FINANCING A SMART CITY – II

WHAT ALL DOES A SMART CITY NEED FINANCING FOR ? As discussed in our SMART City series, in earlier articles, the two foundational components of a SMART City - Information and Communication Technologies (ICT) or popularly known as ‘Internet of Things’ (IoT) and Environment friendly e-initiatives which reduce carbon footprints with zero or reduced emissions, apply in all of the following. 1) SMART Physical Infrastructure and its Maintenance & Monitoring - Road Network - Bridges - Flyovers - Tunnels 2) SMART Public Transportation systems and its Maintenance & Monitoring - Underground Subway / Metro Rail Network - Buses 3) SMART Healthcare and Education and its Maintenance & Monitoring - Hospitals - Schools - Medical Equipments and Wearables 4) SMART Traffic and Parking Management systems and its Maintenance & Monitoring 5) SMART Energy with SMART Grid, Transmission and Distribution systems and its Maintenance & Monitoring - Solar Energy - Wind Energy - Biomass and Bio-gas Energy - Other Renewable Energy sources 6) SMART Water, Sanitation and Waste Management systems and its Maintenance & Monitoring - Rain Water Harvesting 7) SMART Buildings and its Maintenance & Monitoring, including of - Affordable / Low Income Housing - Slum organizing and upgradation 8) Cemeteries and Cremation Grounds systems & management and its Maintenance & Monitoring WHAT, HOW AND FROM WHERE ? Internal Sources constitute all DIRECT sources of income and revenues generated by and within the city only. Internal Sources for gathering Finances to create a SMART city are Secured, as well as Unsecured. In several cases, as observed, cities have adopted a Financing Mix of Debt and Equity from Internal Sources, for Financing their SMART City projects. 1) Land - Betterment Levies - Special Assessment Taxes - Exactions - Impact Fees - FSI (Floor Space Index) Charges - Land Taxes 2) Municipal Bonds (General Obligations Bond) without Guarantee, which are Tax Free and with low interest rate. 3) Revenue Bonds consists of Fees, User Charges and Asset Based Taxes - Highway Toll Charges - Utility Charges - Sewerage Charges - Sanitation Charges - Real Estate Property Taxes - Port Charges and Taxes (Air and Sea Ports) 4) Ancillary Services - Parking Charges - Leasing, Renting Shops, Restaurants, at and of Airports and Other Commercial properties, on a Operating Contract basis - Highway Concession Fees and Charges 5) Tax Increment Financing 6) Advertisement Taxes 7) Entertainment Taxes 8) Professional Taxes 9) Octroi and Intra-State Entry Taxes External Sources constitute all INDIRECT sources from where a city can gather Finances to make itself a SMART City. Generally, Financing is made easily available from External sources when the city is able to provide a collateral / Guarantee, based on SECURED Assets, Services and other revenue generation Internal Continue Reading

Financing a Smart City – I

How  to  Finance  a  SMART  City,  is  not  complicated  or  complex,  nor  is  it  tough,  as  far  as  city’s  books  are  clean,  corruption  free  and  in  order,  and  as  far  as  there  is  a  Political  Will  and  coherent  and  coordinated  agreement  among  all  the  stakeholders  to  make  the  city  SMART.   Getting  Financing  to  create  a  SMART  City,  is  no  different  than,  a  private  citizen  seeking  a  loan.   The  same  two  fundamental  considerations  apply  here  too,  and  which  are -  What  monetized  Internal  Sources  a  city  has  and  What  the  city  can  gather  from  available  External  sources,  based  on  its  capabilities  and  capacities. A  nations’  macroeconomic  Management  and  its  entailing  risks,  affect  not  just  the  broader  economic,  fiscal  and  financial  scenarios  of  a  State,  but  it  can  also  translate  into  restrictions  being  placed  and  hurdles  created,  for  a  State,  on  its  capability  to  raise  funds,  especially  as  the  State  operates  under  the  National  government.   Ideally,  7-8%  of  national  GDP  spent  on  infrastructure,  depends  on  fiscal  sustainability  and  creditworthiness  of  a  city. Considering  the  fact  that,  this  is  going  to  be  an  investment  by  the  city  resident  tax  payers,  of  which  the  fruits  and  rewards  shall  be  reaped  by  all,  for  generations  to  come (150  years  as  discussed  in  earlier  articles),  making  life  easier,  profitable  and  healthier,  it  is  extremely  essential  for  all  City Leaders  (as  discussed  in  earlier  articles)  and  stakeholders,  including  city  residents,  to  acknowledge  and  accept  the  fact  that  all  the  steps  of  Planning,  Connecting  and  Financing  are  followed  and  tapped,  in  a  systematic,  well organized,  Transparent  and  Accountable  manner,  with  a conscientious  effort  and  initiative  by  all  involved  to  go  the  extra  mile.   Not  doing  so,  can  very  well  derail  your  SMART  City  dreams,  and  pull  you  and  your  city  back  twenty  years. Zero  or  low  Debt,  Fiscal  Prudence  track  record,  Consistent  and  crystal  clear  rules,  policies  and  laws,  Strong  and  sound  Regulatory  framework  and  Institutions,  Systematic,  highly  organized,  Open,  Transparent,  Accountable,  Easy  and  Swift  governance  processes,  systems  and  mechanisms,  Predictable  Tax  and  Regulatory  regimes,  and  a  Strong,  fair,  swift  and  effective  Judiciary,  all these  combined  with  best  practices,  are  at  the  Core  for  any  city  to  gather  Financing  to  make  itself  SMART.   These  factors  are  also  critically  important  in  determining  the  creditworthiness  of  a  city,  when  it  approaches  External  sources  to  acquire  Financing.   Any  mumbo-jumbo,  double  meanings,  loopholes,  gaps,  neglect,  inconsistency,  politics,  game  playing,  in  any  of  these,  in  any  way,  shape  or  form,  can  Continue Reading