From the description in the question and in all the comments to all the answers, it appears that the most likely scenario of what has happened is as following:

 - a city employs suboptimal traffic cam devices which may result in citations when none should be issued.
 - a city has an ordinance allowing it to issue some of the citations to car owners, rather than drivers, in the cases when the citations are based on traffic cam observation.  It is possible (but not necessary) that such citations to the owners can only be issued to the owners if the owners are fleet operators (rental companies, cab companies, etc.).
 - such citations do not result in any accusations being made against drivers (which is reasonable because a camera cannot verify identities of drivers).
 - a rental contract, that you signed, stipulates that you indemnify the rental company for any damages it may incur resulting from citations issued against the car while the car is rented to you.  You act as an insurance company with respect to this point.  You are no more considered "guilty" of anything than an insurance company is guilty if a rock falls from the sky and damages an insured property.  If you cannot be "guilty" of anything, you cannot be "innocent" of it, either.
 - you are now presented with a bill for an event which you believe is a result of a case of bad judgement by the city.
 - YOU are NOT accused of a traffic violation.

If you incur damages because of a municipality's bad judgement, you have a tort against that municipality.  

It is almost certain that the damages that you suffered from this event do not justify the legal cost of seeking a remedy.  Had the damages been exorbitant, you would have a reason to pay for a professional legal advice.  So the argument that this can result in unlimited fines, against any one individual, is moot.

The only (potential but unlikely) upside to your situation is that the cameras are automated.  So any mistakes that they make, they likely make time and again.  This opens up a remote possibility of a mass-tort suit.  If you want to explore that route, then you may try to find a class-action legal specialist who would consider it profitable to explore this case.  

As others have suggested, your recourse is not limited to only seeking legal remedies.  You also have the option of raising public awareness of this situation.  To some degree you have already taken a step towards doing this by asking this question on a public website.  There are others.