Systems enabling smart city operations are highly adaptive complex systems that pose great challenges in their development and operation. Current user-driven techniques for system domain modeling and requirements engineering are not adequate for supporting the development of such systems. In this paper, we propose a development process and an environment-driven modeling approach for the Requirement Engineering Context Awareness methodology to be used for smart city applications. To this end, we propose the use of ontologies to build the environment context model. We show that the environment dimension is the most important dimension of context with the highest impact of changes in a dynamic context. We illustrate our approach by presenting an ontology-based context model of I-Parking. We present dynamic models of typical scenarios of interactions. We propose our approach as an important step in developing highly adaptive context-aware systems for smart city operations where uncertainty and changing conditions in the environment need to be carefully modeled and addressed.