If We Want Smarter Cities, We Need Smarter Funding

We live in an age where the services we use every day are becoming more connected and more intelligent. When I was a kid, we had a limited number of TV channels and had to consult a guide or channel surf to know what was on. Today, I have what feels like limitless access to programming on my TV and suggestions on what to watch tailored to my tastes. 

Similarly, my electric car monitors how I drive and notes where the optimal charging stations would be for each journey. Friends use fitness apps that track how hard they’ve exercised and note which days are optimal for more challenging workouts. 

In the consumer world, we now have access to an array of smart services that use data and analytics to optimize experiences by identifying choices we can make to enhance our lives in ways big and small.

An Age of Smart Living

The promise of smart cities was to use this kind of data and analytics to significantly improve the way the cities operate, and in doing so, improve the quality of life for citizens. And cities across Canada are beginning to implement smart technologies. So, why doesn’t it feel like urban life is getting noticeably better?

Maybe it’s because we have a deficit to overcome: A significant amount of infrastructure in Canada is aging. According to Statistics Canada, over $690 billion of public infrastructure is in fair to very poor condition, representing nearly a third of the value of all publicly owned infrastructure in Canada. That impacts everything from transportation to service delivery to utilities. 

Governments are making significant and much-publicized investments in infrastructure. Getting new infrastructure built will take time. But, from my vantage point, as someone who runs a company that sells smart traffic management solutions, I still see some roadblocks that are slowing progress. 

The Need for Smarter Funding

The challenge is not that Canadian cities aren’t innovative or aren’t interested in adopting smarter infrastructure. We have Canadian customers adopting our technology and that of others. The challenge they have is funding—both in terms of size and type. 

A quick primer on municipal funding: Most of the money raised by municipalities comes from property taxes and fees. In fact, 60% of the revenues municipalities earn come from property taxes alone. That has to support municipal services—everything from road building to waste pickup and libraries. There are other sources of revenue. The Federal Gas Tax Fund provides $2 billion a year to municipalities coming from about half of the taxes the federal government charges on gasoline. 

For larger projects, municipalities tap into programs offered by the federal and provincial governments, which tend to be focused on specific deliverables. For example, both levels of government have committed historic funding to build new public transit across Canada. 

But, this funding tends to focus on building new infrastructure with one-time funding. It doesn’t generally cover recurring services. That’s a challenge for smart technologies, which may include installing smart, connected hardware, but really provide most of their value through things like software licenses or analytics services, much like the subscription services required for many consumer smart offerings. 

This is an old-world approach to funding infrastructure, designed more to fund physical infrastructure like bridges, where most of the up-front cost is the construction. Senior levels of government provide that funding, shovels start digging, and the city infrastructure improves. 

But, that’s not a good match for smart infrastructure, where there are recurring costs, and the real value from the infrastructure often benefits from widespread implementation, with sensors and systems being installed across the entire city. 

Trying to fit smart infrastructure into existing funding models forces cities and towns to adopt smart technologies incrementally, as funding allows, and at a pace that can support annual service costs, even if the result is sub-optimal. 

Fear of Buying a Betamax

If you are old enough, you’ve probably lived through a few platform wars whenever a new technology emerges. One of the most famous happened when videotape players first hit the market. Sony led with Betamax and JVC introduced VHS. For a time, the two formats competed, with VHS ultimately winning out in part due to more available pre-recorded content. For Betamax buyers, who had fewer choices at the video rental store, it was a cautionary tale about the costs of choosing the wrong platform.

For cities, the fear is to adopt the smart city version of Betamax—a non-compatible technology that ultimately falls by the wayside, rendering the installation obsolete. As smart technologies emerge, with few standards on software interoperability, cities are being cautious, evaluating technologies and limiting the size of their implementation. 

The result of current funding models and the lack of technology interoperability and standards is that we’re seeing lots of pilot-level implementations—smaller-scale projects that fit within existing funding and give municipalities a chance to evaluate technologies before wider adoption. But, until we address funding and standards/interoperability, the risk is we’ll just have a lot of pilots without measurable improvement in the quality of life across our cities. 

Being Smarter About Smart Cities

So, how do we see bigger improvements in cities faster? 

First, senior levels of government can look at how they support innovation in cities. Infrastructure isn’t just concrete and shovels anymore, and funding and procurement models need to adapt. 

One way to do that is to adopt a challenge funding model. Instead of procuring a specific solution—often describing the technology to be adopted—funding could instead describe a problem to be solved and include expert technical evaluators to look at the viability, potential impact, and costs of different proposed solutions. Imagine a world where a municipality simply said it wanted to reduce traffic congestion and allowed various proposals—like a smart signal solution, technologies to significantly improve transit service, bike or scooter shares or other solutions—to propose how they might address the issue and at what cost. 

Of course, funding also needs to acknowledge annual costs and provide a stable way to fund these services over time. 

This also requires the public sector to improve its capacity to evaluate the strategic impact of emerging technologies rather than treating new technology like any other kind of procurement. New tech can often make new things possible, but it can also require organizations to change their existing workflows to realize these growing possibilities. That’s much different than simply building new physical infrastructure that plugs into existing ways of working. Being able to understand and evaluate the strategic impact of new technologies is as important in the public sector as it is for private sector companies. 

Public sector buyers do have a big advantage over their private sector counterparts. In many sectors, they can define the market. In my business, smart intersections are a market almost entirely defined by public sector agencies. That means the public sector can demand technologies that adhere to open standards and are interoperable. Working together, they can even define new standards the industry has to adopt. Municipalities collectively have the power to make vendors create interoperable solutions, ensuring you don’t end up with systems that don’t talk to each other or are no longer supported by the broader market. That does require developing a deeper understanding of emerging technologies and their implications, but the result will be better for cities and will ultimately create far more competitive markets. 

If we could adopt these measures across all levels of government across Canada, our cities will become global leaders in adopting smart city technologies, making the places we live more efficient and more livable.