How Four U.S. Cities Plan to Fund Smart City Initiatives

The smart cities sector is a prominent poster child for IoT. But there are arguably few truly smart cities. A recent McKinsey report notes even the most “cutting-edge and ambitious smart cities on the planet still have a long way to go.” The management consulting firm also notes the most advanced smart city projects tend to be in cities with relatively high income.  

That doesn’t exactly come as a surprise. One of the principle drags on smart city initiatives adoption is a lack of funding. Observers familiar with city dynamics have long known funding for smart city projects would be a challenge. Grants are not adequate to support ambitious plans for smart cities. City officials would need to fund alternative funding sources to fulfill their smart city ambitions.

Some of the greatest IoT needs in the smart cities realm include:

• IoT applications that allow power and energy utilities to succeed with digital transformation initiatives.
• Transportation services that alleviate congestion and reduce emissions into the air.
• Water and waste management solutions.
• Citizen information-sharing.
• Analytics capabilities that allow cities to use data generated from IoT.

Though the funding obstacle is critical, many cities are finding ways to find the necessary cash for smart city initiatives. Some cities are using user fees for IoT technology. Others are using funds from advertising. And, there is still grant funding available, and some cities can capture that type of revenue.

In spite of funding shortages, there are other ways of launching projects and one attractive type of engagement is a public-private partnership. Those engagements require private funding from companies that will finance, operate and maintain the IoT services. Such deployments can deploy various types of repayment models for the capital investment.

Las Vegas is currently testing three pilot projects. The city obligated $500 million to find ways to connect the entire city by 2025. One project uses sensors to track traffic patterns and maneuver traffic through streetlights connected by sensors. The project also records the reduction of CO₂ emissions that are realized by eliminating congestion. A second pilot that also uses sensors focuses on pedestrian safety. The sensors detect movement in intersections when pedestrians step into crosswalks. If there is a danger of a pedestrian being struck, the sensors change traffic lights to red to stop oncoming traffic. The third pilot is designed to detect when trash receptacles are full and when streetlights are out. This project’s objective is to improve maintenance operations in the city. The city’s smart city sandbox neighborhood, known as the “Innovation District,” depends on public-private partnerships for funding and support. The Las Vegas smart city projects are facilitated by a grant from the 2018 Readiness Challenge, where Las Vegas was one of five winners. The grant program awarded each winner a year’s worth of free mentoring, products and services worth hundreds of thousands of dollars.

Portland, Oregon is using similar IoT technology that attaches a network of sensors to city streetlights and traffic signals. This pilot project provides data about air quality based on improvements made by regulating stalled traffic. If successful, the city will expand the project from major intersections to the city as a whole. The project is supported by a National Institute of Standards and Technology (NIST) Replicable Smart City Technologies Cooperative Agreement grant. The project is a partnership with the Portland Bureau of Transportation, NIST and Portland State University. Three sensor providers contributed three devices each to the project.

Henderson, Nevada has launched initiatives designed to maintain a competitive edge while enhancing the quality of living for residents. The projects fall into five main categories: citizen services, public safety, education, transportation and city government. These projects incorporate many IoT attributes including pedestrian-to-vehicle technology, telematics (long-distance transmission of information), drone assessment tools and smart water metering. The second largest city in Nevada is seeking both public and private partners to help with its transformation to IoT technology.

Kansas City, Missouri embraced a public-private partnership for its IoT efforts. Municipal officials supplied $3.7 million for the project, and private-sector partners financed another $12.3 million. The project installed 25 kiosks for citizens to connect to the Internet to receive city information. The kiosks where information can be obtained also function as an emergency alert system. The city’s repayment model for the initial capital investment will come from advertising revenue that will be incorporated in the programs. The private-sector partner will share in the revenues and has announced that it will likely recoup all its capital costs in less than five years.

IoT represents the future for U.S. cities. The marketplace that is being created is extremely attractive and it’s definitely worth watching — and funding.