Re: No, really... stop believing
Understanding how people move around, where services are most needed, where crime is likely, how well mass transit and automobile flow are working, keeping water and energy systems working all can be tied to IoT. There's a ton of promise in the smart city concept, however, so far municipal use of IoT and analytics is limited to pilot or single-department projects. Sadly, the cost of doing things right presents a political challenge.
Austin was one of a handful of cities that competed as finalists for a big federal Smart Cities grant a couple of years ago. Austin lost, Columbus (Ohio) won.
I and a number of others here following this issue in Central Texas gained some insight and understanding about the program in its current form – mainly a small handful of disparate initiatives. Whether Smart Cities will ever be able to develop into the complex system Jim describes remains to be seen, especially with today's widespread nervousness about hacking, security, privacy, etc.