Citizens and Cities : Citizens and Cities
CASE STUDY 25 EY and citizen-focused cities | 24 | EY and citizen-focused cities The public’s willingness and ability to pay for infrastructure are the keys to shaping the future of urban projects. When we can tap into citizens’ preferences, we can acquire better data on their willingness to pay for different services or projects. For universally popular issues, this process is relatively simple. For example, if a city doesn’t have a good public lighting system, then many citizens may be willing to pay for one because the dark streets make people feel unsafe. Knowing this gives decision makers proof that decisions are being made in the public interest. However, the vast majority of these decisions are about extremely complex trade-offs. Do we build new parks in outer suburban areas or invest in creative spaces in inner suburban areas? Young families may vote for more green spaces in the suburbs; young professionals living closer in may prefer creative spaces that add to the heart of the city. Citizen consultation will provide insight into where these trade-offs are — and where the weight of public opinion lies — but the funding decision will still have to be resolved at the leadership level. The ability to have citizen voices heard in key funding decisions In doing so, governments need to be aware that people’s willingness to pay tends to be expressed through their behaviour, rather than what they say. Also, when citizens consider where money is best invested they consider a whole-of-life perspective. They don’t separate out the value of one change against another. Working out willingness to pay is critical because, ultimately, there is no one else but the citizen to get the money from, whether it is in taxes, user charges or some other mechanism. To date, the cost of almost all city projects has been borne by all taxpayers, proportionate to the amount of tax they pay but irrespective of how much benefit they actually receive from the project. Part of the solution will be value capture mechanisms, which overcome this issue by taking into account the increased value or economic activity that occurs as a direct result of infrastructure investment; for example, the increase in land values adjacent to a new rail line. Value capture mechanisms enable funding contributions to be collected from the beneficiaries and used to repay project financing. Value capture will only work if the politicians embrace the concept and effectively sell it to the citizens. But there’s evidence to suggest that it can work. If the benefit is clear and can be valued by the citizen then, generally, we see a willingness to pay. It may be that we will end up with the US practice of allowing citizens to vote on infrastructure investment that includes funding plans. The most effective investment and creative planning will also be underpinned by behavioural solutions, such as pricing mechanisms to reduce vehicle usage. And we need to explore more options to empower service recipients with funding choices. If we can help citizens to easily make informed choices, they can become part of the funding decision process. Imagine a city that is constantly being shaped and re-shaped by customers efficiently interacting with public service providers — making their decisions based on personal value. Funding options for resilient cities One of the major challenges to resilience projects is forward funding. Sydney’s Chief Resilience Officer, Beck Dawson, says “We are still learning how to create funding mechanisms for a broader range of opportunities in our cities.” “The really fantastic programs happening at the community level are not yet structured in a way that allows large funds to regularly collaborate with communities on resilience programs.” she says. Melbourne’s Chief Resilience Officer, Toby Kent, notes that while there are still restrictions around “betterment” in insurance provision the Victorian Managed Insurance Authority, which provides insurance services for the Victorian government, has found ways to enhance assets after events — spending extra funds to rebuild something better than previously on the basis that it will be less risky in the future. Similar approaches could be applied to asset protection using derivatives-type models that attract finance in anticipation of future outcomes.