urban Innovation at Arizona State University, the Smart Cities Financing Guide provides detailed, expert analysis of 28 municipal finance tools for city leaders investing in the future. Many of the tools represent alternatives to the traditional funding mechanisms municipalities have used for decades. Download the Smart Cities Financing Guide, which is available at no cost to members of the Smart Cities Council.