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FINANCING A CITY

Explore financing strategies for urban development including land, utilities, transportation, and economic infrastructure. Learn from Singapore's experience on fiscal prudence and project prioritization.

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FINANCING A CITY

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  1. FINANCING A CITY Dileep Nair 7 June 2017

  2. Needs of a city • Land • Utilities • Transportation & Communications • Social Infrastructures • Economic infrastructures

  3. Strategic Approach • Principles & Policies • Systems & Processes • Institutions

  4. Principles & Policies • Fiscal prudence • Lifecycle costs • Minimise borrowings • Revenue sources • Cost recovery & co-payment • Market-based approach • Private sector participation • Political commitment

  5. Systems & Processes • Legislation, regulation and enforcement • Budgeting • Revenue collection • Reserves • Project prioritisation • Procurement/tender process • Checks & balances • Coordination

  6. Institutions • Policy making • Implementation & Monitoring • Oversight • Maintaining integrity • Coordination

  7. Singapore’s Experience

  8. Singapore’s experience: Difficult start • 1959 - First general elections with full internal self- government • 1965 – Separation from Malaysia • 1967 – Pound devaluation • 1971 – Withdrawal of British military

  9. Singapore’s experience: Difficult start Singapore downtown in 1960s

  10. Singapore’s experience: Philosophy of self-reliance “I was convinced our people must never have an aid-dependent mentality. If we were to succeed, we had to depend on ourselves.” Mr Lee Kuan Yew, Founding Prime Minister of Singapore “(W)e believe in self-reliance.” Dr Goh KengSwee, First Finance Minister of Singapore

  11. Singapore’s experience: Policies & Systems • Budgetary process

  12. Singapore’s experience: Conservative Budgeting Definitions Operating Revenue (collections from taxes, fees and charges and others) (Less) Total Expenditure (operating & capital expenditure) --------------------------------------------------------------------------- Primary Surplus/(Deficit) --------------------------------------------------------------------------- (Less) Special Transfers excluding Top-Ups to Endowment and Trust Funds --------------------------------------------------------------------------- Basic Surplus/(Deficit) ---------------------------------------------------------------------------- (Less) Top-Ups to Endowment and Trust Funds (Add) Net Investment Returns Contribution (NIRC) --------------------------------------------------------------------------- Overall Budget Surplus/(Deficit) ---------------------------------------------------------------------------

  13. Singapore’s experience: Assessment of large public projects • Establish need for project • Scope, scale & high-level specs • Preliminary design • Final design • Call for Tender • Award Tender Approval process for mega projects Project monitoring Feasibility studies Panel review Check-point 1 Agency to seek Cabinet’s in-principle approval Panel review Check-point 2 Preliminary design approval Check-point 3 DPC approval

  14. Singapore’s experience: Policies & Systems • Budgetary process • Sources of revenue

  15. Singapore’s experience: Sources of revenue Sources of Government Operating Revenue (FY2014) Source: Ministry of Finance, Singapore (Singapore Budget 2015, Revenue and Expenditure Estimates)

  16. Singapore’s experience: Policies & Systems • Budgetary process • Sources of revenue • Use & protection of reserves

  17. Singapore’s experience:Use & protection of reserves • Concept of “past reserves” • 2 fiscal rules on use of Reserves

  18. Singapore’s experience: Policies & Systems • Budgetary process • Sources of revenue • Use & protection of reserves • Careful borrowings

  19. Singapore’s experience: Careful borrowings Government external & domestic debt Source: Singapore, Department of Statistics, Ministry of Trade & Industry. Yearbook of Statistics, various years.

  20. Singapore’s experience: Policies & Systems • Budgetary process • Sources of revenue • Use & protection of reserves • Careful borrowings • Cost recovery & co-payment

  21. Singapore’s experience: Institutions • Statutory Boards with clear mandates & responsibilities

  22. Singapore’s experience: Institutions

  23. Singapore’s experience: Institutions • Statutory Boards with clear mandates & responsibilities • Checks & balances

  24. Singapore’s experience: Institutions

  25. Singapore’s experience: Institutions • Statutory Boards with clear mandates & responsibilities • Checks & balances • Maintaining integrity

  26. Singapore’s experience: Institutions

  27. Singapore’s experience: Institutions • Statutory Boards with clear mandates & responsibilities • Checks & balances • Maintaining integrity • Capability development

  28. Singapore’s Experience: Land policy

  29. Singapore’s experience: Land policy “First, that no private landowner should benefit from development which had taken place at public expense; and, secondly, that the price paid on the acquisition for public purposes should not be higher than what the land would have been worth had the Government not contemplated development generally in the area.” Lee Kuan Yew (1964) • Land is strategic • Land acquisition for public purposes

  30. Singapore’s experience: Land policy • Legislative tools • Land Acquisition Act (1966) • Foreshores Act (1964)

  31. Singapore’s Experience:Public Housing

  32. Singapore’s experience: Public housing • Public housing as national priority • Cost management & land acquisition • Pricing public housing • Affordable homes vs. asset appreciation

  33. Singapore’s experience: Financing Public Housing Source: Centre for Liveable Cities. (2014). Urban Systems Studies - Financing a City.

  34. Singapore’s Experience:Public Transport (Mass Rapid Transit)

  35. Singapore’s experience:Public transport (MRT) • Huge upfront capital investment • Deliberation over feasibility • Proceeded with MRT system in 1982 • First MRT line was operational by 1987 • Role of regulator (LTA) • Role of MRT operator

  36. Singapore’s experience:Financing for MRT • Government pays for initial capital investment and replacement of operating assets • Commuters pay for operating costs • MRT operator extracts efficiency dividends • Fare structure approved by Public Transport Council • Support to lower income & elderly commuters

  37. Singapore’s Experience:Financial Sustainability & Role of Government

  38. Singapore’s experience: Financial sustainability • Revenue Sources • User fees • Mobilization of domestic savings • Tapping capital markets • Asset sales & investment incomes • Privatization • Private-Public Partnerships

  39. Singapore’s experience:Role of Government • Master planning • Infrastructure development • Sustainability • Urban infrastructure • Private sector involvement and private capital • Good governance

  40. Thank you

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