Sustainable and innovative city finance is becoming increasingly critical as urbanization accelerates worldwide. Cities face growing demands to finance infrastructure, deliver public services, and respond to climate challenges. This is particularly evident in low- and middle-income countries, where financing needs are expanding rapidly while access to adequate resources remains constrained. At the same time, limited fiscal space, weak revenue systems, low creditworthiness, and fragmented institutional frameworks continue to widen the urban financing gap, underscoring the need for more integrated and practical solutions.
Against this backdrop, the World Bank’s Urban, Subnational Finance, Tourism, and Disaster Risk Management Global Department, through the Tokyo Development Learning Center (TDLC), convened a Technical Deep Dive (TDD) on Fundamentals and Innovations in City Finance from March 9 to 13, 2026, in Tokyo, Japan. Delivered in collaboration with the International Finance Corporation (IFC), the program brought together 68 policymakers and practitioners from 10 countries to engage with Japanese and international experts and explore practical approaches to strengthening municipal finance systems.
The TDD emphasized viewing city finance not as a set of isolated instruments, but as an integrated system. Effective municipal finance requires alignment among expenditure responsibilities, revenue generation, intergovernmental transfers, and access to long-term financing, all underpinned by sound public financial management. This integrated approach enables sustainable service delivery and investment.
Discussions highlighted that predictable, rules-based intergovernmental transfers and stronger own-source revenues—particularly property taxes and well-designed user fees—are essential to effective decentralization. Improving municipal creditworthiness through sound fiscal management, transparent institutions, and prudent borrowing was also identified as critical for accessing private and commercial finance. In addition, strengthening public investment management and public–private partnership (PPP) frameworks was emphasized to ensure that financing translates into tangible infrastructure and service improvements.
Lessons from Japanese Cities
Japan’s experience offered practical insights into building resilient municipal finance systems. Its framework combines clear functional assignments, diversified revenue sources, stable intergovernmental transfers, and disciplined fiscal management, enabling both fiscal sustainability and reliable service delivery.
Toyama city demonstrated how integrating land use planning, public transport investment, and capital planning can reduce long-term costs while expanding the tax base. Through its compact city strategy, the city has strengthened fiscal sustainability. Fukuoka city illustrated how strategic investments, efficient administration, and prudent debt management can support both economic growth and fiscal discipline, leading to increased revenues and enhanced urban competitiveness.
Site visits further highlighted practical applications of public–private collaboration. Clean Plaza Fujimi showcased a Design-Build-Operate model that leverages private sector efficiency while maintaining public oversight. Shinagawa Season Terrace demonstrated how PPPs and innovative land use, including the use of air rights, can generate land value while supporting urban development and infrastructure financing.
From Knowledge to Action
A key outcome of the TDD was the development of concrete, country-specific action plans. These plans focus on enhancing fiscal sustainability, strengthening revenue systems, and mobilizing diverse financing sources.
Priority actions included improving property tax systems, introducing land value capture mechanisms, strengthening debt management, and developing pipelines of bankable infrastructure projects. Participants also explored innovative financing approaches such as green bonds, PPPs, and institutional reforms to improve creditworthiness and attract private investment.
These outcomes demonstrate that the TDD went beyond knowledge sharing to support practical implementation. Participants identified clear next steps based on Japanese and global experience, reaffirming that municipal finance is a foundation for sustainable and resilient urban development. The program also highlighted the importance of integrating policies, institutions, and financing mechanisms, and reinforced the role of municipal finance not only as a technical function but as a key policy tool shaping the future of cities.
Participant Voices
“We are looking into alternative revenue sources, including user fees, asset monetization, and private investment. These insights are highly relevant, and we hope to apply them in our city, across Maharashtra State, and throughout India.” (participant from India)
"The materials are really relevant to the issue of the client facing and support the client to improve understanding of the municipal finance especially with regard to raising the municipal bond.” (participant from Indonesia)