Rapid urbanization in both developed and emerging economies is exerting pressure on their urban infrastructures—to provide services, make information available across city agencies and with citizens, and carry out processes more efficiently. Governments face the challenges of shoring up physical facilities and systems to make these capabilities possible, often with the added pressure of tighter budgets and static levels of private-sector investment.
McKinsey Global Institute research found that the current pace of infrastructure investment would be insufficient to support initiatives in cities worldwide over the next two decades. Rather, $3.7 trillion in investments in economic infrastructure is needed every year from now until 2035.
If cities are to address the gap between needs and resources, public- and private-sector institutions must collaborate. Together, they must innovate and fund creative solutions to allow cities to effectively deliver citizen services. Public-private-partnership models have certainly been the norm when it comes to financing physical infrastructure in cities—such as toll roads, bridges, airports and hospitals. The next wave of investment in cities is around IoT-enabled infrastructure to digitize urban services. Examples of this include a city-wide smart parking rollout, smart lighting, safety and security and citizen engagement solutions through Wi-Fi-enabled kiosks set in downtown environments and other such connected solutions.
Recognizing this need, Cisco has co-created the City Infrastructure Financing Acceleration Program. The program oversees $1 billion in debt and equity capital that is made available to cities and to operators of urban services to creatively finance smart city technology. Cisco will provide flexible financing through Cisco Capital and will work with private equity fund Digital Alpha Advisors and with pension fund investors APG Asset Management (APG) and Whitehelm Capital, to facilitate faster and more affordable funding options for cities around the world.
Cisco’s $1 billion investment will enable flexible payment solutions via Cisco Capital, equity investments under public-private partnerships, and partnership structures based on the cost savings and sharing of future revenue streams enabled by the new, smart infrastructure. With this increased flexibility, Cisco intends to make investment more attractive and extend the options for cities to adopt “as-a-service” solutions that address their toughest challenges.
The City Infrastructure Financing Acceleration Program will give city leaders the ability to deploy cutting-edge technology with minimal initial investment. It will also enable cities to more closely tie the cost of financing to the desired outcomes of their smart infrastructure projects. Whether reducing energy usage, easing traffic, or boosting public transportation ridership and revenues, cities are given the proof of commitment they want from technology partners that they must trust with the health of their most critical urban services. Revenue sharing can additionally expand cities’ future operating budgets with revenue streams from new services offered via secure digital infrastructure.
“Whitehelm is delighted to support long-term investments in smart city infrastructure,” said Gary Withers, CEO of Whitehelm Capital. “We see significant potential benefits for citizens and governments when services can be delivered more efficiently and tailored to the needs of citizens and their cities.”
Digital Alpha recently invested 10M GBP into Connexin, a UK-based, smart-city-solution provider that is building out Wi-Fi networks and offering urban services in Hull and has plans to scale to other municipalities.
The City Infrastructure Financing Acceleration Program not only serves the cities that will directly benefit from innovative financing options, but also influences more traditional financiers to look at smart city projects with a new lens – seeing these opportunities now with a focus on their potential return versus their perceived risk.