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Funding, Financing, and the Economics of Smart Cities

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  January 9th, 2019  By Joe Supan

Funding, Financing and the Economics of Smart Cities

Wednesday’s panel “Funding, Financing, and the Economics of Smart Cities” focused on the money behind new technologies impacting cities across the globe. Hosted by the global accounting firm Deloitte, the panel had a diverse perspective, with professionals on both sides of the public/private divide.

Why do we need smart cities?
Before the panel was introduced, Deloitte’s Simon Dixon explained what the term “smart cities” means and why we need them. With 1.5 million people moving to cities every day, urban populations are expected to outnumber rural ones by a ratio of 2-to-1 by 2050. Cities are struggling to keep pace with that rapid growth, leading to congestion, health issues, and reduced quality of life for citizens. As Michael Flynn, Principal at Deloitte Ireland, noted, at the same time as that infrastructure ages and gets more expensive, the public is also demanding more sustainability.

Everything from AI-influenced bus routes to buildings that only heat rooms when they’re in use can be used to increase efficiency for a city. Dixon also used the example of Cascais, Portugal, where citizens can collect points for good deeds like carpooling that can be used for prizes like concerts and sporting events. The result? Unprecedented civic engagement.

The public and private sectors can work together
In order to address these kinds of massive, systemic issues, the public and private sectors will need to work hand in hand. Brenna Berman, former Chief Information Officer for the city of Chicago, said that oftentimes the public and private sectors share the same goal. She used the example of damage caused by thunderstorms in Chicago. The city needs reliable data on how they occur in order to help with cleanup and power outages. Insurance companies also need this information to process claims. “Unfortunately,” Berman said, “many cities still look at technology simply as a cost instead of an investment.”

Tackle the low-hanging fruit first
For cities with rapidly aging infrastructure, becoming “smart” can seem like an insurmountable task. Jay Collins, Vice Chairman of Corporate and Investment Banking at Citi, said several times that city governments should not try to “boil the ocean” — that is, to undertake an impossible project. Focus on achievable goals first, such as replacing all the city’s lighting with LED bulbs, which can yield 30% to 40% in savings that can be put toward more ambitious projects.

Who gets to profit off of public data?
This was the touchiest topic in the discussion by far, with a rare disagreement between panelists from the public and private sectors. What they all agreed on is that there is potential for massive revenue here. Berman advocated for public data being handled on a case-by-case basis. Largely anonymized public transit data, for example, is much different than personal health records. “It has to get paid for somehow,” Flynn said, “whether you sell the data or someone pays for the service.” Ultimately, each city has to come to the right arrangement for them: What’s unacceptable in Seattle may be fine for residents of Cleveland.

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