In theory you might get a situation where several cities try to wait each other out for similar tasks, hoping another city will buckle first and fund it.
I worked on image analysis software in a wetlab for a particular type of microscopy. They are in just this position: the lab builds and sells software. The fees are low -- on the order of $10-$15k/license. They use the proceeds entirely to fund ongoing development of the software. And the simple fact is, without these license sales, they don't have the resources to fund development. The software is open source in the sense that the licensees are given the source.
If the lab has to give the software away, all development ends, unless you have $300k/year of grants sitting around.
This is the same bullshit excuse people use to justify subscription licensing.
If they can't get the interested labs to contribute towards the development without the coercion of a commercial license then it sounds like it's either done, or the development roadmap is misaligned with the users' goals. In either case, stopping the abusive current practices would be an immediate improvement for everyone involved.