Investment in infrastructure three pillars of city resilience

LVC establishes a virtuous circle of value from infrastructure upgrades
INVESTMENT IN INFRASTRUCTURE
Underserviced land
Investment in infrastructure upgrade
Upgraded land commands higher values
Private developer earns profit from further land improvements
Part of private developer’s profit is captured by the City
Captured value is reinvested in infrastructure
Developer’s profit is large enough to offset some or entire cost of infrastructure upgrades
LVC is a new source of project financing promoted by The World Bank
INVESTMENT IN INFRASTRUCTURE
If there is a $ 1 billion capital investment program contemplated by a city:

• Business as usual:
• The World Bank finances $100 million with an interest-bearing term loan
• Another $900 million is raised from general funds, public/private debt and grants
• Leveraging LVC:
• In concert with all of the above, The World Bank provides comprehensive technical assistance to the city to help structure additional funding with re-captured land value (e.g. cash proceeds from sale of land / development rights, special tax assessments, etc.)
• This works towards overall reduction of the principal of interest-bearing loans, general fund appropriations and grant resources and enhances bankability of the $1 bln program

Conceptualization of LVC - hypothetical disaggregation of land value
INVESTMENT IN INFRASTRUCTURE

Intrinsic land value
Land buyers (or lessees) pay sellers (lessors) to obtain the property rights of land.
Increases in land value due to landowners’ investments.
Private land owners should profit from this portion of the increment.
Increases in land value due to public investment in infrastructure and changes in land use regulations.
Public service providers could capture this portion of the increment to cover the costs of public infrastructure and local service provision.
Increases in land value due to population growth and economic development.
The government, on behalf of the general public, may keep this portion of the land value.