Cisco UK & Ireland Blog

Funding More Intelligent Cities – Part 2

July 11, 2017

Stu Higgins, Head of Smart Cities and IoT – UK Public Sector and Matthew Smith, IoT Market Development Director

Solving the financial conundrum

Last time, we talked about the dilemmas faced by towns and cities struggling to balance their desire to become ‘smart’ while facing the everyday operating challenges of maintaining basic public services. The term ‘smart city’ is now so commonly used, it would be easy to imagine it’s becoming the norm, yet constant pressure to do more with less means that for many city councils, it must feel like little more than a false dawn.

Asset rich but cash poor, cities have often resorted to selling valuable assets to keep afloat. Airports for example; once privatised, many become populated with shops, eateries, hotels, car-parks, advertising billboards … imagine if councils had been able to take a share of the profits these sites have since generated.

Start low, aim high

We also discussed how relatively modest changes can yield significant savings. Replacing a city’s traditional lighting with an intelligent LED system for example, would reduce energy consumption, improve safety and make navigation easier, while cutting lighting expenditure by up to 60%, which could be invested back into making further improvements.

Meanwhile, the LED system itself would provide a multi-sensor platform to facilitate additional applications, together with the data hubs and transmitters for traffic control, emergency services support, Wi-Fi hotspots, etc. And if the ongoing savings continued to be invested back into the infrastructure, they could be used to purchase further applications; the genesis of a smart city in effect.

All it would need is that initial cash injection…

A partnership approach to creating self-sustaining cities

Of course, the problem is finding the money, and while the most obvious solution would either be to shed more of their estate or find a private backer, many cities have already traded in their most valuable assets for short-term gain, and public-private partnerships haven’t always resulted in the anticipated benefits.

Fortunately, Cisco is not alone in our commitment to helping cities thrive without sacrifice or risk. Specialist investment manager Whitehelm Capital’s socially responsible investment approach focuses on long-term value and financial stability, working with a city’s finance teams to fully understand its economic situation, together with its needs and aspirations.

As an example, Whitehelm’s secure financing could be used in a concession on a city’s transition to smart LED lighting. The savings made from this installation, once initial costs and base revenue needs have been covered, would then be shared between the city and the finance provider, creating a partnership that benefits both borrower and investor, as opposed to asset stripping for short-term gain. In the meantime, the technology platform on which the lighting sits would support other smart applications, allowing the city to evolve over time, as savings made from previous energy efficient implementations are used to fund new services. Again, these new services would be funded initially by the capital provider and again, new revenue streams would be created and shared by the city and funding team.

The most important thing for cities within these models is future credibility; in fact, it almost works as an ‘anti-embarrassment’ clause in ensuring future digital applications built on the traditional assets that create new, unforeseen revenue streams are invested responsibly and benefit the city as a whole.

Thanks to the initial financial backing, the result is a self-sustaining city with stable long-term financial returns, and one that that attracts potential new businesses to the area, ensuring further stability and growth. And with a business model focused not purely on ROI but on what that ROI can deliver, this model doesn’t merely represent a technology disrupter, but a potential financial disrupter too.

Technology at the heart

The technology itself is ultimately just an unobtrusive enabler, something that neither investor nor local council should even need to think about. Yet at the same time, it sits at the heart of the city’s transformation, supporting multiple applications that can serve millions of people. It’s therefore vital that the vendor understands both local government and digital transformation.

We like to think we know a bit about smart towns and cities; we’re already working on ground-breaking projects like CityVerve in Manchester, which provide a blueprint for the future. Even better, we’re proving that being smart shouldn’t be confined to big cities, as evidenced by our work with Swindon Borough Council. And with services accessible on technology platforms via the cloud, location becomes irrelevant, meaning they are equally available to remote villages, enabling them to become smart too.

So, wherever you’re located, why not start your smart conversation by finding out more about Whitehelm’s work with Cisco and its smart concession model.

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