3 ways to fund smart-city initiatives

12 May 2014 | Joel Cherkis, General Manager, Worldwide Government

There’s no shortage of new ideas to help cities address the challenges of urbanization. But city leaders, who are still making do with limited budgets, tell me they don’t have a lot of options to pay for these ideas. What they’re searching for is a solid business model, a blueprint for bringing together the right funding sources—from grantors, the private sector, non-governmental organizations (NGOs), and others—when multiple stakeholders are involved. While I haven’t seen the perfect blueprint yet, in my work with cities, I see some interesting possibilities. Here are three of the most promising:

1. Public-private partnerships

Public-private partnerships (PPPs)—in which private investors finance public projects in exchange for long-term operations contracts—are surfacing all over the world. Barcelona and St. Petersburg are just two of the cities that are relying on PPPs to achieve their strategic plans faster than they could through public funding alone. One of the keys to success, according to Barcelona’s CEO, Mateu Hernandez, is co-designing the projects. This ensures that the city, the investor, and the public all win. To read up on financing your projects through PPPs, check out the World Bank’s resources. And find out if there’s a dedicated PPP Unit in your country.

2. Multi-stakeholder partnerships

In multi-stakeholder partnerships (MSPs), thought leaders from academic and civic organizations—such as philanthropies and NGOs—join with cities and private companies in collaborative alliances aimed at meeting specific local or regional goals. CleanTech San Diego unites five academic institutions, 19 NGOs, 13 government entities, and 60 companies to advance the region’s clean tech mission. In this and other MSPs around the world, people are breaking out of siloed thinking, learning to understand each other, and pooling expertise and resources from all sectors to solve modern-day challenges.

3. Smart-cities consulting companies

I recently talked to a consulting company that’s creating programs to help local leaders plan, deploy, and maintain sustainable city models. This is great news for cities. The smart-cities market appears to have enough financial backing to support the growth of for-profit companies acting as trusted advisors. I’ll be watching to see if other consulting companies will appear. I suspect they will and expect significant growth in this sector. My advice to city leaders: Remember, you get what you pay for.

To put one of these partnerships to work in funding your projects, you’ll need to find out who’s working in your area. First things first: Start talking to other cities. Look at what your neighbors are doing and ask them how it’s working. Next, make sure you have an active advocate in the intelligent cities consortia (with the Smart Cities Council and City Protocol Society, for example). There’s a lot happening in these consortia, and a lot to learn. And finally, actively participate in local and regional events about topics that align with your goals. It sounds simple, but getting out and interacting in these ways can actually open up a whole new world. A world in which new collaborations bring innovative ideas to life.    

Have a comment or opinion on this post? Let me know @Microsoft_Gov. Or e-mail us at ongovernment@microsoft.com.

Joel Cherkis
General Manager, Worldwide Government

About the Author

Joel Cherkis | General Manager, Worldwide Government

Joel leads a team of business development and technology professionals supporting policy decisions and the delivery of relevant and scalable technology solutions into public sector markets around the world. Read more