Subsidiarity, equality, efficiency, transparency, accountability, popular participation and security: these principles lie at the heart of good urban governance and sustainability in cities. Applying them means governing and managing cities in a way that enables citizens to exercise their rights and perform their duties, while providing them with an attractive environment in which to live and work.

Good urban governance involves city governments and administrations using transparent and participatory processes. It is essential that they communicate with citizens appropriately, keep them well informed and actively involve them in local negotiation and decision-making processes. Formal and informal public participation procedures put relations between citizens, businesses, politicians and the administration on a new footing. At the same time, political parties and the media have a greater responsibility at local level to respect fundamental democratic principles and report in a transparent manner on local decision-making processes.

In Germany, local self-government is not only enshrined in law, but also in the country’s constitution (Article 28, paragraph 2, Basic Law for the Federal Republic of Germany). The right of municipalities to regulate all local affairs on their own responsibility within the limits prescribed by the laws is underpinned by their entitlement to appropriate financial resources to enable them to perform their duties. The guarantee of adequate funding is a vital prerequisite for sustainable urban development. Fiscal decentralisation and a system of financial compensation is critically important in ensuring that municipalities have adequate financial resources to perform the tasks assigned to them in line with the actual costs (principle of connectivity). In addition, genuine deregulation and a thorough examination of the tasks carried out by local government leads to a sustainable reduction in the costs borne by municipal budgets. City strategies in Germany are geared to consolidating city budgets, especially reducing debt levels, ensuring independent income for the future, and efficient, transparent and participatory budget planning and management.

The framework for good urban governance is provided by the normative and institutional parameters laid out by central government. These determine the degree of administrative, fiscal and political decentralisation. The extent to which a political and administrative system moves towards greater urban self-government depends on economic, cultural and, most importantly, political factors. According to the World Charter of Local Self-Government, the principle of local self-government should be recognised in national legislation and, where practicable, guaranteed in the constitution. However, in many countries, especially in the South, the principle is not yet adhered to. In these countries, local authorities tend only to be responsible for implementing the decisions taken by the state and have little leeway to act independently.

To give local government more scope for action, associations of local authorities represent the interests of their members. They can, for instance, exercise the right of local government to be heard when national legislation affecting municipal interests is drafted. Strong, independent associations and international support in the form of recommendations, proclamations, good practice sharing, joint project work and twinning can move these processes forward and thus meet an important precondition for sustainable urban development.

Good urban governance makes more demands on local government in terms of innovation. This means improving the management of urban services. Municipal planning, steering, implementation and monitoring capacities must be more effective, structures and operations more rational and more transparent, and local decision-making processes must be freed of unnecessary bureaucracy. Greater use of e-government tools can do much to facilitate access to urban services for citizens and businesses, as well as creating new options for gathering and using data. The basis for all improvements to urban management is human resources development, so that staff are motivated and receive the training they need.

Cities and local authorities are teaming up and establishing formal and informal inter-municipal cooperation structures and procedures to jointly deliver mandatory and voluntary local government services in the face of dwindling public budgets. This can include implementing municipal economic and infrastructure policy.