Monday night I was having drinks in downtown San Francisco with some seriously smart people-top-level IBM scientists and strategists involved in Big Blue’s Smarter Planet initiative.

Given the room’s collective interest in creating smart electrical grids, smart water systems, advanced electric car batteries and other green technologies, the talk naturally turned to how to create sustainable cities.

The technology largely exists, the IBMers agreed, but what’s really needed is a great leap forward in financial engineering to allow cities to finance all the cool stuff being developed in labs at IBM and elsewhere.

“We need a business model for cities,” Deborah Magid, director of software strategy at IBM Venture Capital Group, told me.

In fact, a few hours earlier, San Francisco Mayor Gavin Newsom unveiled GreenFinanceSF, a $150 million program to green up the city’s homes and businesses by financing the installation of solar panels, energy efficiency retrofits, and water conservation improvements.

It’s the latest and largest iteration of the Property Assessed Clean Energy, or PACE, model pioneered by the city of Berkeley across the Bay and now spreading across the country.