It is both a technological and a political issue. The technology would need to be designed in such a way as to not collect "sensitive" data about anyone and to anonymise whatever data needs to be collected. This would not be simple to implement in a way that would prevent abuse, but the example of a motion sensor rather than a video camera would be the sort of thing that I imagine. To what extent a "smart city" could be developed using only privacy-respecting technology, I don't know, but at least some options do exist.