Urban Infrastructure Financing Research Articles

Municipal Financing and Infrastructure: A Critical Analysis of the Cities in West Bengal

Cities, acting as engines of economic growth and generators of public finance for development, will usher in an urban revolution in the developing world. Such an urban revolution is sure to bring in opportunities to millions through the increasing level of urbanisation. This rising trend of urbanisation coupled with the increasing functional responsibilities of the Urban Local Bodies (ULBs) has been creating serious problems for the provision and financing of urban infrastructure. The resource crunch at each level of government in general, and the local level in particular, has instigated the need for analysing the causes behind such adverse state of municipal finance. Against this background, this paper attempts to evaluate the state of municipal finance in West Bengal by performing a comparative analysis of relevant indices. Acknowledging the potential of municipal finances in improving the delivery of basic services, the present study uses secondary data to demonstrate that the higher availability of essential urban services is associated with higher levels of revenue generation. This study presents a spatial and town class-based pattern analysis of the finances of ULBs of West Bengal in terms of their financial base, its adequacy, and their revenue and expenditure performance. The main thrust of this study is to examine the patterns of finances in ULBs in West Bengal and to present a comparative picture thereof along with per capita analysis of revenue and expenditure components based on size categories of the ULBs.

Urban infrastructure finance and its relationship to land markets, land development, and sustainability: a case study of the city of Islamabad, Pakistan

This study addresses the connection between financialization of real-estate, individual investment objectives, and urban sustainability. It uses a survey approach to explore the relationship between the financialization of urban development and its influence on urban sustainability in a developing country. We found that the respondents prefer to invest in real-estate to achieve a return on investment, rather than to build a house to live in. This behavior increases urban sprawl resulting in a slower occupancy growth rate and causes a delay in the provision of basic amenities, hence affecting urban sustainability. We conclude that it is necessary to create a balance between urban land development requirements for housing needs, investment requirements for revenue generation, and individual savings requirements. The study contributes to the literature on financialization by adding the view of individual private investors to the research that mainly addresses institutional investors.

The new urban managerialism in geopolitical context

This commentary critically examines Phelps and Miao’s concept of the new urban managerialism (NUM) in light of three geopolitical processes operating around the state and urban politics: (1) the geopolitics of city-regionalism; (2) the geopolitics of urban environmental management; and (3) the geopolitical implications of the public–private financing of urban infrastructure. It argues that the NUM remains fundamentally a territorialized political project and raises questions about where to draw conceptual and territorial boundaries around the urban public interest.

Addressing constraints to private financing of urban (climate) infrastructure in developing countries

ABSTRACTUrban infrastructure investment needs in the developing world are immense, particularly when the additional costs associated with lower carbon, more climate-resilient options are considered. These cannot possibly be financed from fiscal sources and ODA flows alone; private financing will need to be accessed. Focusing on the ability of city governments and subnational urban utilities to mobilize private finance, this paper makes two core arguments. First, private investment in municipal infrastructure requires robust institutional, fiscal and regulatory systems that are often absent in developing countries. Establishing such systems often requires policy and institutional reform, much of which lies beyond the competence and control of city governments themselves. Second, while the marginal investment needs related to climate mitigation and adaptation complicate and aggravate the picture, they do not alter the fundamental requirements of private investors. Put simply, municipalities and utilities will need to satisfy the requirements of regular private finance before they can attract green private finance. This paper looks across the main avenues for city governments to mobilize private finance – municipal borrowing, public–private partnerships, and land value capture instruments – and identifies four broad factors that determine the potential size and scope of city leveraging activity. It then offers a new framework to understand where the most pressing constraints to private investment readiness lie and proposes priority measures that local and national governments, together with development partners and other stakeholders, can take to address them.

Public asset corporation: A new vehicle for urban regeneration and infrastructure finance

This article presents a hybrid model of managing and financing urban redevelopment and public infrastructure: the Public Asset Corporation (PAC). The model has evolved through the example of Copenhagen City & Port Development Corporation (By og Havn, n.d.), a publicly owned privately managed institution that leverages public assets through land value capture and Public-Private Partnerships. In addition, City & Port leases and sells land to private investors at market prices. The yield serves public benefit by funding a city-wide metro system. Through a mandate by national law to always maximize the yield, City & Port is sheltered from political interference. Thus, it is the blend between public and private ownership, management, and financing that distinguishes the PAC model as it evolved from the case study of City & Port. In contrast, much literature on public ownership and management focuses upon the operational inefficiencies, bureaucracy, and lack of accountability of public organizations, while literature on private organizations is concerned with the amassment of profits accrued by private investors, despite originating from profit generating public sector-driven initiatives, including value appreciation arising from re-zoning, infrastructure, and other public investments.

Urban infrastructure financing in India: a proposed framework for ULBs

Infrastructure has been identified as the backbone of any economy as it provides channels of economic growth. For emerging economies like India, with 31% current urban population and contribution of 63% to GDP; the pie is expected to increase to approximately 40 percentages by 2031 with a GDP contribution of 70%-75%. This creates a need for rapid development as well as the strengthening of existing urban infrastructure to accommodate growing demand and to exploit its economic contribution. The extent of urban infrastructure development is delivered at three levels of governance; Centre, State and urban local bodies (ULBs). ULBs being the last level of governance for infrastructure development in urban India, they are grossly under-equipped to effectively generate revenues and raise capital. The present study has identified issues in the existing financing and assessment framework of ULBs and suggests a framework to rationalise their funding patterns and to bring competitiveness. The paper stresses the need of the proposed framework to bring smart city SPV and other ULBs at the equal platform.

Urban infrastructure financing in India: a proposed framework for ULBs

Infrastructure has been identified as the backbone of any economy as it provides channels of economic growth. For emerging economies like India, with 31% current urban population and contribution of 63% to GDP; the pie is expected to increase to approximately 40 percentages by 2031 with a GDP contribution of 70%-75%. This creates a need for rapid development as well as the strengthening of existing urban infrastructure to accommodate growing demand and to exploit its economic contribution. The extent of urban infrastructure development is delivered at three levels of governance; Centre, State and urban local bodies (ULBs). ULBs being the last level of governance for infrastructure development in urban India, they are grossly under-equipped to effectively generate revenues and raise capital. The present study has identified issues in the existing financing and assessment framework of ULBs and suggests a framework to rationalise their funding patterns and to bring competitiveness. The paper stresses the need of the proposed framework to bring smart city SPV and other ULBs at the equal platform.

Threats and root causes of using publicly-owned lands as assets for urban infrastructure financing

Using publicly-owned lands as assets for urban infrastructure financing considers one of the most ambitious and encouraged approaches to finance urban infrastructure since this approach would provide the needed financing to different types of infrastructure without depending on the government or on the low-income groups. This financing approach is based on obtaining revenues from private developer’s and high-end land owners through publicly-owned land selling or leasing to capture the increment in land value as a result of public investment in infrastructure. However, the usage of this financing approach in the Egyptian new cities had and will expose the government to many negative financial instability risks due to the current used policies. The main objective on this research is to explore, describe, and identify all the threats of using publicly-owned lands as an asset for urban infrastructure financing and to deduce and conclude their root causes. Accordingly, the research methodology includes literature review and qualitative analyses of some local and international failure cases in an attempt to deduce these threats and their root causes. On conclusion, using publicly-owned lands as assets for infrastructure financing ineffectively carries huge socio-economic and political negative risks for government, business and the community.

Frontier financialization: Urban infrastructure in the United Kingdom

This article contributes to critical social scientific understanding of the significance of state power to the furtherance of the financialization of socioeconomic life. Drawing on the poststructural theories of power of Gilles Deleuze and Michel Foucault, the concepts of “diagram” and “dispositif” are developed to foreground how changes in modalities and relations of power are manifest in shifting governmental rationalities and contingent policy interventions that attempt to advance financialization processes. The article's conceptual claims are illustrated through an analysis of the financialization of urban infrastructure that focuses on the United Kingdom's first ever National Infrastructure Plan (NIP), enacted between 2010 and 2015. The NIP is shown to have marked a step‐change in the UK state's approach to the governing of ostensibly public urban infrastructure, one that sought to reconfigure privately owned, market‐operated, and privately financed infrastructures as a “new asset class” to be prospected for value by global investors. As the NIP problematized the private debt financing of urban infrastructure, it was through the diagram of governmental planning that the apparent limit points of financialization processes were identified and confronted, and through specific dispositif that attempts were made to extend the frontier of financialization.

Urban infrastructure financing in India: applying the benefit and earmarking principles of taxation

Cities in developing countries, including India, are the engines of economic growth and structural transformation due to their agglomeration, knowledge and networking externalities. Yet, they suffer from a serious mismatch between their functions and finances. As a result, they have been consistently neglecting core urban public facilities, critically needed for sustaining growth. This is puzzling as externalities in cities create windfall benefits to both immobile and mobile factors. Surprisingly, there is no discussion on benefit taxation, emphasised by Wicksell (in: Musgrave, Peacock (eds) Classics in the theory of public finance, Macmillan, London, 1896) and Lindahl (The justness of taxation, University of Lund, Lund, 1919), as a strategy of financing urban infrastructure. This paper suggests combining the golden rules of local public finance, principles of benefit taxation, value capture financing and earmarking, borrowing, tax increment financing and tax-sharing in the spirit of cooperative federalism to address the needs of planned urban development in India. Our conclusions apply to other developing countries as well.

U.S. Infrastructure Gap(s): Federal Policy and Local Public Institutions

Urban infrastructure development and maintenance needs in the United States are not being met. Likewise many U.S. cities have been slow to adopt innovative new procurement models for infrastructure development and smart city programs despite their apparent benefits. This paper assesses the impediments to the adoption of new models for urban infrastructure development and finance unique to the United States as a function of federal, state and local investment policies and institutions, and how those institutions differ from other developed economies globally. The paper identifies institutional reform, via the creation of new public infrastructure organizations and institutions in U.S. states and cities, as a solution to spur the adoption of life-cycle based infrastructure procurement, smart city programs, and other proven reforms to urban infrastructure development and maintenance.

Housing System and Urbanization in the People's Republic of China

This paper examines how transformations in the housing system in the People’s Republic of China (PRC) influence the PRC pattern of urbanization. It first discusses how housing policies determine the supply and demand of housing in urban PRC and subsequently analyzes how the changes in the mode of housing provision have affected rural–urban migration, intercity labor mobility, the financing of urban infrastructure, and general urban economic activities in the PRC. The PRC experience of the interaction between the housing system and urbanization is unique, but it clearly indicates that an effective housing system that can responsively provide adequate and affordable housing is crucial to the success of inclusive and equitable urbanization.

Managing the Private Financing of Urban Infrastructure

This article explores the implications of private financing for the functioning of urban infrastructure, with a particular emphasis on Australian cities. The article charts the directions of infrastructure financing in Australia from the 1980s onwards, being the period when privatisation and financialisation of utilities and state-owned enterprises in Australia gathers momentum. It then explains how infrastructure emerged globally as an asset class with exposition of how the particular characteristics of urban infrastructure have proven to be attractive to private capital interests. A concluding section points to directions in infrastructure financing that merit close attention from an urban planning perspective.

The Increasing Financialization of China’s Urbanization

This paper provides a heuristic framework to address issues about China’s ongoing urbanization in relation to the role of land and built environment as triggers for economic growth and to the increasing financialization of urban production. While a dominant field of literature highlights the interrelation between land and capital within a specific institutional setting between Central and local governments, it argues to include other key linkages between infrastructures, property development and finance to understand China’s recent exponential urban growth. It first places the current consequent local governments’ debt into perspective along with the evolution of financial circuits for urban infrastructures resulting from Central Government policy and regulation changes. Next, and in line with the real estate literature that highlights the key role of demand, it develops an original understanding of the financialization of urban production from the perspective of China’s property industry. Besides the role of homeownership policies since 1998 which boosted urban production based on use value, various ways of the transformation of property into financial assets have occurred. Chinese households as the main investors have not only been able to directly invest in housing and in non-housing by purchasing flats or commercial property but indirectly by increasing investments in special purpose vehicles such as trust-bank and funds finance and new kinds of investment platforms. In both cases, Central Government macropolicies, both stimulating and restricting from 2008–2016, have gone in hand with increasing financialization processes for local governments’ debt, urban infrastructure financing and real estate.

Who Pays, Who Benefits, Who Decides? Urban Infrastructure in Nineteenth-Century Chicago and Twentieth-Century Phoenix

This article compares the financing of urban infrastructure in nineteenth-century Chicago and twentieth-century Phoenix, highlighting distributional conflicts over the cost of public goods. Using the rich secondary literature on Chicago, particularly Robin Einhorn's book, Property Rules: Political Economy in Chicago, 1833–1872, I explore whether adoption of development impact fees in Phoenix in 1987 represented a transition similar to that in Chicago between 1847 and 1851, when a system of special assessments paid by property owners benefiting from an improvement arose, in contrast to citywide financing of public works for citywide benefit. I examine the history of adoption and implementation of development impact fees, which were intended to “make growth pay for itself” by assessing new development to finance infrastructure it would require, and consider whether the fees resembled Chicago's special assessment system in constituting a privatization of government and in reflecting a view that government should not be used to redistribute. I conclude that models that address the provision of urban infrastructure, such as the Tiebout model, would benefit from greater attention to efforts to shift the cost of public goods over space, time, and social groups or classes in growing communities.

The political economics of investment Utopia: public–private partnerships for urban infrastructure finance

This article explores the policy disconnect between the pursuit of private investment return and the public desire for enhanced social value from public–private partnership (P3) investments in urban infrastructure. Investors view infrastructure finance as an opportunity for relatively safe, high-return investing. But infrastructure-financing architecture to achieve high private returns frequently clashes with financing models that sustain long-term social benefits. The full implications of relational tensions in the structuring of P3s are analyzed. The principal policy conclusion is that, because of these tensions, the use of P3s for this purpose should be restricted.

State-Led Urbanization in China: Skyscrapers, Land Revenue and “Concentrated Villages”

AbstractThis article examines the rationale behind municipal and local governments' pursuance of urbanization, and the political and socio-economic implications of the policy to move villagers from their farmland into apartment blocks in high-density resettlement areas, or “concentrated villages.” It provides evidence of an increasing reliance by municipal and local governments on land revenues and the financing of urban infrastructure by the governments' land-leasing income. Following their relocation to apartment blocks, villagers complain that their incomes fall but their expenditures rise. Moreover, although they cede rights to the use of their farmland to the government, they are not given access to the state-provided social welfare to which urban residents are entitled. The paltry compensation which they receive for their land is insufficient to sustain them. Displaced or landless peasants are emerging as a distinctly disadvantaged societal group, deprived of the long-term security of either farmland or social welfare. The question of whether or not rural land rights should be freely traded is not as crucial to the future livelihoods of landless peasants as allowing them access to the full range of social welfare afforded to urban residents.

FINANCING URBAN INFRASTRUCTURE: KNOWNS, UNKNOWNS, AND A WAY FORWARD

AbstractImproved urban infrastructure is widely believed to be essential in facilitating economic growth and in improving the lives of urban dwellers, both in developed and in developing countries. This paper focuses on several dimensions of urban infrastructure finance: finance for major infrastructure improvements in major economic centers, finance for expansion of basic municipal services in secondary cities and towns, and intergovernmental systems for financing investments with impacts beyond jurisdictional limits. It reviews what is “known” about current practices in these areas, using international evidence and case studies and summarizing international best practices. It also indicates areas in which knowledge gaps remain. Despite these “unknowns,” there are avenues by which our understanding of infrastructure schemes can be enhanced, and some suggestions for a research agenda on financing urban infrastructure are offered in the concluding section.

Symposium on China Studies

To meet the increasing scholarly interest in China, this symposium provides a forum for scholars in public budgeting and finance to exchange research on China-related issues. There have been new initiatives to reform China's public fiscal system in the past two decades. The papers in this symposium examine advances and associated issues in fiscal decentralization, local budgeting, and urban infrastructure financing. The papers not only analyze the existing issues, but also make recommendations on how to develop an accountable local budgeting system, how to finance sustainable urban infrastructure, and how to pursue a more balanced approach to fiscal decentralization in contemporary China.

Funding China's Urban Infrastructure: Revenue Structure and Financing Approaches

Urban infrastructure has become increasingly important in China with its rapid urbanization and economic development. However, many questions remain unanswered about how different levels of governments in China gather financial resources to fund its urban infrastructure development, and whether the system is sufficient or sustainable. This article examines financial resources for China's urban infrastructure investment in recent decades. First, the article traces the history of China's urban infrastructure investment since 1949. Second, using data mainly from the China Urban Construction Yearbook (2000–2008), it examines revenue structure and financial approaches for China's urban infrastructure finance, its recent trends and patterns, and disparities across provinces. Finally, the article evaluates unique characteristics of the China-style urban infrastructure investment, and discusses some issues regarding the use of quasi-governmental authorities and land transfer fees.