We've understood, it is a secret to no one, that rapid population increases put cities in increasingly delicate situations. So at the city government level, we call this the local government, this might be an "urban government," or even in a small village, we must deal with the arrival of these new residents, but also the deficit in infrastructure the deficit in city services. In order to pay for the infrastructure, to pay for the cities, we need financial resources. We are to going to see how to obtain these resources. And what interests us also, is to see which are the mechanisms to obtain financing, how to go about it so that the cities have sufficient resources in order to be able to finance the infrastructure. So we'll see what mechanisms are behind the investment. The city has to invest. There are two ways to do it, we can either answer the demand or create the supply. We can plan and program based on the supply or the demand. We'll use the classic example of the railway, for example, We'll use the example of the railway. We have a demand, to take from point A to point B a certain number of people But we can also program, plan, based on supply. Say I'm providing service from point A to point B every 30 minutes for a certain number of people. And then see if there is a link to the demand. We can start with supply or demand, for investment, it's the same thing. I offer and provide a service, or I respond to a demand. Most of the time we're dealing with responding to demand and we are well below what would be needed. Before providing for the newly arrived, we should note that, Most cities, a huge majority of cities, are underfunded in infrastructure and facilities. So they don't have the means to provide a number of services which are the basic services. In order to finance the investment we have our own resources, we will see what they are. We have loans. We have land. Public-Private partnerships, and grants. These are the five ways to finance investment in cities. Community resources. Broadly, there are four categories of resources. Here are the four types of resources. Transfers, which are issued by the State. Taxes which are handled locally, property taxes, professional taxes. Subsidies, which can be given by donors, and loans, which we'll see in a moment, issued by banks or also by donors. There you have it. This is the classic pattern, these are community resources. These are the resources of the local community. The second type of financing is loans. Loans, whether from the bank, from a donor, or a specialized organization. So the loan is used to borrow money to create an infrastructure. There are infrastructures which are profitable, and others which are not directly profitable but are necessary to the city, yet others which are not at all profitable, "not necessary," and we can question the relevance of building this type infrastructure. These are the infrastructures or facilities of prestige, but in the typical case, at the start, we borrow money to pay for the infrastructure that we'll put in place, so this infrastructure has to be profitable in order to provide a return, to pay the interest and finally so that the loan that we took out can be repaid. So there is a whole series of mechanisms, a whole series of conditions or conditionalities if it's a city who is borrowing or if it's a State, but it's important to know that it's something used relatively little by cities, why? Because they have relatively restricted financial capacities. States borrow, for the most part, massively. The cities in the North are constantly borrowing. In the South of Africa it's something much more rare, why? Because they don't necessarily have the potential to then repay their loan. So in order to borrow, we must prove the ability to repay what has been borrowed. The valuation of land is a way to obtain money, for a local community, in the form of taxes, in the form of taxes on capital gains. We will come back later to these questions, but we have two possibilities, either on the lands not yet urbanized-- We saw in a previous video how the pressure will be on the non-urbanized peripheral areas for now. We can say that we will urbanize these areas, and we can, particularly through taxation, capture a part of the land value. In the centers where we continue to build infrastructure, or where public transportation is being developed, we are creating a land value appreciation due to the centrality and the density and this increase in value should be captured, at least partially, to help pay for facilities. We will come back to this a little later. There is also the possibility of public-private partnership, where the investment is made jointly by private and public sources, and then often the management is handled by the private sources, who pay the dividends, or who pay a return to the public and after a given number of years, the investment, the infrastructure returns directly to the public sector. So there exist as many types of partnerships possible, as there are types of contracts possible, we won't go into detail, but it's something very common in today's cities, That is, one makes these joint investments. If the municipality doesn't have the possibility to invest, it will be the private sector who will invest, and will pay, in the form of a fee, each year, a certain sum to the municipality. Finally there are grants, let's not forget that in certain contexts, the donor is extremely present, and not only in borrowing but lending, with interest. There is also a certain sum available and often for studies, planning studies in particular. It's in the form of grants, and it's a country, via the World Bank, via a donor who gives, without consideration, a sum for studies. We are rarely dealing with large infrastructures but there are bilateral co-operations which make grants without consideration,
