Dive Brief:
- Deloitte's new report, "The Challenges of Paying for Smart Cities Projects," explores how cities can effectively pay for smart technology projects through funding and financing strategies.
- "While the smart cities movement offers exciting new opportunities for governments, their citizens, and businesses, finding the money to support such products or services can be a complex undertaking," the report reads. "When government officials understand the full range of options for funding, financing, and procurement; analyze the advantages of each; and choose strategies that best fit their situation, they can vastly increase the odds that their smart city initiative will succeed."
- The report offers a number of steps to consider before deploying a smart tech project, including developing a business model, evaluating a revenue model, assessing value capture to provide funding contributions, evaluating financing options and selecting a procurement structure.
Dive Insight:
The report highlights a common obstacle in deploying smart city technologies: If your city is the first to test a new tech, it reduces investor confidence, especially if there's not a clear return on investment (ROI) for the project. Even if a smart tech project offers socioeconomic benefits, securing funding may be challenging if cities are unable to monetize those benefits.
This obstacle indicates why only 10% of smart city projects are supported solely by private financing, while 41% are supported by a mix of public and private funds. By developing an innovative funding strategy using a hybrid of public and private options, different aspects of a project can be more properly financed.
In a statement, Michael Flynn, Deloitte Global Financial Advisory Public Sector leader, explained that "financing doesn't have to be a major hurdle to becoming a smart city." As mayors and city leaders pioneer new technologies that, if successful, can alter the course city development nationwide, there are many other complex factors to prioritize — such as security and citizen engagement. By evaluating proper financing tools from the get-go, cities can alleviate monetary stresses and actually focus on the benefits of smart tech projects and how to optimize them.
