P3s broadening financial tool box for state’s facility needs
by Mary Scott Nabers
CEO of Strategic Partnerships, Inc.
The Texas Facilities Commission (TFC) may be involved in as many as 50 public private partnerships (P3s) by 2020, according to agency officials. That’s more than six times the proposals the agency is currently considering.
P3s are growing in popularity and effectiveness nationwide and public officials in Texas find them very attractive - as does the TFC. The last state office building built from the ground up was completed in 2000. Since that time, with budget deficits causing belt-tightening at all levels of state government, the TFC not only has been exploring ways to make the most of limited available dollars, but also has been looking for ways to leverage those funds.
One of the ways the agency plans to leverage current resources, according to TFC Executive Director Terry Keel, is through the use of public-private partnerships. The state agency he oversees is responsible for about 28.5 million square feet of state-owned and leased property that supports more than 40,000 state employees in nearly 300 Texas cities. Keel says the agency is currently receiving proposals from private sector developers for various types of P3 engagements.
Keel was one of the speakers earlier this week at the 8th Biennial Legislative Communication Conference and he said P3s offer a way to generate non-tax revenue while providing an integrated alternative to design-build strategies. And, according to Keel, P3s will become an integral part of how TFC plans to meet the facility needs of the state in the near future.
Public-private partnerships are becoming the norm. Private sector partners are financing and building public school buildings and dormitories on university campuses. And they are financing and constructing facilities on state properties that include retail and residential space that generates revenue to benefit both partners.
Keel explained that in the mid-1960s to the mid-1970s, the state’s focus was on acquiring property for new buildings to meet future demands. More recently, the economy declined and, out of necessity, the state began exploring other ways to meet its needs. Construction was not possible, so the state leased office space and consolidated agencies.
Now come P3s, and the state has yet another alternative – private development on state land. Aundre Dukes, portfolio manager for the TFC, said the state agency currently has eight P3 proposals in hand. These partnership proposals range from projects that involve construction of new state facilities on state land, use of state facilities that are already built, consolidation of leases on property the state does not intend to own and acquisition of new state facilities.
While P3s have been in existence for decades, they are still relatively new to Texas state government. Most previous P3s in Texas have been transportation-related. However, Dukes said the private sector reaction to working with TFC regarding P3s for facilities has been overwhelmingly positive. And he said the agency plans to work with the Texas Legislature when it convenes in January to address any “shortcomings” in the state’s current P3 legislation.
In some cases, the public has been less than enthusiastic about P3s, according to Dukes, but he blames that on misinformation. The TFC portfolio manager says that once people understand what a P3 is and why this method is being used to help finance needed projects, they become more accepting.
Dukes said the best selling point for public-private partnerships in state government is that they "broaden the tool box" for securing additional revenue for much-needed state projects.