Ed note: This article is part of a short series on financing smart city infrastructure, sponsored by Siemens. please join us for a live Google Hangout with Siemens, PwC and Berwin Leighton Paisner on June 12 at 10 a.m. PT/1 p.m. ET, where we’ll talk about this issue live!
Cities are changing the way they do business. And with shrinking budgets and consequently smaller access to resources, it makes sense for burgeoning metropolitan governments to find new ways to upgrade technology, expand infrastructure, and provide new and better transportation options for their residents: the new urban dynamic.
A new report put out by three organizations – engineering and electronics corporation Siemens, law firm Berwin Leighton Paisner, and professional services network PwC (also known as PricewaterhouseCoopers) – suggests that for cities to meet the demands of increasing populations and demand on land, water and resources, sustainable infrastructure is critical. And to accomplish that goal, innovative approaches that not only satisfy the needs of city residents but also inspire investors to take an interest in contributing to the urban dynamic are quickly becoming a requirement in today’s marketplace.
The report’s authors pose this thought provoking question: “What is the best way to make cities attractive to investors and to enable the financing and delivery of the critical urban infrastructure needed for them to become cities of the future?”
Ensuring a competitive, engaging atmosphere for investment is one of the first steps, the report says, addressing its own query.
“[Cities] need to understand the fundamental concept of sustainable competitiveness and how to provide confidence to investors that the emerging challenges are understood, are being planned for and will be managed,” the report’s authors write. Investors need to know that the fundamental pillars of a sustainable marketplace – what the Global Competitiveness Report (2013-2014) refers to as the 12 pillars of competition — are in place. That includes, but isn’t limited to, strong, vibrant institutions, good infrastructure and well-developed financial markets.
“[Staying] ahead of emerging trends and delivering an holistic approach to urban management is the new ‘urban dynamic,’” says the report, in which the ability of a metropolis to meet the needs of its citizenry is more and more dependent on its ability to attract and retain the interest of private capital.
The urban dynamic: Using partnerships to enhance infrastructure
In fact, an increasing number of cities are turning toward new mechanisms for accomplishing projects that are outside the bounds of resources.
New York City and the privately owned and managed bike sharing program Citibike; Ottawa, Ontario, Canada’s light rail program, which is a product of a handshake between several different entities; and Vancouver, British Columbia’s Single Room Occupancy Renewal Initiative, which brings together property owners and public housing programs to ensure that the city’s most vulnerable have places to live, are all examples of innovative urban initiatives.
But the challenge isn’t just finding innovative projects to invest in, says the report.
“Cities need to demonstrate visibly how infrastructure will deliver value to both users and investors,” notes the report. They also have to be able to understand the private sector mindset and find ways of merging with its approach. Planning and continuity is just as important as innovative thinking in order to create a climate in which private investors feel they can succeed.
Out with the old, in with the new urban vision
The old stereotype that government is cumbersome and full of hurdles therefore doesn’t work in this climate, say the authors. Clear vision, “underpinned by a set of well-defined strategic objectives and initiatives,” has always been critical to private management and success, and for a private-public partnership, it’s no different. Cities need to be able to meet the needs of investors and their citizenry in a much shorter amount of time than say, 50 years ago.
Interestingly, the authors also point out that those cities that have shown a global perspective toward the marketplace — and are adept at not only competing with but also working with other cities — are often the most successful in their endeavors.
Examples of this kind of hand-in-hand success include cities in and around the Seattle area that often work together in emergency planning and transportation issues and the Washington Tri-Cities area, whose thriving wine industry succeeds because of the handshake between local partners and the ability to work closely with other tourism sectors across the Northwest. Cities like Spokane, Washington and Canadian cities like Vancouver have formed partnerships with “sister cities” across the globe, expanding dialogue and global perspectives.
Finance in the new urban landscape
And metropolitan areas also need to be more broad-minded in how they raise capital. That includes being willing to look beyond domestic borders, including “from overseas sovereign wealth, pension funds, bilateral and multilateral institutions, equipment suppliers, and through public-private partnerships.” Such options are often a challenge for both the public and private sectors these days, since some investors have become more conservative in their investments. This translates to an even more competitive atmosphere for public entities that want to be able to expand their options financially.
The authors suggest that while public-private partnerships offer increased opportunities for both cities and private investors, intelligent planning is at the heart of their success. Creating a well-working partnership that builds needed infrastructure and expands opportunities for future investment and growth won’t work “without being intelligently phased and sequenced and without addressing the underlying governance, legal and financing requirements.” Cities that are able to adopt a clear vision of the future and set goals that meet future, quickly evolving changes, and at the same time, be responsive to investors’ immediate interests and needs are the cities that will ultimately be the most successful in today’s dynamic and competitive global marketplace.
Seattle WA image: Patrick McNally
Citibike image: Altiemae