Financing Sustainable Development

1. Can local property taxes be enough for making local governance sustainable? What are the alternatives? Are these experimented in some cities? Discuss innovative financing systems you may be aware of.

The first point to make is this that the 12 of the 17 SDGs have to be implemented in cities and a lot of this involves investment involves capacity building and involves resources of many different kinds and so the whole financial package which the foundation for this needs to be mobilized somehow so I think this is a one of the preconditions.

The SDGs in my judgment are good, there’s a good agreement on the what but there’s almost nothing about the how and with the how comes the question of what are the resources to be applied I don’t believe that the aid system the international agencies have the resources to cover this at all and I think I remember years back at one point someone was making an estimate of what was the annual investment in infrastructure in urban infrastructure by developing countries and it was something on the order of a hundred and fifty billion a year and at that time the World Bank was providing six right and so that should have kept everybody in a kind of a more humble mood and realizing that it wasn’t going to come from these institutions so at this point I think the resources have to come from every place they have to come with some kind of combination of catalytic small but catalytic resources from the international agencies but a lot from the global private sector a lot from national and local public finance so it really requires measures at every single level in order to get more resources going.

Well I think the first point on that is there’s a basic misperception by national governments of the role of cities in their whole future in the whole economic situation because we know now that at least seventy percent of GDP in all countries is coming from urban based economic activities so it’s not an exaggeration to say that if cities are not productive the economic and social futures and political futures of all these countries isn’t very promising so if you know that a large share of your future depends on city functioning you better start allocating resources in that direction.

So the first issue is a political is a political technical judgment about the importance of resources coming from these places in the present situation the local the performance at the urban level is insufficient we need some kind of an urban social compact which would increase local and urban institutional performance and we need that performance performance criteria which can give confidence to global capital to be able to land well I think there has to be much more much more control on both the revenue and expenditure side on the revenue side there has to be much more effort as too much more serious it has to be strategic and national government have to not just think about what are traditionally local taxes to but think about what’s the combination of local and national taxes that would make sense to finance something that seventy percent of the economy of the country and I think that probably means thinking about sales and income tax and other things like that also generating revenue at the local level I don’t believe that telling the local governments that their future is going to be based on property taxes is going to go very far in property taxes are highly inefficient and expensive to collect I don’t think that’s going to be a reasonable outcome I would say that national urban policy needs to have as an objective local economic development and that presumes that there is in fact a commitment and that can be backed up by some resources as required but that that the nation requires local prosperity and prosperity productivity is going to come from local places it’s not going to come from some abstraction called the nation right and it’s going to be in real terms of – whether it’s in Mumbai or some other place or Hyderabad –  it’s from a real place it’s not from the cloud.

Right, but here I come back again to this notion of the urban social contract the local has to prove that it’s credible that it has to agree that it’s ging to tighten up on certain things and it’s got to convince people you’ve gotta convince its own electorate and communities that that better administration will lead to long-term better quality of life and better results for everybody.

If we assume that we’re not just talking about water systems or roads or traditional urban infrastructure but we’re thinking about things which affect health and education and protect Social Protection response to climate change all these things I think we’re in a very different situation and the case that that does that I’ve been thinking a lot about now is this question Zika in Latin America where people are realizing that that if in fact this becomes a large-scale epidemic what will happen is that the the care of damage children will lead to a reduction in the number of wage earners and by household so we’ll see a new generation of urban poverty and so we almost need an insurance policy at the level of the city against Zika which I think people would understand I think people would agree to pay a certain Zica tax where they may not be prepared to pay climate change tax yet so it the the cross-sectoral character the SDG must have some opportunities there that we have to discover it.

I think there’s going to be a hot moment and the aha moment will be about the discovery of interdependence. I recently was in some discussions with the CAF the new Latin American Development Bank and they said that the subject what they were interested in was productive transformation and well what sector is that is well that’s got a little bit of people and get them infrastructure it’s got some productive investments that industry and so they began to think about this in a much more integrated way. I’ve had recent discussions in the UN economic Commission for Latin America in Santiago they’re talking about saying the same language so I think there’s a sense there’s a moment where things are beginning to change I think that one of the questions is whether these organizations are interested in being innovative at this point how hungry they are for new customers. How they conceptualize their line of business my impression is that the CAF really is interested in this and my impression also is that the new bank in China is also interested in that. It’s interesting and it’s notable that you don’t see as much activity coming out of the out of the way to Washington right that neither the World Bank of the IDB seem to be is as active and and proactive in fact an innovative on this.

I think the role of technology and this will be very interesting there’s an interesting comparison that I’ve come across in the last several months I was working in Bogota where it turns out ninety percent of the enterprises are under 10 employees that means there’s no room for economies of scale no returns no investment technology so firm size is a problem in production and employment. Come to New York it turns out that sixty percent of the new startups since the year 2000 under five employees so what’s the difference is not that sizes that what matters what matters is infrastructure and connectivity and human capital investment.

So productivity is related to other things and I think we have to kind of move more and towards this direction of what we’re seeing in places like Brooklyn here in New York which has a different which is suggesting more about the future. In Mexico, Mexico has 5 million empty housing units surrounding Mexico city where people without housing and housing without people right and so the lack of regulation of the developers of the private sector demonstrates that next thing as housing policy is really the disastrous.

The number is six million in Brazil, is four million in Argentina and so we’re we’re coming out with a book now which basically says that housing policy  has undermined urban policy and I believe that part of that’s related to the global financial sector because this is is some money that’s landing in these places and allowing for outcomes which are not urban outcomes their housing outcomes and bad housing outcomes and that’s one of the things that for example I think was is terribly weak in the New Urban Agenda the regulatory function there’s almost no mention of regulatory functions there’s almost no mention of markets alright and that’s a pretty silly thing to do that’s a big mistake so the question I mean the Mexico example would show you that even though after Habitat II Mexico put in heavy decentralization and all kinds of institutional reforms but they still were unable to regulate the markets and you come up with this terribly wasteful situation. It’s in fact it’s even worse because they ended up using public savings and public resources, they use the social security fund the workers payments have gone into financing this housing I think that we need to think about regulation as I think there has to be a national perspective on regulation but one of the things that we we really have not seen in decentralisation in general is the decentralization of the regulatory function and maybe the regulation we really have to think about a different form of regulation or where different jurisdictions for regulation to govern local markets so that these are not so generalized as not to be meaningful in local places real ecologies and where people can manage them on the ground.

I don’t really see a big improvements in the water sector. I think the water sector is a little stuck and it is dangerous because we know that the marginal cost of water is going up and almost every city in the world so that we’ve got to move to a different approach on water but the institution doesn’t seem to be that much reform and the promises of privatization by the big companies absolutely did not work on the privatization of roads, people are prepared to pay for tolls for some of these roads because the traffic situation is certainly become disastrous in many places but that doesn’t solve the urban transport problem we need much more public transporting and public transport system.

Let’s say we take a city like Buenos Aires they have a big architecture school that brings 28,000 architect you know come out of there but these people don’t learn about environment they don’t certainly don’t worry about public health they don’t learn about enough about the infrastructure right there housing and housing design maybe some of the best in the world but they’re not urbanists. I’m particularly interested in how urban practice is increasing exclusion, right. I mean if you think about it a lot of urban practice is about definition about definition of spaces definition of jurisdictions of eligibility criteria and every time we talk about definitions we talk about distinctions and exclusions so we need to think about a different kind of urban practice which is much more integrated. They have to help in the estimation of what are the resources required to service any particular urban area what do we need to do and to build the consensus among the institutions and the political forces that if we have to tax at a 30-percent level instead of a 20-percent level we should do that but this is what we expect to get out of it that part of the job is the mobilization of resources and management of expectations to needs and and all these things so it’s a much more holistic kind of judgment. I also think that’s absolutely essential if one imagines the prospect of climate change and the need for infrastructure to to mitigate and and later for adaptation so I think that this kind of judgment it’s somebody who is much broader than the traditional you know micro surgeon who worked with micro economist who can tell you about the rate of return on the housing project. We have an interesting dissertation for example being done on Karachi it turns out that everyone will say well Karachi has a very poor urban governance the public institutions don’t work very well yet Karachi recently has been called one of the most charitable cities in the world.

Ok so where’s all this coming from and what are the practices and in fact when we look at what the practices are we see that they are highly integrated right but they’re out of the formal governance structure.

Alright so now the question is how you train for that how would you modify curricula how would you get people to think about a kind of urban practice which is much broader and I think again the Zika problem is a good example of that is it a public health problem is that urban infrastructure problem or is it an urban economics problem I mean it becomes all of those things and so this is a new urban practice this is no longer architects. This is, alright… architects they are helpful for but limited in a limited way but we need people who are can cross these disciplinary boundaries who can see the whole right it’s almost like urban practitioners in fact which are aware of these range of things I think that would be important.