Habitat III Issue Papers - 7: Municipal Finance

Many central and local governments recognise the importance of cities to their national economies. They also recognise that cities need a sustainable flow of resources and the necessary conditions to unlock endogenous financial resources to achieve sustainable urbanisation. However they are yet to act on that recognition. Effective financing mechanisms operating within a strong legal and institutional framework are needed to cater for urban expansion and to provide better services in existing urban areas. However, many city financing systems are structured for their role in the economy of a bygone era, rather than in line with global best practice.

Some governments, however, are more clearly defining the responsibilities of authorities for the delivery of urban infrastructure and services and better structuring transfers and mandates for local revenue generation to encourage efficiency in service provision, and in the management of resources for operations and capital investment. Yet this process needs to be extended and systematised. This paper set out the key drivers in the development of an effective system of local government finance.

This issue paper on "Municipal Finance" is part of a series of thematic reports offering a comprehensive, expert-level view of the processes of urbanisation that characterise today’s century of cities — and look forward to what could and should come next. The 22 “issue papers” were submitted by a range of multilateral institutions. They will ultimately be used to guide discussion by 10 formal “policy units”, which will focus on the six thematic issues deemed important for the Habitat III process. Made up of independent experts, these units touch on housing, resilience, equity and other issues. Eventually, they will each provide formal input regarding the crafting and, especially, implementation of the New Urban Agenda.