Smart technologies will result in substantial cost savings to cities and their residents. However, finding the initial funds needed to pay for upgrades and new technologies will be challenging, especially in the present era of reduced federal assistance to cities. Over time, however, smart cities will have opportunities to pay for themselves by generating new revenues from economic development while maximizing existing revenues from user fees, franchise fees, lease payments and other newly created opportunities for packaging and branding city assets.
To be sure, there are still occasional grant and government funding opportunities for smart cities initiatives. Very often these are for pilot projects, but some are for more permanent infrastructure. As an initial step and ongoing process, city leadership should seek to identify and exhaust all possible government grants that might relate to or support the smart city initiative. However, a broad array of other funding options also must be examined as potential resources for investment in smart infrastructure.
Utilities are a natural and indispensable partner for investment in the backbone technologies that will support the other smart technologies. A modernized power and telecommunications grid is the critical starting point, serving as the platform for the smart city. Utilities offer the benefit of a publicly reviewed rate structure plus a vested interest in a modernized multidirectional grid. So a financing mechanism is already in place.
Beyond grid modernization, some new technologies have proved challenging to finance partly because it is difficult to measure the dollar value of projects whose principle benefits are socioeconomic in nature, or which are difficult to monetize. In other cases, the integrated, cross-sector nature of many smart city projects makes traditional financing complicated at best. Of course, every new frontier poses similar hurdles. From interstate highways to space exploration, every trail blazer has, at some point, had to address the same threshold questions: Is it worth it and how will we pay for it? The process of collecting and analyzing information to answer these questions is a necessary first step in the transformation of communities to smart cities, and will be critical to plotting an early roadmap toward achieving the city's goals.
In addition to the financial tools discussed above, a smart
cities committee has many other possibilities which it needs to
explore, assess and either discard or develop.
For most cites, particularly those that are not wealthy, taxes (or taxes alone) are not a realistic solution, which makes the challenge that much greater. That means that exploring the vast array of possible alternatives must be high on city leaders' agenda.
Among those possibilities are public-private partnerships, which have had varying degrees of success around the country and the world. The typical structure involves a sharing of risks and rewards, with the added benefit that the private partner often will take charge of long-term operation and maintenance of the infrastructure asset. This structure does need to be approached thoughtfully. City leaders must decide if it is beneficial to effectively privatize critical city assets. It has been done very successfully in some instances, and with mixed results in others. Thus, while it is a structure that must be considered, it should be evaluated in terms of both the city's priorities and lessons learned from other cities.
Green funds and philanthropies might also be tapped to assist with financing projects. Tech firms eager to deploy their technologies also may offer assistance and favorable terms. Tech companies often will work with philanthropic organizations to provide assistance on projects that are in the public interest, so some synergy might exist there.
There are also many things that can be done without funds, through "smart regulations." For example, city procurement processes and existing contracts should be examined to determine if smart technologies can be written into procurements and services contracts, e.g., a provision requiring municipal waste disposal providers to include smart sensors on vehicles or technology to monetize, recycle or reuse products. Land use, zoning and building regulations can be amended to similarly require the incorporation of smart technology as prerequisites for approvals and permits. These changes could be immediately applied to new construction and development or phased in for renovations, rehabilitations and reconstructions.
A city can and should move quickly on projects that are low-cost, but immediately beneficial, such as dynamic parking; re-routing of traffic; some sensor technologies; and increased Wi-Fi access in libraries, parks and recreation facilities, all of which can be done in conjunction with the granting of telecommunication and other right-of-way franchises. Reaching for this "low-hanging fruit," even as more complex, costly projects are being developed, will yield quick, short-term results and cement a message that city leaders are committed to smart improvements. It would also help to build community buy-in while strategies for larger projects are being developed and discussed with residents and businesses.
At the end of the day, while becoming a smart city is a challenge, it is one that is well worth tackling. Financing municipal projects is never easy and often unpopular, but with creativity, diligence and a commitment to benefitting every segment of the community, a city or community can become a smart, 21st century city.
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.