Smart City Funding Gets Smarter

A look into the smart city financing

Due to an increasing popularity of big cities, it becomes clear that the “concrete kingdoms” have to combine new technology with urban planning, rethink the management processes of energy transport, business planning and much more. With the use of innovative technologies, cities are able to reduce resources spending, improve the infrastructure and general aspects of citizens’ lives. The limitations in this case are only fiction: cities can use sensors to monitor water and electricity consumption, use the AI and machine learning to decrease the crime rate. Such ideas have already been implemented in a few cities in Great Britain.

It becomes clear that smart city technologies is a potential market market. More and more people move to big cities for living and over 70% of the global population will be living in cities by 2050. According to the International Data Corporation (IDC) report, this year’s investments in smart cities have totalled $80 billions worldwide, and in 2021 this number will raise to $121 billions a year.

Smart city investments can trigger “a robust cycle” of economic growth by unlocking savings and attracting businesses, residents, and talent
ESI ThoughtLab’s report of 136 cities

At the same time, funding of smart cities’ initiatives remains a challenge: high risks of failure and no proof of previous experience or success pushes the investors to play safe, rather than to go “all in”.Taking this into consideration, Deloitte considers that smart cities require innovative business models and present their vision of smart city funding and financing in the document “Smart Cities Funding and Financing in Developing Economies”.

Despite the challenges in smart city funding, ESI ThoughtLab considers that a three year path, public-private partnerships (65%), will be a dominant financing technique, followed by a concession financing (60%), revenue share financing (60%), and department budgets (59%), which will all grow in use over current levels. Federal and state support will grow the most in use over the next three years, by 71% and 58%, respectively.

Here is the infographic information, demonstrating the importance of smart city technologies.

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