Innovative Finance Models for Sustainable Cities of the Future

By Meghna Tare

Meghna is the Executive Director, Institute for Sustainability and Global Impact at the University of Texas at Arlington where she has initiated and spearheaded many successful cross functional sustainability projects related to policy implementation, buildings and development, green procurement, transportation, employee engagement, waste management, GRI reporting, and carbon management. She is a TEDx UTA speaker, was featured as Women in CSR by TriplePundit, has done various radio shows on sustainability, is an active blogger, and graduated with an MBA in Sustainable Management at the Presidio Graduate School. You can connect with her on LinkedIn or follow her on Twitter @meghnatare.

Jun 9, 2014 | Smart Cities | 0 comments


Who will you meet?

Cities are innovating, companies are pivoting, and start-ups are growing. Like you, every urban practitioner has a remarkable story of insight and challenge from the past year.

Meet these peers and discuss the future of cities in the new Meeting of the Minds Executive Cohort Program. Replace boring virtual summits with facilitated, online, small-group discussions where you can make real connections with extraordinary, like-minded people.


 

City budget deficits are far from rare. San Jose, Chicago, Phoenix and Las Vegas are just a few examples of cities confronting likely shortfalls in the upcoming fiscal year. A wave of cost-cutting, and in many cases conflicting, policy drivers awaits the sustainability champions of US cities.

With business starting to take sustainability seriously, not only is there a commercial opportunity in implementing city sustainability strategies, but also a ‘read-across’ in terms of public and private sector strategies. The key question is how to find effective models of financing that will meet the objectives of both public and private stakeholders when it comes to sustainable cities.

Tax Incremental Financing (TIF)

A new report, Investor Ready Cities released by  Siemens, PwC and law firm Berwin Leighton Paisner, aims to help cities think about new ways to fund their infrastructure projects – by exploring traditional funding models like taxes and user fees and by attracting private investors.

For example, tax incremental financing (TIF) is an innovative a way to fund urban infrastructure projects. TIF can be a valuable public finance tool for city redevelopment projects. Establishing a TIF program allows the city to invest selected new property tax dollars into the neighborhood instead of into the city’s General Fund, for a defined period (typically 20 years). TIF funds are used to leverage public funds to promote private sector activity in a targeted district or area or supporting sustainable community. TIF districts are typically established in areas with redevelopment potential and enable municipalities to use anticipated growth to raise money to finance essential infrastructure improvements by leveraging public sector bonds based on future tax gains.

The 2013 Sustainable Communities Tax Increment Financing (TIF) Designation and Financing Law passed by the Maryland General Assembly as House Bill 613 uses TIF supported bonds in a Sustainable Community for:

  • Historic preservation and rehabilitation;
  • Environmental remediation, demolition and site preparation;
  • Parking lots, facilities and structures of any type for public or private use;
  • Highways and transit services that support Sustainable Communities;
  • Affordable or mixed income housing; and
  • Storm water management and storm drain facilities.

Crowdfunding

Crowd and micro funding projects are not unheard of in the social cause community. Kiva has enabled developing world entrepreneurship through microloans since 2005. But until recently, crowdfunding hadn’t really been applied to creating businesses and sparking innovation around the triple bottom line of sustainability – people, planet, and profit. Crowdfunding – popularized by platforms such as Kickstarter and Indiegogo, provides a way for many people to pool resources, typically through online donations, toward a larger goal.

For example, Missouri in their bid to grow and support Kansas City’s B-Cycle program, and deliver infrastructure improvements to the bike share system, recently launched a crowd funding campaign on the Neighbor.ly platform. The goal was to run simultaneous mini-campaigns, ranging between $50,000 and $250,000, to bring one to five stations to 10 different Kansas City neighborhoods. The current campaign is the second crowd funding effort by B-Cycle. The first gathered funding for the purpose of maintaining existing stations.

In February 2014, Binghampton, a neighborhood on the east side of Memphis, Tennessee broke ground on the Hampline: a two-mile cycle track that will connect Binghampton to nearby parks and trails. While the bulk of the money for Hampline came through the usual avenues of city grants and foundations, the last $69,000 of the $4.5 million project was raised via ioby, a crowdfunding platform that’s helping to launch environmental and community development initiatives around the country.

Green Revolving Fund (GRF)

Energy efficiency saves money. But there is always the challenge of justifying and securing the upfront capital often needed to implement efficiency projects. The Green Revolving Fund (GRF) model is emerging as an effective solution. The model is increasingly common among higher education institutions and state governments, and it is gaining traction with healthcare facilities, municipalities and businesses.  A GRF is an internal investment vehicle that provides financing to parties within an organization for implementing energy efficiency, renewable energy, and other sustainability projects that generate cost savings. These savings are tracked and used to replenish the fund for the next round of green investments, thus establishing a sustainable funding cycle while cutting operating costs and reducing environmental impacts.

For example, the City of Ann Arbor established The Municipal Energy Fund in 1998 to be a self-sustaining source of funds for investment in energy-efficient retrofits at city facilities, so the City could continually reduce its operating costs over time. The Energy Fund is financed by re-investing the funds saved through energy efficiency measures into new energy saving projects. In 1988, the City utilized its municipal bonding authority to fund a $1.4 million Energy Bond which enabled the City to implement energy efficiency measures in 30 City facilities. The payments for this ten-year bond were generated through energy cost savings. With the bond paid off in 1998, the City chose not to eliminate the bond payment line item in the annual budget but rather to reduce it by 50% to $100,000. This money was then used to finance the new Municipal Energy Fund.

Vision for the Future

Cities are hubs for ideas, commerce, culture, science, social development and innovation. At their best, cities have enabled people to advance socially and economically. The challenges cities face can be overcome in ways that allow them to continue to thrive and grow, while improving resource use and promoting sustainable development. The vision is to give people a tool to build their own city. They can use these finance models as a vehicle to organize, invest and manage and be a part of development around them.  It is going to create better cities that are more connected and relevant to local community.

Discussion

Leave your comment below, or reply to others.

Please note that this comment section is for thoughtful, on-topic discussions. Admin approval is required for all comments. Your comment may be edited if it contains grammatical errors. Low effort, self-promotional, or impolite comments will be deleted.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Read more from MeetingoftheMinds.org

Spotlighting innovations in urban sustainability and connected technology

Sustainability and Resilience: Not Quite the Perfect Relationship

Sustainability and Resilience: Not Quite the Perfect Relationship

People seem frequently to assume that the terms “sustainability” and “resilience” are synonyms, an impression reinforced by the frequent use of the term “climate resilience”, which seems to enmesh both concepts firmly.  In fact, while they frequently overlap, and indeed with good policy and planning reinforce one another, they are not the same.  This article picks them apart to understand where one ends and the other begins, and where the “sweet spot” lies in achieving mutual reinforcement to the benefit of disaster risk reduction (DRR).

Stormwater Management is an Equity Issue

Stormwater Management is an Equity Issue

As extreme weather conditions become the new normal—from floods in Baton Rouge and Venice to wildfires in California, we need to clean and save stormwater for future use while protecting communities from flooding and exposure to contaminated water. Changing how we manage stormwater has the potential to preserve access to water for future generations; prevent unnecessary illnesses, injuries, and damage to communities; and increase investments in green, climate-resilient infrastructure, with a focus on communities where these kinds of investments are most needed.

Public-Private Collaboration – Essential for Disaster Risk Reduction

Public-Private Collaboration – Essential for Disaster Risk Reduction

A few years ago, I worked with some ARISE-US members to carry out a survey of small businesses in post-Katrina New Orleans of disaster risk reduction (DRR) awareness.  One theme stood out to me more than any other.  The businesses that had lived through Katrina and survived well understood the need to be prepared and to have continuity plans.  Those that were new since Katrina all tended to have the view that, to paraphrase, “well, government (city, state, federal…) will take care of things”.

While the experience after Katrina, of all disasters, should be enough to show anyone in the US that there are limits on what government can do, it does raise the question, of what could and should public and private sectors expect of one another?

The Future of Cities

Mayors, planners, futurists, technologists, executives and advocates — hundreds of urban thought leaders publish on Meeting of the Minds. Sign up to follow the future of cities.

You have Successfully Subscribed!

Wait! Before You Leave —

Wait! Before You Leave —

Subscribe to receive updates on the Executive Cohort Program!

You have Successfully Subscribed!

Share This