Addressing the Challenges of Funding and Scaling Smart City Projects

By Kevin Taylor, Business Development Manager, Smart Cities, Axis Communications, Inc.

In recent years, more and more municipalities have adopted some form of smart-city mindset. From smart traffic systems to video surveillance to parking and much more, these projects are designed to not only streamline city services but to improve the lives of the people who live, work, play and learn in a particular community.

With an increasing number of municipalities looking to become smart cities, the unfortunate reality is that, as beneficial as smart-city technologies may be, all too often a city’s goals and vision are outpaced by its ability to pay for the correlating solutions. So, it should come as no surprise that funding is often the biggest impediment to smart-city adoption.

Thankfully, there are several creative strategies cities can use to address this roadblock and take advantage of all the benefits smart cities have to offer.

Public-Private Partnerships

To overcome the challenges of making smart-city programs work in the face of tight budgets, many municipalities have turned to public-private partnerships, often referred to as P3 or PPP, to obtain the financing to support their vision and goals.

These partnerships consist of a collaboration between public and private entities, including businesses and other organizations with a vested interest in keeping their city clean, safe and attractive. Under these arrangements, corporate citizens (companies) within the community take an organized and active role supporting the vision of local government and public safety leaders. For private companies, the ability to provide goods and services to support smart-city functions can also help increase their business dealings in a city or region.

In some U.S. cities, local non-profit organizations are created to help raise money and provide resources for programs, equipment and special needs that can’t be readily provided through public-sector funding.

One such organization is the Atlanta Police Foundation. Founded in 2003, APF has worked as the strategic arm of the city’s public safety efforts by securing and leveraging private resources to fund high-priority projects that enhance the Atlanta Police Department’s ability to improve the safety for all within the city. One significant benefit of APF is its ability to be more agile and provide funding without the red tape and other delays associated with the political process of seeking funding from the city council. By complementing the police department, APF has helped put more police officers on the street, has fostered trust by initiating community outreach programs to businesses and residents, and has expeditiously funded the deployment of technical resources for use in public safety efforts.

Third-Party Funding

Aside from raising taxes, cities may also turn to grant opportunities or private equity firms to fund projects. While grants are helpful, they are often not sufficient to fund smart-city programs to full scale, but rather for test-bed districts and proof-of-concept deployments.

In some cases, the private sector can offer more robust and flexible financing options for cities. As seen in the public-private partnership arena, businesses do have an interest in helping to develop smart cities.

Among the models that have been used to help fund smart cities are consumption-based financing, under which municipalities pay for technology based on usage and capacity as needed. There are also as-a-service options, which allow cities to avoid paying upfront for technology in a cap-ex model, instead deferring the initial cost into an operational expense. Concession financing provides the benefits of technology at little or no cost to the city while generating incremental revenue and/or cost savings. There are also revenue-sharing financing models that allow cities and investors to share revenue streams or cost savings that result from smart city projects.

These are just a few of the innovative new approaches to financing smart cities via third-party funding, all of which make the challenge of moving from pilot to full-scale deployment less daunting.

Scaling Systems through Federation

Like funding, scaling these projects can also prove challenging for cities. There is often no room in the budget for citywide procurement of emerging technologies. In the area of video technologies for public safety, the amount of devices and systems owned by other stakeholders, including the private sector, presents an opportunity to grow the city’s network of devices while reducing the burden on the city of both purchasing and maintaining every device.

The solution for many cities has been to incorporate systems deployed by those in the private sector into the city network with authorization from those systems’ owners—businesses, universities, transit authorities and others. Through this type of federation, these systems then become part of the overall smart-city solution. This provides visibility into areas where the city wouldn’t be able to afford coverage through traditional municipal financing.

For example, Atlanta’s Operation Shield incorporates more than 10,000 private and city-owned cameras, all of which are integrated into the city’s video integration center. Through this video surveillance hub, the Atlanta Police Department is able to detect and confirm events more accurately, therein allowing the most appropriate and efficient response to address issues. The city has even used the system to effectively maintain safe conditions at cultural festivals as well as championship collegiate and professional sporting events.

Looking ahead, it’s a good bet that most municipalities will eventually adopt some form of smart-city initiative, particularly if some of the main impediments can be overcome. As demonstrated by these examples, there are many ways municipalities can fund their smart city projects and scale them beyond pilot to full deployment. While at one time the onus for developing a smart city may have fallen solely on the public sector, that is no longer the case today.

As the benefits of smart cities have become clearer, the private sector is more willing than ever to assist in turning these goals and visions into reality, whether through funding, providing access to private systems, or a combination of both. Under this new reality, smart-city technology and systems can be available to cities and towns of all sizes that are willing to get creative in building partnerships to benefit the citizens, businesses and guests in their community.

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Article Written by Kevin Taylor, Business Development Manager, Smart Cities, Axis Communications, Inc. | View all articles by Kevin Taylor, Business Development Manager, Smart Cities, Axis Communications, Inc.