Leveraging the opportunity of #OpportunityZones

recently headed up the coast to Los Angeles to spend the day with mayors from across the country, real estate developers, bankers and community leaders. Accelerator for America had brought this diverse group of people together to discuss something at the top of everyone’s minds. The topic? Opportunity Zones.

Opportunity Zones were created by the Tax Cuts and Jobs Act of 2017. They create a tax incentive to push more dollars into the communities that need investment most. The basics of how it works: someone has capital gains, by reinvesting those gains into a pre-approved Opportunity Fund that someone will receive a temporary tax deferral and other tax benefits. These Opportunity Funds are required to invest 90% of its money in pre-approved census tracts — most of which are in rural or lower-income urban communities.

Proponents have estimated that this could be a $6 trillion dollar opportunity for cities to leverage. As a result, communities could see real estate investors rehab old buildings to create tech incubators and more VC money for local startups. Those more hesitant to jump on-board warn that this recent policy isn’t much different than previous attempts to encourage economic development with tax incentives which failed to generate substantial economic growth.

If there’s one thing our diverse group agreed on, it’s this…

Cities need to act now and get positioned to leverage the $6T investment Opportunity Zones promise.

Otherwise it’s uncertain that these investments can be channeled towards the projects communities need the most, as those project often have uncertain returns associated with them.

Mayor Eric Garcetti (Los Angeles), Mayor David Holt (Oklahoma City), Mayor Greg Fischer (Lousiville) getting ready to share their thoughts on Mayor of South Bend, Pete Buttegig’s draft investment prospectus. Love when cities learn from other cities!

Some initial thoughts about how cities can start acting now to take advantage of Opportunity Zones are below.

  • Early bird gets the worm. 8,700 specific census tracts have been defined as Opportunity Zones across the country, but implementation isn’t certain (the Treasury Department is still figuring out lots of deets!) But even with lots of uncertainty, 20+ funds have already launched, and there are more in the works. Cities that prepare now will be best positioned to receive funds, and do so in a way that is focused on their priorities, rather than the investors.

 

  • Match the hatch. Money has never been the (only) problem when it comes to investing in communities. Private sector dollars flow to projects that are well designed, quantified, and valued — in terms that investors understand! This means that to get money in the door for a specific project, public entities have to first identify projects that either create revenue or generate savings that can be attributed to a specific entity. Not to mention define capital stacks, ratios, and IRR. Just like you can’t turn a blueprint directly into a mortgage document, you can’t turn an economic development strategy directly into a set of bankable projects….but you may be able to turn it into an investment prospectus. Accelerator for America, in collaboration with smarties like Bruce Katz and Jeremy Nowak,* are helping cities do just that. By defining, in an investor friendly way, an existing set of goals and a pipeline of projects that could be possible if there were private dollars available, cities can help ensure that investments are made in ways that actually make their most vulnerable neighborhoods safer, smarter or more sustainable. (h/t to my dad for raising me on catchy fly-fishing lingo that is also very useful for business!)

 

  • Define success first. Some have raised concerns that this could be just another way for money to flow towards investments with stable financial returns — like franchise fast food restaurants (see EB5) — instead of local grocery stores or cool projects like school LED light replacement that doubles as STEM education that could truly help transform distressed neighborhoods. Whether doing an all out investment prospectus or just getting organized, cities should start thinking now about what success looks like and putting mechanisms in place to track whether Opportunity Zone investments are helping. There are plenty of tools that cities can use to track how a neighborhood’s jobless rates, per capita income, or crime rates are changing over time. (Checkout how High Point, NC is tracking neighborhood scale improvements as they work to alleviate blighted properties or how Nashua, NH is tracking how livability factors like obesity rates and access to healthy foods are impacted by community investments.)

 

  • People should drive projects. Successful Opportunity Zone investments will align with city priorities and deliver on neighborhood needs. $6T is an excellent carrot and cities should use it as another reason to support meaningful engagement with their residents. Ideally, all Opportunity Zone projects stem from asking residents: what are the most significant problems in your day to day life? what can make your community better? There are tons of tools cities can use to make that process easier. (Checkout how Kansas City used a citizen survey to pass a $800M bond. Or how Purceville, VA used a polling platform to prioritize block-by-block investments.) These tools, used at scale, can be a great way to not only inform an investment prospectus but create a pipeline of projects that drive value to residents.

Finally, one caution from this eternal optimist…

The rise of the rest of the unicorns?

There’s a lot of discussion about how Opportunity Zones could be the thing that finally moves venture capital money from its current comfortable home on the coasts. Don’t get me wrong, as a co-founder of a startup based in San Diego, I strongly believe that good ideas are everywhere and VC money should be more evenly spread across the country. But it’s important to remember that most startups that get venture funding have high margins(some operate at 90% margin!). To get there it often means companies have low capex (meaning they don’t build many things) and low opex (meaning they don’t hire many people).

Venture-backed startups are not the most likely to create jobs for low-income residents in vulnerable communities, and they are not the most likely to stay in those communities after they get quickly acquired to payback their investors.

The biggest job creators in communities tend to be existing business in those communities. When it comes to Opportunity Zones, those are the types of corporate investments that should be prioritized.

To realize the value that many believe Opportunity Zones can create, investments need to go into the businesses, real estate projects, and community services that drive value for the most vulnerable residents. Investment dollars will find projects that make financial sense, its on city leaders to make sure those projects make community sense too.

Want to read more on Opportunity Zones? Checkout these recent pieces in Route FiftyWall Street Journal and all this great stuff written by Bruce Katz and Jeremy Nowak.

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*Shortly after I drafted this piece, Jeremy Nowak passed away. His absence is felt by our entire community. My heart goes out to his family, friends and colleagues. Read more about his incredible life of service here.

Our street light poles are more valuable than we think. Do you know why?

Cities today are expected to do more with less: better services and more transparency, but with smaller budgets and less federal funding. The value of street light poles is largely unrecognized and untapped, but also rapidly increasing — this is extremely unique when it comes to public assets. How cities and utilities approach the value of their street light poles could lay the foundation for improved economic development, digital inclusion and smart cities. Or it could lay the foundation for an enormous missed opportunity. 

 

By Kip Harkness, Deputy City Manager of  the City of San Jose, CA

 

As the private sector succeeds in giving consumers more and better digital service experiences — think streaming movies on Netflix or rapid delivery with Amazon Prime — cities face increasing pressure to up their own service experience. Citizens expect to pay their water bill online with a simple app, and many balk at paper bills. New government technologies promise cheaper, better, faster city services. But to achieve the promise of this smart cities wonderland, local governments have to be innovative in their approach to service delivery and nimble in seeking out new sources of revenue. With the triumph of mobile and the resulting desire to fully build out 4G/LTE networks (with 5G fast on the heels), there are few government assets that represent as much of an opportunity as the street light pole.

This ubiquitous ‘vertical street furniture’ is now at the heart of both the local government innovation imperative and the never-ending hunt for new revenue sources. While the value of street light poles is largely unrecognized by the public sector, it is thoroughly understood by the telecommunications industry and others who intend to profit from the next wave of the mobile revolution and the Internet of Things (IoT). How cities approach their street light poles could lay the foundation for improved connectivity, digital inclusion, and more modern delivery of public services. Or it could it could go down as an enormous missed opportunity.

In San Jose, we’ve decided that the best approach is to see the value of our street lights as contributing to a closed loop of improving connectivity for all. From that basis, we work with telecommunication companies at the local level to find and expand the opportunity for mutual gain, while opposing new state or federal legislation that takes away local control. This collaborative ‘connectivity first’ approach shifts away from a pole by pole permitting or revenue fight and puts us on the same team, facing the opportunity to expand connectivity together. In this way, we are open to improving our processes to move at the speed of business and use just enough government intervention to reach a tipping point: where Telcos can meet their goals of rapid, predictable deployment at scale, and the city can ensure more equitable access to connectivity that lays the foundation for the smart city of the future.

Why Are We Here? Digital transformation & increasing citizen expectations

“Why, sometimes I’ve believed as many as six impossible things before breakfast.” ― Lewis Carroll, Alice in Wonderland

Three explosive trends over the last 10 years have transformed the consumer experience. You know them intuitively: Mobile, Data, and Digital Services

  1. Mobile: The mass adoption of mobile technologies. Think iPhone.
  2. Data: The exponential growth in data usage and increasing sophistication in data analytics.
  3. Digital Services: The increasing customer expectations for instantaneous and novel services. Can you even imagine mailing a letter to a catalogue and then waiting 6–8 weeks for delivery anymore?

 

Just think about how you used to use your phone 10 years ago — we were fine with a halfway decent voice call and some texting. Now, we expect to stream movies on our phone while they’re mapping our location and paying for our coffee, all without missing a beat. A few milliseconds of latency in an on-line transaction can cause an impatient millennial (or boomer) to abandon a purchase and go on to the next thing. 

“Alice: How long is forever? White Rabbit: Sometimes, just one second.” ― Lewis Carroll, Alice in Wonderland

These factors are motivating the completion of the 4G/LTE build out and the pending upgrade to 5G mobile networks. The bottom line for city folks who don’t work in telecommunications is this: with 5G will come incredible opportunities for the Internet of Things (IoT). IoT encompasses all of the technologies — the sensors, lights, meters (and analytics) — that can dramatically improve city services through improved awareness, responsiveness, and flexibility.

IoT technologies can improve city services by allowing our infrastructure to ‘talk’ to us and itself. For example, today a fire engine has to blare its sirens and cautiously inch through a busy intersection against the light. With IoT, the fire engine can use IoT to let a system know its location and destination and the system can use IoT to tell the traffic signals along the route to turn green for the engine and stop all cross traffic. This isn’t science fiction; we are currently in deployment of a system like this in San Jose right now. San Diego is using cameras built into connected streetlights to monitor pedestrian traffic and reroute cars during peak hours to avoid pedestrian accidents and alleviate congestion. Camden, New Jersey, is using gunshot detection technology to try to improve public safety. All of these and similar systems will be built on networks that will increasingly rely on the height, power, and near ubiquity of the street light pole to mount and power the dense network of small cells and sensors that are required.

The result is the value and importance of our street light poles has skyrocketed and private companies are now vying to be the first to secure the best locations and deploy improved services.

They are also working hard to change federal and state laws with the goal of reducing local control, give them by right access to poles, and cap or eliminate permit fees and lease rates that allow cities to fully recover costs and create revenue streams.

How Can We Leverage the Increasing Value of Our Light Poles?

“Would you tell me, please, which way I ought to go from here? Alice asked. That depends a good deal on where you want to get to, said the Cat.” ― Lewis CarrollAlice in Wonderland

Like Alice, many cities aren’t being as strategic as they should be before pursuing the wonderland of IoT and smart cities technologies. Some see light poles only as a new revenue source, and most are unclear on what role their cities should play in accelerating broadband deployment. There are unique challenges to pursuing smart cities technologies from within local government: universal service obligations, mandated transparency and the inability to charge for many services.

It is easy to get excited about flashy potential of Smart Cities and IoT devices and put the technology cart before the outcome horse.

Many vendors are happy enough to take this approach, sell us some cool hardware and leave us with an incomplete and siloed smart cities portfolio that doesn’t deliver real value to our cities and their citizens.

Before wading too far into the adoption of smart cities/IoT technologies, city officials and staff should ask themselves some key questions:

  1. Are we putting people at the center of our strategy and solving problems that actually matter to them? Or is our approach vendor-driven?
  2. Are we being strategic about how we are trading the value of our street poles and other assets?
  3. Do we understand the use cases (i.e. real world applications) of the technologies we’re considering? What applications do our residents want and need? What technologies are mature and which are nascent?
  4. What are the technical requirements for those real world applications (e.g. operating system, sensor data aggregation platform, municipal broadband specifications)?
  5. What about the policies required? (e.g. security, data, fiber, conduit, pole remediation)
  6. Have we done the due diligence required to ensure that access to our poles will be non-exclusive?
  7. Have we thought through privacy concerns and, as a community, decided on a strategy to address them?

 

Smart City IoT Architecture. Above and below are the real world use cases and problems we are trying to solve. These use cases should drive the architecture of the layers below it, not the other way around.

PC: City of San Jose, adapted from consultant analysis for City of Barcelona website, Cisco.

We are asking ourselves these questions right now in San Jose. To answer them, we have decided to work iteratively to pilot and deploy IoT devices on our street poles and test out various use cases. Simultaneously, we are developing a city-wide strategy and policy framework that ensures we are putting people at the center of our smart cities approach.

What Can We Do Now?

“No wise fish would go anywhere without a porpoise.” ― Lewis CarrollAlice in Wonderland

For the cities just starting to consider adoption of IoT technologies, here are some practical things you can do to position your city for the future, based on the lessons we’ve learned in San Jose:

  1. Be clear about the problems you are trying to solve, and focus on those that are: A) Causing a lot of people pain or annoyance, B) Core to what your city should do, C) Actually solvable with technology and process improvement
  2. Go ahead and set out a big vision, but start small and iterate.
  3. Start to see your street light poles as THE platform for both IoT and small cells and begin to value them accordingly.

 

For companies seeking to partner with cities to demonstrate/pilot their technologies, here are some things to consider:

  1. Collaborate with cities to identify use cases that matter and can actually be addressed with your technology,
  2. Be candid and direct about the limitations of your technology and what other technologies or capabilities will be needed to make a complete solution work, and
  3. Consider taking a platform approach that would allow both the integration of legacy technologies and competitors as well as your own.

 

The city of the future will have to meet rising citizen expectations, by embracing mobile, data, and digital services. This will result in a new digital layer of our infrastructure, much of it powered by IoT. And many of these devices, and the networks supporting them, will want to reside on our street light poles.

The future wants our light poles. Don’t give them away lightly.

 

Cities aka Laboratories of Innovation

When Mayor Roberts from Charlotte, North Carolina said today, “let cities be cities…the laboratories of innovation!” we almost jumped out of our seats cheering. Cities are creatively addressing our nation’s most important problems: inequality, mobility, climate change. This is especially impressive when you consider that cities don’t have much—if any—room to fail, and experts agree that ability to experiment is a key driver of innovation. Can you imagine a mayor explaining to her constituents that a day-long disruption of an important city service, say a mass-transit line, was because the city was experimenting with a new technology to streamline payment and collect ridership data? Of course not. That’s because all day and every day, cities provide essential services like clean water, efficient transportation, and emergency services, and citizens are rightfully outraged when there’s a disruption or degradation of one of these city services that impacts their daily lives.

For many cities, it’s a challenge to balance the need to consistently deliver essential services with fostering a culture of experimentation, improvement and innovation.

Today, as a part of Infrastructure Week, Bloomberg Live brought together mayors from six cities in the United States that are truly leading the way towards making our cities smarter, stronger and more sustainable. In each of their cities, they’ve figured out ways to foster cultures of innovation, despite not having much room for failure. Their wide-ranging conversation included a discussion of innovation and the role of experimentation in their cities. Here are some of the thoughts we found particularly insightful:

Mayor Muriel Bowser (Washington, D.C.) stressed that citizens—especially millennials—want to live in cities that are constantly improving and changing for the better.

Mayor Jon Mitchell (New Bedford, MA) explained that they are creating an “ethos of innovation.” He explained that as a historically industrial city, it is especially important to be seen as a test bed for new ideas and technologies.

Mayor Andrew Ginther (Columbus, OH) pointed to the importance of partnering with local universities and discussed their successful partnership with Ohio State University on neighborhood revitalization efforts.

Mayor Jennifer Roberts (Charlotte, NC) had the group laughing when she jokingly suggested calling everything a “pilot.” In all seriousness though, she explained the importance of using pilot projects to help avoid the fear of rapid change, and of making sure not to leave low-income neighborhoods out if they want to participate.

Mayor Michael Hancock (Denver, CO) discussed the importance of smart cities data and how that data can be used to understand project impacts and communicate those impacts to communities.

Mayor Megan Barry (Nashville, TN) flipped an old saying on its head when she said she’s fostering a culture of “Yes in My Backyard.” She stressed how important it is to get to yes – whether that’s for mixed income neighborhoods or diverse schools.

These mayors lead cities that are shining examples of the power technology has to address some of the toughest, most complicated problems out there, and we can’t wait to learn more from them about specific ways cities can encourage innovation as Infrastructure Week continues.

For those of you who work for or with cities: do you think cities need the ability to experiment in order to creatively solve problems? How can we make sure that cities are learning from the cities that are the first (or second, third) to experiment with a particular solution? In our minds, streamlining city-to-city learning is key to scaling and replicating the best, most innovative solutions.

 

Smarty Pants

Sometimes walking into conference exhibitions, we feel like we’re living in the Silicon Valley parody of TechCrunch. But, after attending Smart Cities Silicon Valley this week, we feel genuinely energized about the range of city-centric technologies being developed and deployed to make local governments more efficient and effective, while also improving our daily lives.

Here are some of the companies and technologies that caught our eye:

Echelon: We know that LED lighting reduces energy use and saves money, but this adaptive control system lets a city adjust streetlights block by block to better match neighborhood needs. This level of responsiveness is pretty great from a public safety and economic development standpoint too.

Fybr: Knowing that legacy water and sewer systems are something many cities in the US are dealing with, we were most excited about their ability to provide real time insights into the operations of wastewater, stormwater, energy and streets systems on one dashboard. Not only will that save utility and public works staff time (and $) but it may also help cities find opportunities for system integration.

CNX: Last mile broadband expansion is a big issue for a lot of small and mid-size cities. Making the permitting process easier for both cities and companies, using a platform like theirs, will go a long way towards solving it.

Ike: These digital kiosks are cool not only because they provide guidance to tourists, visibility to local businesses, and are designed to match the local vibe…but also because they generate revenue for the cities that deploy them.

Inrix: They’re doing a lot of thinking about how autonomous vehicles will impact our cities. Also, after getting to play with their system we’re hoping my next car comes with Inrix navigation.

LocalIntel: We loved that this unique data-driven economic development support is applicable to nearly everyone, including the small cities that often need the most support. Also, we appreciate their CEO’s commitment to keeping operating costs down so they can continue offering affordable solutions.

Ingenu: Still wrapping our heads around this one, but it sounds like this network is designed specifically to support smart city deployments – and ensures that monitoring flood sensors won’t be impacted by our constant streaming of The West Wing.

Hitachi: Obviously not a small company, but one that is doing innovative work to improve public safety and streamline emergency response by aggregating data captured by everything from video feeds to social media.

We’re looking forward to understanding more about the tangible benefits (and any challenges) that these, and other smart solutions, are providing for cities and their citizens.

What other smart city technologies have you been impressed by?

P3s are great, we want P3s! But what about…?

Last week, we proposed rethinking public-private partnerships (P3s). Instead of closing a financing gap, P3s should fill a project execution gap. This change in perspective can better align incentives upfront and address the fundamental fact that public and private partners have different priorities.

Today, we’re taking a closer look at the issues cited as top barriers to traditional P3s: political risk, payments, and responsibilities. Lack of clarity for any of these three issues will exacerbate differences and drive a wedge between partners when project financing, rather the project delivery, is the goal. Let’s dive into each area of concern, and consider how a focus on execution rather than financing could lead to more successful public-private-partnership.

 Political Risk: Traditionally in the US, P3s are developed after the project scale and scope has been established, and the project has become so big, complex and/or long-term that it cannot be entirely financed on a city’s balance sheet. These types of expensive, complicated, and long-term projects leave public and private partners exposed to all sorts of non-market risk — not the least of which is politicians changing their minds or being voted out of office mid-project. In traditional financing-focused P3s, changing political dynamics can doom an entire project. But if a P3 is designed for execution rather than just financing, then private partners are involved in troubleshooting and negotiations from the beginning, not just once it’s clear the money will be hard to find. That early engagement between public and private partners builds trust in a city’s staff and institutions, beyond individual elected leader(s) — which is key to ameliorating political risk. In addition, early engagement means all parties are driving towards and end goal that is focused on addressing local needs, not just on financing a solution. Some cities are already encouraging early engagement and participation with private partners through broader use of competitions and Requests for Information.

 Payments: Quality cash flows are one of the greatest risks for any public-private-partnership. Many public infrastructure deals have failed or been slammed by citizens because real cash flows end up being very different than were predicted. The Indiana Toll Road is just one of several P3s that filed for bankruptcy after revenue came in much lower than projected. On the other hand, Chicago’s 2008 parking meter deal with Morgan Stanley caused a citizen uproar when the city’s inspector general concluded, a year later, that it had undersold the rights by about $1 billion, forfeiting an important source of revenue for the City. When a project is designed from the start to focus on service delivery instead of solely on financing, there is often opportunity to uncover non-traditional funding sources. The same is true when designing a P3. When private partners are at the table to start, more creative work can be done to clearly identify and quantify a range of potential payback streams. Having private partners help design, verify, and securitize cash flows results in a better deal for the city, the developer(s) and the investor(s). That’s why availability-payment projects, which are focused on service delivery and often require earlier engagement by private partners, are often more successful and growing in popularity compared to revenue-backed P3s.

 Responsibilities: Designating a single entity — or at least a very clearly defined process — responsible for capturing, aggregating, and monetizing direct and indirect revenues is key to successful P3s. The easiest way to clearly define these responsibilities is through a contract between the city, the developer(s) and the investor(s) that allocates risk among the partners by defining sources of revenues, scope of work and payment terms, goals, and bonuses. A P3 focused on execution rather than financing helps define these lines more clearly so each partner can focus on what it does best. Government would set goals and standards to protect health and safety. Developers and investors would set targets, build and manage cost efficient systems. Government organized P3 offices have been used to successfully execute these arrangements internationally in Canada and Australia, and at the state-level domestically in Virginia, California, and Michigan. P3 offices provide the technical support public agencies need to coordinate public and private partners. These offices are effective because they steer governments towards projects that can thrive with P3s and help with upfront planning, and structuring using their in-house financial expertise.

P3s are an effort to make building and maintaining big-dollar, complicated, long-term infrastructure projects more efficient and affordable. P3s are complicated. There will always be questions about political risk, payments, and responsibilities. But well-conceived P3s — those focused on project delivery instead of financing — can effectively align incentives and address risks for all partners upfront. Not only can these well-conceived P3s save taxpayer money and reduce burden on local governments, they can also result in better service delivery for residents and maximize the social benefits of a project.

For example, the City and County of Honolulu partnered with Covanta on the H-Power waste-to-energy plant with the goal of eliminating landfills from the island while creating a sustainable energy source. Since its initial completion in 1993, the plant has not only consistently met or exceeded environmental permits and invested in innovation, it has also generated more than $201 million in revenues for the City, which has more than covered the costs of operation. More and more, we are also seeing examples of startups and other technology firms developing exciting P3s with cities to upgrade infrastructure systems.

Next in this series, we’ll explore various examples of successful execution focused P3s — from the traditional to the more exotic.

P3s are dead, long live the P3!

For cities, President Trump’s budget includes some proposals that are sources of optimism and others that have raised concern. President Trump’s consistent support for increasing investment in infrastructure has been encouraging. If the proposed $1 trillion in infrastructure investment is strategic, the investment could be a great help to those cities struggling to upgrade aging and failing systems. However, the President’s budget also proposes to eliminate or drastically cut many of the programs that cities around the country rely on to provide essential services to their poorest and most vulnerable citizens.

 

Amidst this uncertainty, two things are clear: federal funding will continue to dry up, and cities must take charge where state and national politics are deadlocked. This reality has jumpstarted a decades old conversation on the role and importance of public-private partnerships (P3s).

 

Unfortunately, traditional P3s are complicated for everyone. Not only does each state have different processes and practices, but the American public has varying levels of comfort with private ownership, or even operation, of public infrastructure. It’s those reasons — in addition a strong municipal bond market and regular infusions of federal funding for infrastructure after the 2008 financial crisis — that have kept P3s from proliferating here in the US the way they have in other developed countries around the world.

 

Or maybe we’ve been thinking about P3s the wrong way. Instead of thinking of P3s as a solution to the financing gap, we should approach P3s as filling the execution gap.

 

In the US, P3s have always been touted as a solution to the financing gap: “your city doesn’t have the resources to build an infrastructure project? You should pursue a P3!” But in Canada, and elsewhere around the world, they are used to fill an execution gap. This means P3s are focused on service delivery, optimization, and efficiency — where financing comes as a result, but isn’t the driving factor. May seem like semantics, but it gets to the fact that public partners tend to focus on services and private partners tend focus on ROI. Execution-focused P3s address that fundamental fact that public and private partners have different priorities, and explicitly seek to better align those differing priorities upfront.

 

Execution focused P3s can also better match the types of modern infrastructure systems that technological advances have allowed cities, and their citizens, to demand. These modern infrastructure systems — unlike highways and bridges — are often diffuse and consist of many small pieces and parts. For example, a modern stormwater management system might include thousands of street trees, green roofs, wetlands, and repaved roads to absorb water. Or a large power plant might be replaced with a network of neighborhood generators that turn food waste into energy. Because these systems tend to have a large number of smaller component projects, aggregating them into a single P3 focused on delivering project financing can have insurmountably high transaction costs.

 

Because these more modern infrastructure systems are deliberately designed to more flexibly and efficiently provide the same services to citizens as traditional projects, they tend to result in the same, if not greater, local benefits. In addition, they require extensive citizen participation, open new pathways for private investors to participate, and can take the burden off government budgets to build.

 

Examples of successful execution-focused public private collaboration abound, especially around smart cities technology. Waze, through the Connected Citizens Program, is partnering with cities around the world to use real time data to reduce traffic congestion. The City of Las Vegas released an app this year for Amazon’s Alexa that lets residents pay bills and fees, check the status of applications and permits, and get more information on city services and officials. These technology businesses have figured out how to approach distributed infrastructure systems by focusing on providing a service. We should aim to learn from these successful cases, and apply them to develop and deploy execution-focused P3s for in sectors, like electricity generation and delivery and stormwater management, moving forward.

 

As with any multi-party agreement, there will always be questions about political and staff turnover, ROI, payments, and responsibilities (more on that in future posts!). But if at the outset, a P3s focus is on service delivery and execution, the details — and the money — seem to shake out more clearly and in the public’s favor than they do in traditional financing-focused P3s.


P3s in the Trump Era can’t look like P3s of the past. Instead of being a solution to the financing gap, P3s should be leveraged to fill the execution gap. They should be focused on service delivery, optimization, and efficiency — where private financing comes as a result, but doesn’t drive decisions. And where each partner is focused on what it does best: the government partner set standards and desired outcomes, permits and regulates; developers and investors build and manage cost efficient systems; and citizens actively engage in optimizing solutions for their community.

 

What do you think? What are some of the most impressive technologies, business models, or execution-focused public-private partnerships you have seen? What were the benefits and drawbacks to the public and private partners involved? What was the impact on citizens, and how did they respond?


Like this topic? Keep an eye out for future posts where we explore in greater depth some of the challenges of traditional P3s, as well as highlight examples of execution-focused P3s.

4380

THAT’S THE NUMBER OF HOURS SINCE THE ATLAS LAUNCHED!

We’ve learned a lot from our growing network of users in the past 6 months (welcomed Boulder & Burlington this week!). In honor of the occasion, here are 6 things we’re thinking about and using to inform future Atlas development:

Cities (and counties, and utilities) “don’t have the opportunity to swing and miss.” When making large, long-term infrastructure investments, cost efficiency, community health, and safety are top of mind — that’s why tried and tested solutions are often preferred. But we also know there are new, transformative infrastructure solutions being deployed here in the US and around the world every day. That is why we’re doubling down our efforts to unearth those installed solutions. Our goal is to help cities leapfrog to these new infrastructure solutions by making them easier to discover and easier to compare.  In addition, we’re exploring new partnerships that will help to directly connect our city users with a network of urban innovators.

And on that point…We’ve been really excited to learn about The Ray and other infrastructure demonstration sites like the Hempstead Energy Innovation Park or the new Claiborne Corridor Innovation District developing in New Orleans (an Atlas city user!). If the Atlas is like an Ikea catalogue, these demonstration sites are like an Ikea showroom. Not only can the city, and its citizens, interact with and understand innovative technologies, the demonstration sites also helps real solutions prove their worth. Before leaving public service, The Atlas Marketplace CEO Elle Hempen worked with Israel’s Ministry of Environment to understand how they supported water technology demonstration in public systems. Elle learned that some of Israel’s success in supporting innovative technologies was due to a willingness in local governments to create safe spaces for testing (and sometimes failure). Bravo to those doing the hard work of innovation here in the US, we’re excited to work with you!

In December of 2016, the City of Boston (also an Atlas city user!) released a request for information that asked for new ideas to improve its streets. Why is that so exciting? First, the RFI was purposely written in plain language, void of overly technical jargon, to maximize the number of respondents. Second, they asked that respondents ditch the pitch: instead of flashy PowerPoint presentations, the City asked respondents to demonstrate community engagement and to focus on tangible value for residents. This RFI, combined with Boston’s Smart City Playbook, aim to help ensure pilot projects are successful and leading-edge solutions can scale. Cool, right? Check out the ideas they received.

We know cities learn best from other cities. But when peers aren’t available, city employees revert to familiar resources – using, for example, Google and Pinterest to brainstorm solutions for their top infrastructure challenges. That’s why we’re leveraging the power of social networks in the Atlas. The Atlas works more like Match.com than Facebook or Twitter. An integrated matching algorithm identifies cities around the world facing similar challenges, and uses that information to find solutions that are most relevant to the local needs of an Atlas user. Want to act on the information? Users can message other city and company representatives to understand how projects are working and replicate them more easily.

Many of our city users are upgrading their aging water and wastewater infrastructure. This trend matches data from across the country: Onvia has reported a 21% increase in water and sewer maintenance contracts, 55% of which were issued by cities. What are some of the most interesting solutions to managing leaky pipes? One solution piloted in Australia caught our eye. TaKaDu is a cloud based big data system that uses raw data from multiple sources – meaning it often doesn’t require additional equipment be installed. In addition, the data platform can learn normal system behavior so not only does it detect problems quickly, but it can also predict problem spots. Talk about smart water!

Everyday technologies like Uber and Amazon have increased citizen expectations for on-demand delivery of goods and services. Those expectations now also extend to their local government. In addition, there is a new generation of government professionals who already accept technology as solutions to inefficiencies. Both reasons explain why technology solutions for government is a rapidly growing market. But even with a boost in visibility, many small and mid-size companies with technology based solutions for public agencies struggle to “get the word out.” (We’ve heard those exact words from countless companies at this point!) That is why to achieve our mission of helping cities leapfrog to modern infrastructure, we are helping raise the awareness of the companies who are building inventive solutions. Through the Atlas, we want to open the door and give city decision makers the information they need – from how the project is working, to how it was financed and contracted – to close the deal.

Have other ideas about how the Atlas can improve how infrastructure is found, compared, and procured? Leave a comment here or let us know @_The_Atlas!