Briefing points to steps in smart city financing

Deloitte paper advocates measures including infrastructure bonds and revenue sharing with the private sector

Global business consultancy Deloitte has advocated a threefold approach, including incentives to private sector backers, to financing smart city initiatives.

Deloitte smart city report coverIn a new briefing paper from its Centre for Government Insights, it says there is a need for new partnership models for smart cities that reallocate risk and reward between the public and private sectors.

This leads to the outline of three key steps to support development efforts:

  • Support fiscal incentives, public-private partnerships (PPPs) and qualified infrastructure bonds focused on smart city requirements. These can reduce short term costs of investment while balancing risk and rewards.
  • Incorporate performance based approaches for revenue sharing into delivery models. This can enable the public sector procurer and private sector investor to share the rewards from efficiency gains and data analytics that add value.
  • Encourage collaboration between different levels of government. This can open the door to funding for special purpose vehicles and innovation districts.

Although the paper makes direct references to the outlook in the US, it deals with themes that are highly relevant to the development of smart cities in other parts of the world, the UK included.

“To make the vision of smart cities a reality, government finance officers will have to find creative alternatives to traditional infrastructure financing models,” Deloitte said in an accompanying statement. “Under their stewardship, municipalities can seek out cross-government collaboration and innovative partnerships that provide new sources of investment.

“Public–private partnerships, revenue sharing agreements, and pay-for-performance arrangements are examples of resourceful new approaches to funding and financing smart cities. Investment vehicles like these go beyond traditional debt instruments to ensure less risk and more reward for all stakeholders.”

Image: Detail of report cover from Deloitte