Urban finance has received considerable attention over the years and is reemerging in 2016 as a focal area within the Sustainable Development Goals, the Financing for Development initiative and the dialogue around the Habitat III conference. Although there is a well developed framework for designing intergovernmental and local finance systems, performance of these systems has often failed to meet expectations. The mainstream framework focuses heavily on technical policy considerations derived from public finance/fiscal federalism and public management principles. Underwhelming performance is often framed as a product of poor design and management, limited capacity, and inadequate political will. The premise of this paper is that the conventional approach does not sufficiently consider the larger institutional framework in which urban finance must operate, the political economy factors underlying this framework, or the forces that shape the implementation of even normatively well designed reforms. Taking these considerations into account can help policy-makers and practitioners to understand the openings for, and constraints on, pursuing more effective and sustainable urban finance reform.
Paul Smoke is Professor of Public Finance and Planning and Director of International Programs at the NYU Wagner Graduate School of Public Service, where he teaches courses on public finance, development planning, governance, and development assistance in developing countries. His research and policy interests include urban and regional development and the political economy of fiscal reform and public sector decentralization. He previously taught in the International Development Program and chaired the Master in City Planning Program at MIT, and he worked as a resident policy advisor with the Harvard Institute for International Development in Kenya and Indonesia. Smoke is an affiliated scholar with the Center on International Development and Governance at the Urban Institute in Washington, D.C., and a senior research associate at the Overseas Development Institute in London.