How will we finance the city infrastructure of the future?

New road tunnels under construction in Rio de Janeiro, Brazil, in 2013. Image: AFP/Getty.

What are the biggest financial priorities for cities in our rapidly urbanising world? Who are the key players to invest in urban infrastructure? What are the most effective, innovative financing mechanisms that cities can adopt?

These are urgent questions that global cities are asking as they face a huge infrastructure funding gap. To find solutions to this major 21st century challenge, the New Cities Foundation has launched the Financing Urban Infrastructure Initiative. Its mission is to produce actionable research and pragmatic recommendations for key urban decision-makers, including mayors, institutional investors and real estate developers, on how we can use innovative financing models that can address this gap.

The Initiative will be led by Dr. Julie Kim who joins us from the Stanford Global Projects Center as a New Cities Foundation Senior Fellow. We caught up with Dr. Kim, to find out more about her planned research.

NCF: How has infrastructure financing changed over the past few decades?

In the past 50 years, we went from infrastructure financing being largely in public hands to increased private sector participation – starting in the mid-80s for emerging economies and mid-90s for advanced economies.

More recently, it came back into the public hands with “remunicipalisation”, especially for the water sector.

Today, there is an unprecedented investor appetite for infrastructure globally and there are more financing options available for cities. As the market becomes more complex with increased demand, a more sophisticated approach is required.

NCF: What are the most pressing priorities in financing cities in the 21st century?

JK: Firstly, cities must strive to be more independent financially. They need to seek local financing capacity while capitalising on all resources available from multilaterals, bilaterals, central and provincial governments.

Secondly, they need to become smarter. The money is there, but packaging bankable projects is difficult. It takes sophistication and financial knowledge to reach well-balanced financing structures, which requires better education, networking and capacity building. This is one of the areas where the New Cities Foundation can play an important role.

Thirdly, cities need to be balanced in their development approach, especially big cities facing rapid growth and globalisation. They must balance the desire to grow economically with the need to address critical environmental and social equity concerns, whilst being sensitive to local needs and promoting inclusivity.

For small to medium-sized cities, it’s important to tap into all external resources – including grants, subsidies, credit guarantees and more.

NCF: It is well documented that cities in the Middle East and Asia face the toughest challenges when it comes to meeting investment resources with demand. How will you go about researching solutions specific to these zones?

JK: These cities need credible institutions and rule of law to attract financing: political instability presents a big challenge. In the short to mid-term, these cities must work closely with multilaterals and other development-oriented institutions to tap into their resources on technical assistance, capacity building and political risk insurance programs. Then, with multilateral backing, they must engage institutional investors for the long haul, in order for economic growth to catch up with the repayment needs.

In particular, they should explore opportunities with sovereign development funds and other impact investors who are interested in socially responsible investments with long-term positive impacts.

NCF: Do you have some standout examples of effective urban financing models that you’ve worked on or witnessed, that you can share with us?

JK: One example related to the local financial independence I mentioned earlier is the Enhanced Infrastructure Financing District (EIFD) model in California.

EIFD allows local and regional agencies new taxing powers – benefits assessment and Tax Increment Financing, for example – as well as multi-agency collaboration across multiple sectors, including transportation, water, waste management, and more. Urban infrastructure projects should not be developed in isolation, but in conjunction with land development that helps to trigger economic growth.

I was also involved in Pusan Centum City in South Korea where a 300-acre former air force base was converted into a major “economic incubator”. This was initially entitled “DMZ” – digital media zone – mixing technology, media and entertainment with education and residential land uses. This was a successful development that succeeded in drawing $2bn in outside investment.

NCF: This June, you’ll be coming to our New Cities Summit in Jakarta: a city that encapsulates many of the issues faced by rapidly urbanising zones in Asia. What interests you most about this city and its neighbouring areas?

JK: I’ll be fascinated to observe how this booming megacity plans to address economic, environmental and social equity challenges within a context of rapid urbanisation and growth. On a personal level I’m fascinated by Jakarta’s incredibly rich culture: its multi-layered, multiethnic population, peaceful and functioning effectively in all aspects.

I think Jakarta can emerge into one of the most unique metropolises in the world, on a par with global cities such as Paris, London, New York, Tokyo, Shanghai – growing to symbolise South East Asia beyond what’s being offered by Singapore.

Dr Julie Kim is a senior fellow at the New Cities Foundation (NCF), an international non-profit organisation. This Q&A was originally posted on the foundation’s blog.

The Financing Urban Infrastructure Initiative is supported by Cisco and Citi.

 
 
 
 

To transform Australia’s cities, it should scrap its car parks

A Sydney car park from above. Image: Getty.

Parking may seem like a “pedestrian” topic (pun intended). However, parking is of increasing importance in metropolitan areas worldwide. On average, motor vehicles are parked 95 per cent of the time. Yet most transport analysis focuses on vehicles when they are moving.

Substantial amounts of land and buildings are set aside to accommodate “immobile” vehicles. In Australia, Brisbane provides 25,633 parking spaces in the CBD, Sydney 28,939 and Melbourne 41,687. In high-demand areas, car parks can cost far more than the vehicle itself.

However, parking is not just an Australian problem. By some estimates, 30,000 square kilometres of land is devoted to parking in Europe and 27,000 km² in the US. This parking takes up a large part of city space, much of it highly valued, centrally located land.

Traditionally, transport planners believed that generous parking allocations provided substantial benefits to users. In reality, excessive parking is known to adversely affect both transport and land use. These impacts, along with recent land-use, socioeconomic and technological trends, are prompting cities to start asking some important questions about parking.

Australian planners must engage with emerging trends to help cities work out the best way to reclaim and repurpose parking space in ways that enhance efficiency and liveability while minimising disruption.

Here we chart likely challenges and opportunities created by these trends over coming decades.

Key trends affecting parking space in cities. Image: author provided.

Land use

All Australian cities have policies to encourage densification, consolidation and infill development in their centres. In conjunction, some cities are setting maximum limits on parking to prevent it taking over valuable inner-city properties.

Transit-oriented development (TOD) has also become popular, at least on paper. This is another form of urban consolidation around transit nodes and corridors. It is known to benefit from high-quality urban design, “walkability”, “cyclability” and a mix of functions.

These developments mean that people who live in CBDs, inner-ring suburbs and near public transport stops will use cars less. Consequently, demand for parking will decrease.

Some non-TOD suburbs are trying to replicate inner-city features as well. For example, some suburban shopping centres have introduced paid parking. This is a significant shift from previous eras, when malls guaranteed ample free parking.

Suburbanites who lack easy public transport access will continue to rely on cars. But rather than driving all the way to a CBD, commuters will increasingly opt for park-and-ride at suburban stations, thereby increasing demand for park-and-ride lots at public transport interchanges. However, excessive capacity might hurt rather than help patronage.


Social trends

In addition to land use, several social trends will affect the need for parking.

First, young people are delaying getting drivers’ licences because driving is culturally less important to them than in previous generations.

Second, people of all ages are moving from outer suburbs to inner cities. For many, this means less driving because walking, cycling and public transport are more convenient in inner cities.

 

inally, the emergence of Uber, Lyft and vehicle-sharing arrangements means that people are not buying cars. Research suggests that each car-sharing vehicle removes nine to 13 individually owned vehicles from the road.

Together, these trends point to a reduced need for parking because there will be fewer cars overall.

Technology

The importance of technology in parking is rising – paving the way for “smarter” parking.

The emergence of a host of smartphone apps, such as ParkMe, Kerb, ParkHound and ParkWhiz, has begun to reshape the parking landscape. For the first time, users can identify and reserve parking according to price and location before starting their journeys.

Apps also make available a host of car parks that previously went unused – such as spaces in a residential driveway. This is because there was no mechanism for letting people know these were available.

In addition, smart pricing programs, such as SFPark in San Francisco, periodically adjust meter and garage pricing to match demand. This encourages drivers to park in underused areas and garages and reduces demand in overused areas.

The advent of autonomous vehicles promises to have dramatic impacts on transport and land use, including parking.

According to one school of thought, mobility services will own most autonomous vehicles, rather than individuals, due to insurance and liability issues. If this happens, far fewer vehicles and parking spaces will be needed as most will be “in motion” rather than parked most of the time.

More space for people and places

The Tikku (Finnish for ‘stick’), by architect Marco Casagrande, is a house with a footprint of just 2.5x5m, the size of a car parking space. Image: Casagrande Laboratory.

The next decade promises much change as emerging land-use, socioeconomic and technological trends reshape the need for, and use of, parking. Cities will devote less space to parking and more space to people and places.

Parking lanes will likely be repurposed as cycling lanes, shared streets, parklets, community gardens and even housing. Concrete parking lots, and faceless garages will likely be converted to much-needed residential, commercial and light industrial use.

The ConversationBy transforming parking, much urban land can turn from wasteland into vibrant activity space.

Dorina Pojani, Lecturer in Urban Planning, The University of Queensland; Iderlina Mateo-Babiano, Senior Lecturer in Urban Planning, University of Melbourne; Jonathan Corcoran, Professor, School of Earth and Environmental Sciences, The University of Queensland, and Neil Sipe, Professor of Urban and Regional Planning, The University of Queensland

This article was originally published on The Conversation. Read the original article.