It’s time to ramp up public-private partnerships

By Al Maloof

State, regional and local governments need to rethink how they develop and upgrade critical infrastructure. There’s a way to speed up delivery, ease management burdens and relieve tax pressures— public-private partnerships. Collaborations with private industry on everything from ports to commuter rail to student housing are producing better results than the traditional bid-build methods.

In my home state of Florida, public-private partnerships on transportation projects are being embraced on a massive scale: a $2 billion upgrade of I-595 in Broward County, the $665 million new Port Miami tunnel and the $2 billion I-4 Ultimate project near Orlando. Roads are being built faster, with more cooperation from private companies, more innovation and less local money.

For example, the $2.1 billion tunnel project for the cities of Norfolk and Portsmouth, Va., are being financed with bonds, private equity, federal funds and toll revenues. A private company will operate and maintain a new, toll mid-town tunnel when it opens in 2017. This is revolutionary compared to how the companion downtown tunnel was built and financed in the 1960s.

Projects can be customized to the identified, but unfunded needs. For example, a 20-mile light rail system is being built on the New Jersey side of the Hudson River in Bergen County. The $2.3 billion project is being publicly, not privately, financed. But private companies are guaranteeing the delivery date, providing and maintaining the rail cars and operating the line for 15 years.

Public-private partnerships are not just for roads. Cities, counties and public agencies across the country are planning and building airports, hospitals, jails, water plants, light rail and streetcar networks in partnership with private ventures.

The 22.8-mile railway that will connect Denver International Airport and Denver Union Station demonstrates that there are few, if any limits. The line is one of three that will open in 2016 as part of the Eagle P3 project, a $2.1 billion, 10-year effort to improve public transportation in metro Denver. Like the Virginia project, private companies are investing money and will operate and maintain the system under a long-term contract.

Projects like these are attracting investment from some of Wall Street’s biggest names – Morgan Stanley, Bank of America, JPMorgan and UBS, to name a few. They are creating investment funds to attract capital from funds, and other institutional investors. Their money is being matched with public and private loans to pay for projects that would otherwise require governments to bond and or borrow heavily.

The federal government supports public-private road and other transportation related projects through funding of the Transportation Infrastructure Finance and Innovation Act, or TIFIA. Congress is also considering a version of financing for water related projects, known as Water Infrastructure Finance and Innovation Act (WIFIA). Those resources can help fill the gap between available funding and private investment.

The benefits of public-private partnerships accrue to more than taxpayers and investors. Companies can make money designing, building, operating and maintaining properties they control – not own. Even when the private sector is fully involved, companies have contracts with fixed timetables.

How do public agencies get on board? Start by thinking first of public-private partnerships that have a revenue stream: toll roads, water bills, fare-box’s, even brownfield developments. Then, learn how other projects were assembled: Where did the money come from? Which entities put in how much capital? Under what terms did a private company win a contract to operate the finished project? Who was on the management team?

With that, public officials should cast out the old model of contract bidding and public financing. Invite members of the private sector to come to the table with a business plan, capital, financing and the finest managers they can assemble. Consortiums across Europe, Asia and the Middle East have been leaders in this sector for decades.

Businesses should take the initiative, too. Go to public agencies and say, “You have a need and we know how to fulfill it. Let’s talk. Unique and innovative unsolicited proposals are welcomed”

Those discussions will lead to more efficient and stream-lined solutions for the biggest infrastructure challenges facing communities. They will be implemented much faster and more efficiently than the way they are addressed now. These novel approaches will make cities and counties more attractive to residents and business.

Al Maloof, a government affairs expert, is managing director of GJB Consulting LLC (GJBC), which specializes in creation of P3 developments and team strategy for innovative projects and unsolicited proposals. Maloof can be reached at [email protected].
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