In 1889, steel magnate Andrew Carnegie penned a number of articles on the subject of wealth, and specifically on the disposal of “surplus” wealth. At the time, Carnegie wrote that this lack of regulation in a free market economy had created the rise of “robber barons,” whose great fortunes multiplied in their sleep as income disparity between the rich and the poor was growing sharply. Socialism was on the rise—and the country was young.

The population density was 20 persons per square mile, according to Carnegie, compared to 15 times that in Britain. America was in the midst of a building boom. A steady flow of immigrants crowded its cities. Development pushed ever westward. Perhaps more importantly, Carnegie himself was just embarking on what would become one of America’s most interesting and lasting legacies—the construction of more than 2509 “free” libraries throughout the country, and beyond.

Carnegie was a builder. As an immigrant working in Allegheny, Pennsylvania, a local businessman permitted workers to borrow books from his own personal library on Saturday nights. It left a lasting impression. “And it was when reveling in the treasures which he opened to us that I resolved, if ever wealth came to me, that it should be used to establish free libraries, that other poor boys might receive opportunities similar to those for which we were indebted to that noble man,” Carnegie later wrote. 

In thinking about the disposal of his own “surplus” wealth, Carnegie developed a framework. He felt strongly that it should be given to projects of lasting value during his lifetime. (As his wealth accumulated this would become a surprisingly daunting—and ultimately impossible—goal.)

All but the first few library grants Carnegie gave in accordance with what became known as the “Carnegie Formula.” Any town wishing a library would receive a grant for its construction provided that the town was willing to supply the land and contribute 10 percent of the cost of construction annually to support its operations. There was one condition: the library remain open and free to the public in perpetuity. Construction grants were made by a board of trustees who served life terms. The construction grant amount was determined by two factors: the population which was to pay the tax to maintain the library, and a specified minimum revenue from the tax.

Cities issued bonds to cover their share of the costs, asking taxpayers to pay about 19 cents on every $1000 USD of assessed property annually. Interestingly, many cities were legally barred from issuing bonds for the purposes of building a library. To accept Carnegie’s offer, many had to put new legislation in place. Women’s groups across America caught wind and stepped in to raise local shares of the library costs, establish library committees and lobby their fellow citizens to vote in support of the new library tax. “Shall pennies outweigh brains? Let the workingman’s vote answer,” urged the Bingham Citizens Library Committee in one pamphlet.

Once a city had raised the necessary funds to accept Carnegie’s offer, the design and construction of the building was left largely to them. Grants were disbursed in draws based on progress. A “Daily Register of Donations” recorded as many as 10 to 20 transactions each day. 

“No millionaire will go far wrong in his search for one of the best forms for the use of his surplus who chooses to establish a free library in any community that is willing to maintain and develop it.”

Andrew Carnegie, The Best Fields of Philanthropy, 1889

Top image: The Seattle Central Library was funded by the “Libraries for All” bond measure, as well as a $20 million USD donation by Bill Gates. It was designed by OMA and opened in 2004. Photo: Noah Collins

Above image: The Ballard Library in Seattle, designed by Henderson Ryan, was partially funded with a $15 000 USD grant from Andrew Carnegie and opened in 1904. Photo: Noah Collins

However, as time went on, there were many instances of construction overruns, and Carnegie’s secretary James Bertram, who managed the program, responded by developing guidelines. Towns were to receive a “circular” that included recommended building plans and gave notes on “modesty in design.” As one architect said, the buildings were designed to “tell the same story, but each in different words.” In New York City, where Carnegie funded 67 branch libraries, library trustees hired three firms and requested they work together—forming a committee that approved each other’s designs and shared standards and lessons learned. 

Carnegie libraries promoted innovations in library design, most significantly open stacks. Previously, it was more common for readers to ask clerks to fetch books from closed stacks. In Carnegie’s libraries they were invited to browse themselves. Central circulation desks offered sightlines of the well–lit open–plan reading room, which usually remained open evenings to cater to the workingman. A typical library might also include a children’s room and an assembly hall in the basement for lectures and concerts. To encourage walk–in traffic, the reading room was placed on the ground floor with large arched windows facing the street. Many libraries were located near immigrant or working-class neighborhoods to support acculturation. Whether built in the Beaux–Arts or Spanish Mission style, they were often the most prominent building in town. Today, many are listed in historic registries.

Carnegie built 2811 free libraries in all. Of these, 1946 were located in the United States (in every state except Rhode Island). There were 660 in Britain and Ireland and 156 in Canada. A handful of libraries were also scattered in New Zealand, the West Indies and Fiji. When the last grant was made in 1919, there were a total of 3500 libraries in the United States, nearly half of them built with construction grants paid by Carnegie. Perhaps more significantly, he caused cities around the world to invest many multiples more into their operation. It was a marriage of philanthropy, civic engagement and municipal financing—what today we call public–private partnership, leaving behind a legacy of landmark buildings. 

“Yet though the people are very proud of [the library], many a man said to me, ‘We’d rather they hadn’t cut our wages and let us spend the money for ourselves. What use has a man who works 12 hours a day for a library, anyway?’”

Margaret Frances Byington, Assistant Secretary, Charity Organization Department, Russell Sage Foundation, Homestead: The Households of a Mill Town, Russell Sage Foundation Publications, 1910

Yet even during his lifetime, some called into question Carnegie’s priorities. In 1910, 12 years after he funded the construction of a library in the Carnegie Steel Company mill town of Homestead, Pennsylvania, Margaret Frances Byington conducted a research study of mill worker living conditions there. “Yet though the people are very proud of [the library], many a man said to me, ‘We’d rather they hadn’t cut our wages and let us spend the money for ourselves. What use has a man who works 12 hours a day for a library, anyway?’” she wrote. 

Byington’s research uncovered that though the mill and most of the Carnegie Steel Company holdings were located in Munhall, the workers generally lived in Homestead, a different borough. Tax dollars that improved the living conditions and paid for sanitation, clean water and other improvements in Munhill stopped at the borough line. Homestead’s workers, whose taxable income and property holdings were far less—and whose wages were cut in the years following deadly labor union conflicts—could not collectively fund improvements needed to provide clean water and sanitation to their own crowded community.

Hindsight is imperfect. However, it’s interesting to wonder what impact could Carnegie’s philanthropy have had in the many communities in which he bestowed his generosity, if he had also focused his attention on helping to make systemic changes to improve the immediate living conditions of workers as well as their minds.


Location Randburg, South Africa
Cost 1 million Rand/$149 543 USD
Area 147 sq m/1582 sq ft
Photo: Letitia Botha/Remax

Location San Bruno, California, USA
Cost $399 750 USD
Area 137 sq m/1470 sq ft
Photo: Bo Wongkalasin

Location Nontaburi, Bangkok, Thailand
Construction Cost $53 000 USD
Area 135 sq m/1453 sq ft
Photo: Bo Wongkalasin

Location Karlskrona, Sweden
Cost 3 million Kron/$316 465 USD
Area 145 sq m/1561 sq ft
Photo: Andreas Svensson

It’s a conversation that is as relevant today as it was a century ago. Community development is unique. Investing in the improvement of a place as opposed to a person or people includes investments in infrastructure (water, sanitation, energy, telecom, roads) as well as investments in parks and open space, cultural amenities, education, health care and job creation. The investments are generally long–term, one–time capital outlays, yet they impact generations. With the rise of the city, mobile workforces, climate change, and shifting populations, sustainable community development increasingly involves complex trade–offs. And, just as in Carnegie’s own time, questions of how and when to use public funds versus private capital, land use and community empowerment are at the heart of the work.

Financing for community development is not just a question of priorities. How projects are financed weighs heavily on their planning and design—and ultimately their success. Clearly, we no longer live in a world where communities can wait for the largesse of wealthy patrons to improve their living conditions. The constraints faced by community development professionals, particularly architects and urban planners, in meeting the needs of communities can often only be addressed through equally thoughtful financing. 

A major barrier to finding solutions for both urban crises in emerging economies, and sustainable maintenance of existing cities and small towns, is the disconnect between financing and place. Broadly speaking, this is largely due to three main hurdles. 


Maosi Ecological Demonstration Primary School

Location Xifeng City, Gansu Providence, PR China
Design Firm Edward Ng and Jun Mu
Cost 70 000 EU/$99 656 USD
Area 1005 sq m/10 818 sq ft
Photo: Jun Mu/Edward Ng

El Porvenir Kindergarten

Location Bogota, Colombia
Design Firm Giancarlo Mazzanti Arquitectos
Cost 1.8 billion COP/$967 742 USD
Area 2100 sq m/22 604 sq ft
Photo: Rodrigo Davilo/Giancarlo Mazzanti Arquitectos

Dano Secondary School

Location Dano, Burkina Faso
Design Firm Kéré Architecture
Cost 70 000 EU/$99 656 USD
Area 318 sq m/3 423 sq ft
Photo: Kéré Architecture

Marin Montessori School

Location Corte Madera, California, USA
Design Firm Pfau Long Architecture
Cost $4.5 million USD
Area 1 115 sq m/12 000 sq ft
Photo: Pfau Long Architecture

The first is the more obvious issue of sector–based funding. Take for example a project to build a basketball court and storage facility on land adjacent to a school. Typically, funds for school construction and maintenance (often handled at the county or provincial level) are separated from funds for school operations (handled at the local level) and further separated from funds for parks and recreation (handled by a different local agency). As a result, developing recreational opportunities on school grounds can require threading funding from three or more sources. At the international level, bilateral and multilateral aid delivery is focused on housing, health, education, etc. As a result, funds earmarked for health care delivery cannot be used to support an investment in sanitation infrastructure in tandem—despite the obvious correlation between improved sanitation and improved health.

The second obstacle is the issue of “restrictions,” be they eligibility requirements or exceptions. Restrictions on funding are usually put in place to create incentives for certain perceived positive development attributes (walkability, owner-occupied home ownership, savings requirements) or to cure perceived or real market deficiencies. For example, following the devastating earthquake and tsunami that struck Japan in 2011, the Japanese government announced that any school that accepted private donations for reconstruction would not be eligible for government funds. The intent was likely to prevent schools from double–dipping, but the result was a slowdown in school reconstruction. Schools declined private donations for fear of losing larger sums of government funds that took much longer to disperse.

The third and most subtle hurdle relates to timing. For those of us who are community development practitioners, this may be the most critical. In most parts of the world construction financing is unavailable to homeowners, small businesses and most critically community groups. As a result, facilities are built incrementally at much greater cost to their users.

The timing issue is felt most acutely after disaster. It took nearly two years for funds that had been earmarked for Hurricane Katrina reconstruction to reach the ground. The same is also true in Haiti, where families displaced after the 2010 earthquake lived in tents for more than two years awaiting international pledges from donor nations to be fulfilled and disbursed.

If public financing is slow and restrictive, and private financing is risk averse, the result is a delay in capital that can significantly increase the costs of managing and implementing community development projects. The cost of that delay is typically born by community development agencies.

Finally, financing schemes, because of their high cost to implement, are still often modeled on macroeconomic data at the national level. This data is interpreted to create regional or national programs that are then carried out at the local municipal level. The issue, of course, is that needs and demographics differ at the local level. Any program designed in this way will by default work better in communities that more closely reflect the population makeup and economic trends of the norm. If that’s 2 percent growth, then the program will be designed to support and manage that growth through housing production or infrastructure investment. What to do about the community that differs from the norm, either because its main job generator requires seasonal labor (therefore rental housing is at a premium) or because it has a shrinking population due to competition from nearby regional centers with greater international ties? 


Beit–Cure Hospital

Blantyre, Malawi
Design Firm MOD Chartered Architects
Cost $1.3 million USD
Area 3082 sq m/33 174 sq ft
Photo: Mod Chartered Architects

Evelina Children’s Hospital

London, United Kingdom
Design Firm Hopkins Architects Partnership LLP
Cost £41.5 million GBP/$67 million USD
Area 16 500 sq m/177 605 sq ft
Photo: Glitzy queen00/Wikipedia

Providence Newberg Medical Center

Newberg, Oregon, USA
Design Firm Mahlum
Construction Cost $42 million USD
Area 16 782 sq m/180 636 sq ft
Photo: Benjamin Benschneider/Mahlum

The Royal Women’s Hospital

Parkville, Melbourne, Australia
Design Firm Woodhead International and Design, Inc
Cost $246 million AUD/$264 million USD
Area 73 000 sq m/785 765 sq ft
Photo: Royal Women’s Health Partnership

Many people have tried to solve this problem and connect finance and place through calls for better coordination or community engagement. The United Nations Cluster approach is an example of this. Depending on how these meetings are run they can be effective or waste the energy and time for the participating agencies. There have also been various online aid reporting tools like, which we suspect will evolve and become increasingly effective. However, again, coordination comes at the expense of the agencies and citizens participating—oftentimes with hidden costs—and is rarely funded.

More successful are programs that offer flexible grants to communities, provided the funded activities tie to an overall development plan. For example, in the United States, cities can apply to the US Department of Housing and Urban Development for Community Block Development Grants to fund affordable housing, anti–poverty programs, and infrastructure development. Use of the funds is left largely to the discretion of the state and local municipality.

By far, municipal financing continues to represent the bulk of financial support for infrastructure development and services in most communities, whether urban or rural. Increasingly, however, public–private partnerships are combined with innovative planning approaches that offer broader access to capital for infrastructure and community development—from small–scale projects such as facade upgrades, to school construction, to community–wide slum upgrading.

In our experience, the most effective solution seems to be the creation of community development corporations or economic development authorities. They solve the timing issue (by offering liquidity and access to credit) and have the ability to bundle or thread funding from a number of different sources—including private investment and government funding. They are flexible containers in the way that municipal agencies are generally not. And more importantly, they can be accountable for meeting broader development goals over a long period using monitoring and evaluation tools from the onset to measure their impact. One example of this kind of quasi–public agency is the Empresa de Desarrollo Urbano de Medellín (see pages 318–21).

Understanding the intersection between urban planning and finance is of critical importance to the future of cities. In 2007, and for the first time in human history, the world’s urban population exceeded its rural population. The shift impacts both historically large cities like London and Tokyo, and secondary cities as disparate as Memphis, Tennessee in the United States, and Changzhou, China. More dramatic still are the number of emerging cities such as Kigali, Rwanda, where today cranes building high–rise office towers stud the skyline. 


Quincho Gorro Capucha

Pinohuacho, Villarrica, Chile
Design Firm GrupoTalca
Cost $6000 USD
Area 106 sq m/1 141 sq ft
Photo: Rodrigo Sheward/GrupoTalca

East Community Center

Pierrefonds, Montreal, Quebec, Canada
Design Firm Les Architectes FABG
Cost $3.5 million CAD/ $3.5 million USD
Area 1208 sq m/13 000 sq ft
Photo: Louis Rachiele/City of Montreal

Surry Hills Library and Community Center

Location Sydney, Australia
Design Firm Frances–Jones Morehen Thorp
Cost $16 million AUD/$17 million USD
Area 2 000 sq m/21 528 sq ft
Photo: John Gollinas/City of Sydney Council

Spikkerelle Cultural Centre

Avelgem, Belgium
Design Firm Dierendonckblancke Architects
Cost 3.6 million EU/$5 million USD
Area 2370 sq m/25 510 sq ft
Photo: Dierendonckblancke Architects

The world’s poor—those earning less than $2 USD a day—make up the majority of people migrating to cities. In 2003, nearly one–sixth of the world’s population lived in slums, according to the United Nations Agency for Human Settlements. Demographic researchers forecast that 1.9 billion people will migrate to urban centers by 2030, drawn by the promise of opportunity, education and jobs. The future of the world’s emerging cities lies in their ability to convert the tremendous potential of urban migration into economic prosperity. The challenge for these cities is formalizing their informal settlements.

At the same time, for every city that is growing there are others that are shrinking. These include former Rust Belt hub Detroit, Michigan, in the United States, and cities such as Leipzig, East Germany, which saw a dramatic population decline after the fall of the Berlin Wall. Research shows that the number of shrinking cities has increased faster than the number of boomtowns. Between 1950 and 2000, the number of cities with significant, ongoing population loss has grown by 330 percent. Meanwhile, the number of cities with more than 100 000 residents has increased 240 percent. In the last 50 years, about 370 cities with more than 100 000 residents have temporarily or lastingly shrank in population by more than 10 percent. In extreme cases, the rate of loss reached peaks of up to 90 percent (Âbâdân, Iran).

Moreover, population indicators show that many regions of the world are entering into an era of overall population decline, though fear of a population explosion is pervasive in some parts of the world. Globally, birthrates have declined by more than half since 1979, according to the documentary film The New Economic Reality: Demographic Winter (2011). This decline in fertility, primarily in developing countries, means that many nations will be coping with aging populations and shrinking economic bases. There are now 59 nations—comprising close to half of the world’s population—with below–replacement fertility rates.

In her 1991 book, The Global City: New York, London, Tokyo, Saskia Sassen writes of urban “winners” and “losers.” The winners are cities that offer a wide range of financial and specialized services in one place—command centers in the global economy—and the losers being those with outdated infrastructure and economies. Similarly, economist Richard Florida points to the importance of the “creative class” and the need for cities to attract talent from a mobile workforce in order to thrive. In the end, cities will need to watch and anticipate these demographic shifts in the same way that corporations already do.

Today, few cities put adequate resources into analyzing their own market viability. Increasingly, however, it is possible to very cheaply gather data at the local level. Rather than relying on national census results, communities can track their own data sets. The rise of user–generated data mapping tools such as Ushahidi, FrontlineSMS, and OpenStreetMap (see our section on Crowd–Sourced Planning on pages 294–95) are one of the most exciting changes brought by the digital revolution. Now it is up to cities to use that kind of data to create short– and long–term development priorities and a case for investment.

So what do these global trends mean for cities?


Centro Abierto de Actividades Ciudadanas

Location Cordoba, Spain
Design Firm Paredes Pino Architects
Construction Cost 3.3 million EU/ $4.6 million USD
Area 11 920 sq m/128 306 sq ft
Photo: Parades Pino Architects

Miami Beach Soundscape

Miami, Florida, USA
Design Firm West 8
Construction Cost $13 million USD
Area 10 117 sq m/108 900 sq ft
Photo: John Loewy/New World Symphony

Paddington Reservoir Gardens

Sydney, Australia
Design Firm Tonkin Zulaikha Greer, JMD Design
Construction Cost $8.7 million AUD/$9.3 million USD
Area 3600 sq m/38 750 sq ft
Photo: Eric Sierens/City of Sydney Council

Namba Parks

Location Osaka, Japan
Design Firm Jerde Partnership
Construction Cost $520 million USD
Area 130 064 sq m/1.4 million sq ft
Photo: Jerde Partnership

Place matters. Just as we need to invest in people, we must also invest in place—and like car racing, every square meter counts. Cities that turn a blind eye to pockets of blight and violence not only put community members at risk, but also put themselves at greater risk for the flight of capital and jobs. This, combined with the leveling of populations in many areas, and projected population declines in others, means that cities cannot count on urbanization and rising birthrates to fuel economic development. Companies can and do go “city shopping,” looking for “creative” places that are safe and desirable. Cities that breed cultural diversity as well as opportunity—where the walk to and from work offers spontaneity and chance inspiration—will thrive. Others will shrink, creating a different but equally challenging kind of opportunity to reinvest in open space and renew the natural environment.

Food security, clean water access and natural resources will force communities to find far more responsive models for managing the balance between the built and natural environment in response to shifting populations.

Professionals charged with stewarding the built environment—architects, planners, builders, real estate developers, city managers—must also shift their focus. More holistic investments in place require an understanding of how cities and natural eco–systems function. Urban planners with business degrees will be offering comprehensive urban management models along with master plans. As stewards of an increasingly competitive landscape, these models will use demographic modeling, return on investment analysis on tax investments, land-use inventories, data tracking and impact measurements to target design and planning interventions.

A typical large–scale development today will use any and all of the tools available to it and often in combination. As a result, community development financing has become a complex and often opaque field dominated by specialists. Ultimately, however, there are four basic considerations that any financing structure for community development must take into account: 1) how are funds to be raised, 2) what kind of entity will hold and disperse the funds, 3) what is the legal structure binding the parties, 4) how is land acquired and who will ultimately own it.

The following chart offers a (simplified) view of some common tools available to communities and their use. It is organized into three sections: Municipal Finance, Public–Private Finance and Private Finance. While not exhaustive, it is intended to serve as a primer for community groups, architects, and others seeking to finance their initiatives.

It is not intended to be an exhaustive survey of financial models and their risks, but rather a reference guide to the types of financial approaches and instruments—both public and private—that have been used historically and are in use today to fund the design and construction of civic infrastructure such as schools, hospitals, urban streetscapes, parks and museums, among others. In short, the kinds of projects, large and small, that community designers take up each day.

This essay was researched and written by Kate Stohr



Redistribution of tax revenues collected centrally, either nationally or on a regional level. A main source of revenue to local municipalities. Used to bridge the gap between the revenue–raising capacity of municipalities and mandatory local expenditures.

Central taxes on income, capital gains, corporate revenue, sales, etc.

National and/or regional tax authorities 


State/provincial and/or municipal governing body

Recurrent expenditures (municipal salaries, water, sanitation, roads, policing, public education, etc.)

Limits local independence. Reliance on central government transfers can result in deferred maintenance and lack of infrastructure investment 

Source of Funds

Holding / Collection Entity