Citizens today expect cities to deliver the same kinds of seamless, relevant and personalized user experiences they have grown used to receiving in other areas of their lives from retailers, banks, and communication service providers to name just a few.
Businesses have set the bar high and in order to win the battle for the investment and talent needed to build vibrant urban centers, cities must innovate and adapt. They must become smart-cities.
Smart technologies can help cities address challenges like pollution, crime, transportation, congestion and many other issues. They can change the way cities interact with citizens, drive opportunities for deeper engagement and fuel the creation of innovative services that improve the lives of citizens.
Smart city initiatives come with a price tag, however. Once cities have determined which projects and investments are best for their citizens, they must find ways to pay for them. There are many financing options from both traditional and innovative sources. Enclosed below are just a few that were highlighted in the recently published e-book, Smart Cities: The Economic and Social Value of Building Intelligent Urban Spaces, from TCS and Wharton Schools online business analysis journal Knowledge @ Wharton.
- Free up capital through cost efficiencies: Cities can use digital technologies to reduce operational costs and generate funds that can be invested in smart city initiatives. E-procurement, for example, provides increased operational efficiencyand significant cost-savings. Money saved can be used to fund new cost saving smart city projects.
- Implement performance contracts and shared revenue models: Some cities are tapping into innovative performance contracts and shared revenue models to make smart city infrastructures a reality despite limited capital. An energy saving performance contract, for example, can fund smart city projects from the cost savings the project generates.
- Partner with private enterprises: Cities are finding inventive ways to partner with private enterprises to create smart-city solutions that meet the needs of its business stakeholders, cities and citizens. CityBridge, a New York City-based consortium of leading experts in technology, advertising, connectivity and user experience, is a great example of one such partnership. CityBridge was approved by NYC to replace its aging payphone infrastructure, more than 6,400 payphones, with smart kiosks that provide free municipal WiFi and other public services, all funded by advertising displayed as digital signage on the kiosks.
- Tap into multilateral institutions: There are a number of non-governmental organizations (NGOs) that provide financing for a wide range of sustainable projects. The World Bank, one of the best known, offers seed-stage capital to fund Smart-city initiatives. Another well-known organization, Climate Investment Funds (CIF), provides support for four key programs: Clean Technology Fund, Forest Investment Program, Pilot Program Climate Resilience and Scaling Up Renewable Energy Program.
- Explore impact investment funds: The impact investing movement is growing, and the increasing number of impact investment funds available reflects the desire many people and businesses have to drive positive social change. There are a number of foundations that provide investment opportunities to people who want to do good and are willing to receive a reduced return for smart-city initiatives that make the world a better place to live. Investopedia lists some top investing firms.
- Seek philanthropic investors: There are a number of private foundations and nonprofit organizations like Funders Network for Smart Growth and Enterprise Community Investors that offer gifts or grants to help communities build more livable and sustainable cities.
- Combine financing options: Many smart-city projects rely on multiple funding sources. City officials and administrators need to think creatively to use the many financing tools at their disposal including taxes, bonds, public private partnerships (PPPs), grants and other sources of private or philanthropic support to fund projects that make our cities more livable, efficient and sustainable.
- Expand existing sources of revenue: This is a more obvious and a bit less exciting option, but one to be mentioned nonetheless. It can include raising property taxes and tariffs like parking fees, tolls, traffic fines and more. This approach may not be popular with citizens unless there is clear communication and engagement and citizens understand and appreciate the value the smart initiative delivers. Charging user fees, which are not taxes but rather fees citizens elect to pay for a service or enhancement, such as paying a toll to drive in an express lane, is a possible paid for by choice source of revenue. Monetizing new services such as public Wi-Fi or using data analytics to mine information that can be sold to marketers is yet another way to expand revenue sources.
Are you are interested in learning more about projects already underway and discovering how to fund smart city initiatives? More information about the smart city phenomenon can be found in the recently published e-book,Smart Cities: The Economic and Social Value of Building Intelligent Urban Spaces.