Attractive financing schemes for Smart cities
See how smart cities can finance their transformation
- June 03, 2018 18:00
- Monika Dimitrova
Smart solutions, which are often untested innovations, may look like giant risks to governments. Look on the next financing schemes that can be used to support smart interventions. These are public-private partnership, tax increment financing (TIF), green bonds, and Energy Performance Contracting (EPC) contracts. Public-private partnerships are one of the most popular means of financing city innovations. They are the most viable solutions and public authorities are usually open to implement them.
Another financing option for smart cities are green bonds, tax-exempt bonds handed out strictly to develop sustainable projects that generate environmental benefits. Usually investors take high risks, because the success of an innovation cannot be certain, but the returns are tax free.If you have green bonds at the European level, you reduce their risks. Tax increment financing is the most difficult scheme to drum up enthusiasm for because such measures may be unpopular with citizens. People may worry about raising tax rates. Typically, a municipality identifies a district to be restored, and re-allocates funds from property taxes to develop the area and encourage investment. The additional tax money generated by the higher property value is then reinvested in the same district.
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