Research from Siemens Financial Services (SFS) shows a growing number of global cities are approaching smart transformation through a series of smaller projects, typically costing a few thousand to a few million euros. SFS has conducted a global study across 13 countries, including the U.S., and one of its cities, San Jose, CA, which has developed initiatives to become “smart,” to assess the potential accessible funding that their top 40% of cities could be raising from private sector asset finance for these smaller-scale SmartStart investments.

A SmartStart investment is a low-risk, high ROI, which will help any city begin to digitalize its infrastructure. Public sector budgets are often insufficient to take advantage of the benefits of smart city development. As a result, alternative forms of finance from the private sector have become a priority. The need for a public-private partnership is bolstered by the U.S. Secretary of Transportation, who noted that there is not enough public money to pay for the estimated $1 trillion infrastructure funding gap.

The report highlights nine smart city initiatives historically known to have dependable ROI, from building controls for greater energy efficiency to vehicle routing systems for improved traffic flow. The SmartStart potential demonstrates the level to which asset finance could contribute to smart city transformation. The SFS study estimates that approximately $32.6 billion could be raised in the U.S. from sources of private sector finance to fund SmartStart investments.

The study identified a selection of nine early stage smart initiatives that have a track record for delivering dependable return on investment and are currently being financed through asset-financing arrangements. These are building controls (energy efficiency), improved medical technology, citizen self-service online, vehicle routing, parking systems, road pricing, mobile workforce enablement, e-bus and e-vehicles and low-energy street lighting.

Asset finance arrangements are well-suited to funding SmartStart projects. Finance options are widely available, affordable, simple and quick to arrange. They also offer high transparency for cost-benefit monitoring and analysis. Such financing can often be self-funding through the savings they deliver, helping to unlock more finance for other smart city transformation initiatives. Different financing techniques can be used according to their suitability for specific projects.

“Cities around the world are increasingly engaging in smart development to improve efficiency of local services, enhance sustainability, improve the lives of their citizens, and develop their competitiveness. Private sector asset finance allows cities to make the full range of SmartStart technology investments in a timely manner,” said Gary Amos, CEO of Commercial Finance, North America at SFS. “By diversifying their sources of funding for smart investments, cities can benefit from the resulting savings and improvements to citizens’ services without any delay.”