Smart city : development projects and financial instruments | CDP

The Smart city

Development projects and financial instruments

The Smart City has been at the centre of a spirited debate for some years now. The need to rethink urban spaces, focusing on the needs of city dwellers, rationalising resources and raising the efficiency of service delivery, has taken on a key role in the definition of the possible paths of development for cities.

In this context, technological innovation allows us to envisage scenarios unimaginable only a decade ago, raising the question of how best to unleash the potential of the technologies now available.

From a purely theoretical point of view it is now possible to conceive of a Smart City on a manageable scale for end users, one that incorporates services and processes that optimize the available resources. However, on a practical level the design of the project must necessarily take account not only of the specific features of the individual urban area, but also the organisational and financial feasibility of the initiatives required.

Programming initiatives with a clear, long-term vision and the financial viability of the associated investment are two critical issues that, in reality, prevent Smart Cities from going beyond formulations of principle to enter the realm of the feasible.

A first unavoidable step is deciding what a Smart City is. This discussion has led to the proliferation of sometimes discordant opinions that have captured only a part of the concept, producing semantic distortions and contributing to the idea that a city can qualify as smart merely though impromptu and uncoordinated individual initiatives.

Now, however, consensus has formed around the idea that the creation of a Smart City must be founded on the construction of a strategic, planned and comprehensive vision, associated with an ability to assess the potential of the territories involved by a political actor capable of rethinking the city for the long term, taking an integrated approach that impacts a broad range of areas.

The actual development of a Smart City thus implies a continuous process of innovation that will translate into the delivery of new services and the use of new products. The goal is to improve the quality of urban life, in part through the closer involvement of city dwellers in governance processes and the close monitoring of real needs.

This process, however, requires a level of investment – including spending on infrastructure – that cannot be funded solely through government budgets. Indeed, although public expenditure is justified to achieve public interest objectives and to remedy certain market failures (as in cases, for example, where the relative immaturity of a technology may make the investment too risky), in the current fiscal environment we must necessarily tap private-sector capital, including through the more extensive involvement of institutional investors.

In this context, it is essential to assess the maturity of the various technological options available, partly with a view to determining the evolution of possible business models and the impact on financial sustainability. The various application domains are highly diverse in their infrastructure requirements, the complexity of the required interventions and their investment needs.

In the light of these considerations, this report attempts to trace a sustainable path for Smart Cities, both from the point of view of planning and that of identifying the funding sources for the associated projects.

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