On first glance, this may be the dumbest idea I've yet to hear about in terms of municipal/city surveillance projects:
Think about it this way:
Who wants to look at a security camera with a flashing police light? That's exactly where you advertisement would be, and everyone is going to instinctively turn their eyes and face away from that point. And for all the libertarian people who associate police cameras with a police state, your company just was associated with the trampling of liberties. It can't get much worse...
 Back to the drawing boards for funding ideas, folks!
-Geoff
P.S. I believe the TSA tried this; they wanted to sell ads on their gray bins that you use at airport security checkpoints. That went over about as well as you trying to get a big bottle of water through their X-ray machines.
