Smart technology has made its way into virtually every aspect of our daily lives since the inception of the smart phone in the mid-2000s. Since then, cognitive computing technologies, such as machine learning and artificial intelligence, are radically changing how we value the quality of our interactions. They relinquish us from the mundane act of merely doing; they create space for living, learning, connecting and thriving.

At the same time technology is becoming more commonplace, populations are increasing in dense urban areas causing cities to rethink what public service looks like in the age of technology. Digital reconstruction is inevitable. Just as city blueprints are going back to the drawing board to incorporate smart infrastructure, traditional capital project funding and financing sources will also require a think-outside-the-box strategy.

What Makes a Smart City So Smart?

A smart city is a technological ecosystem of citizens, municipalities, businesses and non-profits connected through a network of technology made up of smart infrastructure. Connected through sensors, fiber optics, and broadband Wi-Fi, these technologies facilitate the ease of communication and transmission of data in real time, generating efficiencies in operations while also stimulating community collaboration that enriches the wellbeing of the public.

Cities with Smart Initiatives

There are a great number of smart city initiatives around the globe, including these powerful examples.

Chicago, Illinois

The value of data and analytics helped the Department of Public Health in the City of Chicago assist health inspectors systematically assess more than 15,000 restaurants more efficiently. Using historical data and algorithms, they determined establishments at greatest risk of violations. The results of this new tool increased the number of critical violations detected in the community by 15%, preventing sicknesses by greatly affecting deterrents of food borne illnesses.

Kansas City, Missouri

Streetlights in Kansas City were outfit with sensors along a new stretch of their light-rail. The sensors gather traffic and parking data along the route and go so far as to even count foot traffic. This entices local entrepreneurs interested in areas where new storefronts might be economical. With all this foot traffic comes congestion and cleanliness issues as well, so the city is able to also monitor disturbances and deploy maintenance crews when attention is needed most.

Louisville, Kentucky

A partnership of public and private organizations provided some 1,000 asthma sufferers with inhalers equipped with sensors. These powerful little devices tracked when and where users were administering puffs, giving public health officials direct insights into areas with poor air quality. In response, the city planted trees in areas with poorer air quality. One area in particular saw a 60% reduction in air particles known to cause breathing issues. Users of the inhalers and their healthcare providers reported that the devices provided them with more measurable data that they incorporated into their treatment plans, and patients saw improvements to their overall health.

Mobile, Alabama

The City of Mobile supplied building code inspectors with smartphones, documenting more than 1,000 code enforcement violations around its city limits in roughly one week’s time. This was an endeavor that was never even thought possible with traditional paper tracking systems, let alone in such a short amount of time. What it did next was even more valuable. The city cross-referenced their findings with county records creating an index of problem properties cataloged in public databases, which is very attractive to local non-profits and property investors, in a city in need of revitalization.

Creative funding and financing strategies

With progress comes a certain set of challenges. City budgets are already strained, and the thought of sinking the balance sheet by leveraging more debt is far from anyone’s priority list. However, traditional financing models alone are not the only solution. As city infrastructure is reimagined, so too are the means for covering their cost and addressing the added burdens of (1) maintaining these new devices as technology continues to rapidly evolve  and (2) overseeing data collection, storage and cyber security. Below are four strategies finance officers should consider when adapting smart infrastructure into their agencies.

Partnership models

In a 2017 report by Deloitte, Inc., entitled, “Funding and Financing Smart Cities,” Deloitte explains the rebalancing of risk and reward through revenue sharing models such as pay-for-performance. Relationships with the private industry allows investors to absorb loss leaders in the upfront costs of long-term investments, while implementing piloted phase-in approaches of new technological concepts into city grids over time. Revenue generated from new infrastructure is used to cover the cost of the investment and maintain the assets into the future, including routine maintenance and  implementing technological improvements, ensuring smart cities stay on the cutting-edge.

Revenue generating potential of collected data

The data collected and shared can be thought of as an asset of its own in the form of intellectual capital. A concept known as “monetizing data” is new to municipalities. Traditionally, data has been public record. It is not to say that this will change, but the value the data creates is stimulating commerce, as every byte of information has 10x the revenue generating potential. In the case of Kansas City mentioned above, where sensors are monitoring traffic and parking, private companies like WAZE and other app developers for parking assistance use the same traffic data to map traffic patterns and track available parking spots. Leveraging data in this way stimulates local economies and has the potential to become a cost recovery mechanism for municipalities, and the possibilities are endless when communities are empowered with data in the market place.

Grant funding and in-kind contributions

A new take on grant funding is coming in the form of competitive bidding. In 2015, the US Department of Transportation rolled out their “Smart City Challenge.” The challenge invited cities across the United States to submit their proposals on smart city initiatives for a chance to receive $40 million in funding. Likewise, Smart Cities Council has a similar program. They call it a “Readiness Challenge.” Each year, the Council takes applications from all municipalities in North America, awarding five agencies a year’s worth of one-on-one coaching, workshops, and other products and services worth hundreds of thousands of dollars, all free of charge.

Crowdsourcing

In the spirit of competition, some cities are looking to their community members for help. Under the direction of the Chief Data Officer in the Office of the Mayor, the City of Los Angeles bolsters collaboration between the city and its citizens by hosting an annual summer camp and hackathon. The results of these initiatives aid the city in developing solutions to its needs, while also inspiring opportunities for local commerce by igniting the minds of young people in the community. The City of West Sacramento recently did something similar. The city launched an open call to all community members to submit app design ideas that addressed public-transportation concerns. Traditional public transportation services were doing their best to meet the needs of the community, but they wanted to do more. The city recently sponsored a ride-share service that not only bridges this gap but is also one of the first of its kind transitioning public transportation from fixed routes to on-demand service.

What to do next

As a finance officer, you may be wondering what your role might be within smart city initiatives. The first step when considering smart city initiatives is to proactively keep a finger on the pulse of your organization’s efforts so you can aid in supporting its overall goals and mission. See if smart infrastructure has been considered, and find out if they are facing any challenges. may be unaware that technological solutions are available, and others might think they are out of reach or even impossible. The next recommendation would be to educate yourself. Seek out additional resources, articles, and training Reach out to other organizations, ask questions, and see what other finance officers are doing. Some possible outcomes might include opportunities to collaborate on a joint venture, creating an infrastructure JPA, or gaining advice and direction from early adopters who have broached similar initiatives before. These are all options that stem from healthy conversations by breaking down silos across organizations and considering new and creative ways of molding your city into the future.

Resources

Below are some suggested resources for staying up to date with smart cities.

Deloitte – http://smartcity.deloitte.com
Smart Cities Council – http://smartcitiescouncil.com
Smart Cities Connect – https://smartcitiesconnect.org/
US Department of Transportation – https://www.transportation.gov/smartcity
CityLab (The Atlantic) – https://www.citylab.com/
Consumer Electronics Show – https://www.ces.tech/
SXSW Cities Summit – https://www.sxsw.com/conference/cities-summit/