There are a number of different conceptions of what "municipal broadband" means, and what it would include (organization, business model, services), especially in the case of Syracuse. There is the idea of having an up to date fiber system that the City would own, which would compete with other providers for all services. Then there are more limited approaches such as city wide Wi-fi, or municipal connections between various sectors (education, tech, gov. etc.) that could be a joint venture. And how does all this relate to the new initiative coming from the FCC and the administration (stimulus money etc.)?
I'll touch on each topic and then answer the question on stimulus. SMBI would be a municipal authority (in this case, a utility company), organizationally and financially separate from the city, but regulated by it. It would be initially financed and then operated exactly like a privately owned utility, except that it would be publicly owned and regulated. Initial financing would be via revenue bonds, just as privately utilities would use.
As a full-service broadband provider, a municipal utility has a well-established lucrative business model to successfully sell bonds, and can compete with incumbents via newer technology (somewhat compromised by Verizon FIOS imminent entry) as well as lower prices and more services, options, and community benefits (in lieu of profits), and also the "buy local, it's our network" loyalty advantage. (Note that Verizon FIOS can't take advantage of and compete with its full capabilities---very high bandwidth, significantly lower prices than normal---because it will attract attention from all its other markets, offering proof of price gouging, bad press, and lawsuits).
Establishing city-wide Wi-fi alone is problematic. First, the technology is limited and inefficient for large area use; second, if you don't already own the back-haul network (as a municipal utility would), it's not cheap; third, the business model is far less compelling (as history shows for both private and public attempts), and makes financing more difficult and expensive. In short, city wi-fi is a partial solution with (current technology) little business upside and significant financial risk.
A more robust cell-type network (Wimax, white space spectrum, etc.) is an interesting alternative. But the Wimax spectrum license is currently held by ClearWire, and white space spectrum use policy has not yet been established by the government. This more robust (higher speeds, cheaper) solution is more compelling, but still a partial solution, insufficient to provide all service (TV, data, phone) needs. Wireless works best as an add-on to wired broadband service---extending the ubiquity and flexibility of the network.
An institutional network (INet) exists today in the form of Syracuse Metronet. However, it gets its service from Verizon. A state court judgment against Verizon, 10 or so years ago, has provided Syracuse (and others) financing for their INet, where members pay about 10% of the market rate for their service. However, the money is now gone, and members are scrambling to find another low-cost solution. Establishing a municipally owned INet would cost money, which would be borne only by its dozen members. This is where SMBI can provide the ideal solution. SMBI could incorporate any infrastructure Metronet owns (a significant jumpstart on city-wide fiber buildout) and offer existing (or better) rates to Metronet members. With SMBI versing surplus revenue into the city general fund (effective 100% income tax), city government will almost always get free service on balance. It is the revenue from city-wide full service (TV, data, phone, etc) that would pay for the system, including the INet (a tiny fraction of overall revenue and expenses).
Now, as to the applicability of broadband stimulus grants, they can be used in many parts of the network buildout, such as, connecting government and non-profits, funding public access computer clusters, connecting to the premises of low income families (public housing and individual homes), possibly computer literacy training, etc. It seems at least 1/3 of the network could qualify for grants. The lower overall financing overhead will allow us to offer even lower prices and more generous community services.