Striking the right note
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Finding balance and harmony
When the public and private sector works in sync, it can yield innovative and impressive results, Mays says. “Financing is really one of the triggers [for P3s,]” she says. “However, communities also can benefit from P3s in other ways. Perhaps the private sector has technical expertise or the technology to do something more efficiently or effectively. Or, perhaps it’s better to partner with the private sector to help transfer some of the risk.”
The community of Sandy Springs, Ga., is so sold on the benefits of PPPs that Mayor Rusty Paul says he’s “double-downed” on them after outsourcing all city services except police, fire and 911.
In 2005, the city of nearly 90,000 residents signed a comprehensive PPP contract for all major city functions, including administrative services and nearly all public works functions. Today, Paul says he rebids the contracts every three years to make sure contractors are fulfilling their obligations on service delivery, and he has a backup contractor lined up in case the primary contractor fails to meet expectations.
Paul says his city’s commitment to the privatization model has improved customer satisfaction and helped contractors feel like they are part of the fabric of the community. “Private sector partners know their number one job is to focus on service to earn a paycheck,” Paul says. “We foster a teamwork environment and our private sector partners play an essential role and are partners in delivery services to the public.”
The bonus, he says, is that by contracting out services to the private sector, his city has price predictability in providing services for several years, which frees up the budget to provide additional city services. Because of PPPs, 25 percent of the city’s budget can now be used for capital projects and improvements like repairing streets and creating new parks and public art.
Another example involves Fairfax County, Va., which is building its Metro line. David Birtwistle, CEO of the Virginia Transportation Alliance, said at the end of the first phase of the Metro line expansion in Reston, Va., the county needed a parking facility to accommodate ridership. Knowing that such a project would be expensive, it sought a private partner to provide the parking structure.
When it solicited bids, Fairfax received a bid from Comstock Partners that wanted to charge double what it would be to build 2,300 parking spaces. The bid seemed strange at first, consultant Norment says, but it turns out the developer proposed the project with an additional 3,000 parking spots for no charge so that it could put a mixed-use residential/commercial facility on top of the parking spaces and pay the county for the air rights of the structure. In addition to the parking spaces, the project now includes a commuter park-and-ride facility, transit bus depot, 1.3 million square-foot, mixed-use center that will include 900 luxury apartments, a 200-plus-room hotel, restaurants and office and retail space.
“It created very positive cash flow for the county,” Norment says, noting more innovative projects like these are cropping up, with more wrinkles than in years past. “The adage goes, ‘if you’ve seen one PPP, you’ve seen one PPP.’”
P3s may not be the best solution for governments that are reluctant to raise taxes to fund infrastructure projects, but they are worth considering, Sandy Springs’ Paul and Centennial’s Danielson say.
“You don’t have to roil the whole city and throw out every department to private sector [management] at once,” Paul says. Yet, if you give PPPs a chance, “you may be pleasantly surprised by the enthusiasm and innovation you get out of the process.”
Danielson suggests communities start with areas that are the least or most poorly served — areas in which you struggle to operate. “If things are not going well, it might be a great place to start looking at a partnership to see if there is a different service model that doesn’t cost you any more money. Find someone who has a good partnership and spend a few days to find out what works and doesn’t, and what things that might fit in your organization,” he says.
Even if resources aren’t as tight as they used to be, “when state and local governments look for ways to meet public need, P3s very much belong as part of the evaluation process,” Birtwistle says. “The pitfall is that [P3s] were looked at as financing mechanisms, and as revenues increase, [there] may be less of a reliance or interest in such partnerships.
However, partnerships can bring more than just financial resources to the table. They can bring new ideas and more efficient solutions that the public sector may not otherwise have had opportunities to. It would be unfortunate if the public sector didn’t continue to look at P3s as an option to a project. It’s not the solution in all cases — but in many cases it can be advantageous,” Birtwistle says.