By Jonah Wagner
Cities benefit from economies of scope and scale which tend to make them more ‘efficient’ places to live. In most countries around the world, it is ‘greener’ to live in a city than outside of it. Home and work are closer together, reducing transportation time and cost. Population density also allows for the development of large, centralized, public utility infrastructure – lowering costs for energy generation and transmission, water purification and distribution, waste collection and management, etc. Historically, these utilities have benefitted significantly from scale.
Example: Water purification costs by plant size
This may be changing. New technologies (e.g., remote sensors) are making possible the coordination of modular, scalable, decentralized systems of public service delivery in cities. Continue reading
By Lauren Burrows.
We recently read a case about a company called Living PlanIT that has proposed to build a greenfield “Smart City” in which it will attempt to reduce waste and increase the use of renewable materials in building, deploy renewable sources of energy, and manage energy, waste and water more efficiently. While this sounds very appealing, as we discussed the case and reviewed the drawings of the concept, I could not help but be reminded of the book, “The Death and Life of Great American Cities,” by Jane Jacobs. Jacobs published this book in 1961 in response to the “urban renewal” movement of the mid-twentieth century, which was a program of land redevelopment in dense urban areas that sought to bulldoze slums in order to create open (and, Jacobs argued, sterile) city spaces. In recent years, the concept of a “smart” city has attracted a great deal of attention and several new cities have been proposed based on this model, including Masdar in Abu Dhabi and New Songdo City in Korea. However, it remains to be seen how we will measure the success of these developments. Will companies choose to locate in these cities? Will people choose to live there? Will we choose to replicate them elsewhere or will they simply prove to be sterile research laboratories?
If these developments do prove to be nothing more than research laboratories, as I suspect they may, how can we predict which “smart” technologies will prove successful in being implemented elsewhere? First, the technology must create clear, measurable and repeatable value that can be captured by a single entity. A technology that creates value for the greater public good or that cannot be easily quantified will have trouble gaining traction. Second, there must be a clear decision maker for the sales process. Technologies that require a number of parties to collaborate will also experience difficulty. One example of a technology that meets these requirements comes from a company called Big Belly Solar, which develops solar-powered, networked trash compactors that save time, fuel and money for municipal governments and other institutions that manage waste removal from public spaces. Big Belly Solar trash compactors add five times the capacity as existing trash cans, reducing the frequency with which entities have to send personnel and/or trucks to collect trash. Furthermore, these trash compactors are solar powered so they do not require grid connection and are networked so that an entity can track which garbage cans are full and only send personnel and/or trucks to garbage cans that are full, further reducing fuel use and time. The savings that this technology generates can be easily measured and tracked and there is a clear entity that derives the benefits and the company can identify who the appropriate decision maker is within that entity. Regardless of whether these experimental “smart cities” lead to a proliferation of other greenfield “smart cities,” I expect that they will generate a number of viable technologies like the Big Belly Solar trash compactor that will be developed and applied elsewhere.
When entering a Public Private Partnership (PPP), local governments have opportunity to seek out terms that achieve a broad range of social and economic development goals. A government hoping to create jobs for locals in new city projects might impose a quota of local employees or contractors, provide incentives to boost the candidacy of local workers, or remain neutral, relying on local expertise and proximity to lead to jobs for locals. The first option in particular may be unappealing to private corporations, but could be feasible for the right project.
However, opportunities to contract social benefits go beyond direct job creation. In the TransMilenio case, the government of Bogotá required new BRT operators to buy out and scrap buses from the old system. Reducing the old buses while simultaneously implementing BRT eased traffic congestion, reduced emissions from the older buses, and boosted demand for the BRT. Early on, new BRT operators had little trouble with this requirement, as there was a ready market of drivers willing to accept cash for their old buses. As the project progressed however, the supply of old buses decreased and BRT planned expansion to more lucrative lines. OId bus drivers increased their demands, raising costs and complications. The government and private operators remained aligned in goals, but the increased burden of buying out set number of old buses fell largely on the private side.
It is instructive to contrast social policies through contract to traditional regulations. Major health, safety, or environmental concerns will likely remain regulated areas, as they can be imposed upon all industries or residents within a city at once. However, passing these regulations can meet with political hurdles and delays. Moreover, in some communities, including Bogotá and the Dharavi Slum, so much of the local economy is in the informal sphere that these regulations are unenforceable anyway. In TransMilenio, we saw an effective example of leveraging a PPP to bring many private bus drivers under formal contracts, thus ensuring their involvement in social security and workplace safety requirements.
Acting through contract also offers opportunity for experimentation. Employment quotas may be unnecessary or ineffective. Contract also allows more precision. The local pool of candidates for jobs in banking may be vastly different than those in engineering—one quota may not fit all. Eliminating ineffective social policy clauses in contracts could permit governments to demand higher concessions from the private operator.
 For example, the Portuguese government offered to pay the first two years of salary for any Portuguese PhD graduates hired to work in PlanIT Valley. In doing so, the government is building the capacity and experience of its population and creating a ready benefit to be touted in future elections.