Old funding mechanism may jumpstart India's new smart cities

Old funding mechanism may jumpstart India's new smart cities

How do you pay for 100 new smart cities? India may turn to the municipal bond market an investment tool that seems to have fallen out of favor in that country.

The last time municipal bonds were issued in India was 2010, and it involved a state issuing the bonds on behalf of the city. The last truly conventional municipal bond issue in India was in 2007. And in the entire history of Indias municipal bond market, only 25 series of bonds have been issued.

Investors seem to have little interest in municipal bonds because of a vast array of issues within the cities themselves. Many are dealing with financial challenges, including short revenue and shoddy accounting practices. And then there are the bureaucratic and regulatory hurdles, and the question of who will even guarantee them.

But with the new national government pledging to create 100 new smart cities -- and only a fraction of the funds needed are allocated The Financial Express reports that officials are looking at other sources to help bridge the gap. Supporters of the municipal bonds plan believe they could raise 10% of the needed funds that way once they figure out how to pique the interest of investors.

Financing smart cities

India, of course, is not alone in its search for ways to pay for smart cities. That's why the Council in partnership with the Council by the Center for Urban Innovation at Arizona State University -- developed the Smart Cities Financing Guide. It provides detailed, expert analysis of 28 municipal finance tools and examples of financing options cities around the world are using to pay for smart infrastructure.  Many of the tools represent alternatives to the traditional funding mechanisms municipalities have used for decades.

Source: SmartCitiesCouncil

SMART GRID Bulletin March 2018

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