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Three smart city funding sources you may not have thought about

August 19, 2016



A report from Council Associate Partner Black & Veatch issued earlier this year noted that only 20% of cities responding to a survey could afford to pay for the upgrades they wanted to transform themselves into smart cities, and almost 50% didn't know if they could. And that about 60% didn't know what the rate of return would need to be to justify investment in smarter communications technologies and data analytics. That sums up the crunch. How does a city strapped for cash embark on a completely new way of delivering services to growing populations without diverting money from the basic services cities need to provide? Like healthcare and social services, schools.

The story below describes options you may not have thought about or haven't had the opportunity to explore. And it may provide a few ideas that would help justify your business case for a smart city initiative. Unless you're San Francisco, Austin or Chicago maybe you don't have the cash to do several projects at once. It's OK to start small. It's also OK to ask for help. You might get more than you expected. — Doug Peeples

1. Public-private partnerships (PPPs)
Collaborations between technology companies and local governments are increasingly popular as an option to share responsibility and  future returns on investment. PPPs can be complex and the agreements can be set up in several ways. For example, a city may choose to retain ownership of the assets while the company handles delivery of the service. A company also can both own and manage the service or services, depending on the agreement.. Kansas City partnered with Council Lead Partner Cisco and others on the free public Wi-Fi component of its downtown smart city pilot project. The private partners built the Wi-Fi network and also own and operate it. Council Lead Partner GE and its partner ShotSpotter have worked with numerous cities to install sensors capable of locating gunshots in streetlights.

Cisco also works with Whitehelm Capital  to provide what they refer to as the Smart Concession model, a global program that offers Cisco's smart city technology solutions and innovative financing from Whitehelm. "The Smart Concession solution bridges the funding gap by addressing the issue of cities having to make trade-offs between technological investments such as public Wi-Fi with social investments such as schools and hospitals," according to Stephen Burns, head of infrastructure for Europe and the Americas at Whitehelm.

2. Get competitive about grants.
As the winner of the U.S. Department of Transportation's Smart City Challenge, Columbus, Ohio will receive up to $40 million from the agency to help support its plan for a connected, integrated and vastly improved transportation system. But DOT isn't the only game in town. This year, Council Lead Partner IBM is sending groups of experts to 16 cities that won consulting services grants in its Smarter Cities Challenge. The teams will work with cities in the areas of jobs creation, healthcare, transportation, social services, public safety, revenue, public works and more. IBM has valued each grant at $500,000 spent $66 million providing services to 130 cities throughout the world.

3. Get creative about funding sources.
Kansas City's PPP with Cisco and other partners isn't the city's only approach. Earlier this week, three city parks and seven boulevards were recognized with listings in the National Historic Register. The listing does place some restrictions on what the city's parks and recreation department can do to continue buildings its parks system. But Department Director Mark McHenry sees more benefits other than the national recognition. He believes the designation could help open doors to grant funding possibilities such as historic tax credits for restoring parks.

And a few words about the Smart Cities Financing Guide
The Smart Cities Financing Guide provides valuable information about ways city leaders can get around tight budgets and high project costs to build the smart cities they envision. Developed for the Council by the Arizona State University Center for Urban Innovation, it includes 28 alternatives to traditional financing options  as well as detailed discussions on each one. The Guide is available to Council members at no cost.

Smart Cities Council: GE and ShotSpotter