Where is the smart money going?

There is a better way to park with the help of asset finance

Chris Wilkinson

Chris Wilkinson

Several UK cities are looking to initiate smart projects and developments to improve the efficiency of local services, enhance sustainability and develop their competitiveness. Smart city initiatives improve the ‘livability’ of a city, helping to attract business and talent to support economic and business growth. A number of cities are now approaching smart transformation through a series of smaller smart projects that help to generate savings and effectively pay for the initial investment. These projects, costing a few thousand to a few million pounds, can offer a highly dependable Return on Investment (ROI), helping to ease the pressure on public budgets.

An example of one such ‘smart’ project is the installation of parking systems that help to simplify driver decision-making with the provision of valuable information on parking availability, ultimately reducing congestion and frustration. The new systems can also maximise a city’s potential parking charge revenue – to underpin a clear ROI model. Drivers are guided to their final parking destination along the shortest possible route via in-car navigation or with the help of programmable dynamic message signs, giving commuters the current occupancy levels in the surrounding parking zones.

According to the British Parking Association, drivers spend an average of 5.9 minutes looking for a space, with 44% of those polled calling the endeavour a ‘stressful experience’. Nearly half of people (48%) are frustrated by the lack of spaces in their area, and 59% are angry with bad drivers taking up multiple spaces with a single vehicle. As a result, new tools like smart parking apps are becoming more popular as they help cities improve and manage parking provision.

Westminster City Council in London introduced a smart parking system in 2014 to tackle high parking demand, congestion and poor air quality. The council installed 3,000 infra-red sensors in ‘paid-for’ and disabled parking bays across the West End. The sensors detect if a car is parked and therefore determine whether or not the space is vacant. Real-time data is sent back to a main system that informs drivers of nearby parking availability via an app and electronic signs around the city. The scheme has been such a success it has now been rolled out to the borough’s remaining 7,000 on-street parking spots.

Research by Coventry City Council found that paid parking bays in the city were vacant 33% of the time between 8am to 6pm, amounting to £475,000 annual lost revenue. As a result, in 2016, the city council introduced real-time sensors along three of its busiest streets and across all 36 of its disabled bays. Through a free mobile app and website, motorists can use their smartphones to locate a parking space and find out how much it costs. The app also enables users to pay for parking on their smartphones.

Clearly, there are numerous benefits to implementing smart parking systems. Investing in such equipment, however, requires financial resources that may be beyond the reach of city council public budgets. Councils are facing cuts in central government funding of 6.7% between 2016 and 2020, which comes on top of an overall 30% reduction between 2010 and 2015. Local authorities are therefore looking to other forms of finance to help them invest in new equipment including technology to enable the implementation of smart parking systems. 

The reality is that cities need to access a blend of public and private sector finance to accelerate their smart initiatives in a timely way and benefit from the resulting savings, efficiency, quality and citizen service improvements as quickly as possible. A diverse range of funding sources allows a city to make the full range of desired technology investments – using a combination of public and private sector finance – in a timely fashion. Different financiers can be sourced for the different types of technology investment. The sooner the smart investments are implemented, the quicker the savings (or revenues, or inward investments) begin to accrue.

A recent report from Siemens Financial Services (SFS), SmartStart (2016), identifies a number of potential ‘Smart City’ initiatives – including smart parking systems – that can be financed by using funds from the private sector and have the potential to generate savings that effectively pay for the investment. The report estimates that as much as €6.21bn (£5.28bn) could be available in funding from the private sector in the UK for these small-scale initiatives. Many of these projects effectively unlock more finance availability for cities from financiers that intimately understand how such smart city technology applications work and the benefits they produce. 

Tailored, all-encompassing financing packages tend to be offered by specialist financiers who have an in-depth understanding of energy-efficient technology and its applications. Specialist finance providers understand the importance of implementing new equipment and new technology to generate revenue and cut operational expenses, and can therefore provide customised financing solutions that deliver energy savings and lower expenses, for instance, flexing the financing period to suit cash flow. This contrasts with the standard financing terms usually available from generalist financiers.

Smart parking systems are just one example of a small-scale smart city development. These new initiatives can help reduce councils’ carbon emissions, cut down on traffic congestion and make motorists’ experience less stressful by solving many problems faced with parking their vehicles. The budget, however, has to be available to implement the system in the first place. As their public funding continues to be cut, many councils are recognising the important role that the specialist private financing can play to help them fulfil their ‘smart’ ambitions.

Chris Wilkinson is head of sales for healthcare and public sector for Siemens Financial Services in the UK