Out of necessity comes invention - for governments that can mean P3s
by Mary Scott Nabers
CEO of Strategic Partnerships, Inc.
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The City of Kilgore's economic development corporation (EDC) partnered with a private investor to develop a business park. The EDC contributed $1 million in land, money and expertise and the private investors contributed $1 million to be used for financing, marketing and management of leases. Initially, five projects broke ground resulting in dozens of new jobs and millions of dollars in new investment.
Midwestern University in Wichita Falls recently completed a construction project as a partnership with a student housing developer. The new building is a revenue-generator and this particular project can pay for itself. The money borrowed in many situations such as this is often pledged against anticipated revenue streams. The partnership is balanced by the university's investment of land and/or funding with expertise from a company that is experienced in construction or oversight and knowledgeable about what students expect in on-campus housing.
The City of Cameron may issue a five-year contract to a private sector firm for management, operation and maintenance of the city's wastewater and water treatment plants. Even though the contract is for a hefty $4.7 million over the five-year period, the city expects a 5-10 percent overall cost reduction over what it would have cost the city to handle the work.
A private real estate development firm recently completed a 300-room hotel and conference center in Lubbock through a partnership with the City of Lubbock. The capital plan, put together by the developer, included private debt and equity, city bonds, naming rights, room licenses and nonprofit foundation grants. The conference center will be leased to the hotel owner, who will operate both the hotel and the center. The city expects the hotel and conference center to attract legions of state and regional conferences to the area, providing a significant impact on the local economy.
Texas state government has had similar success using P3s. The most widely publicized to date have been used on transportation infrastructure projects. While the American Recovery and Reinvestment Act is pumping $88 billion into projects to repair or replace roads and bridges nationwide, that is only a fraction of the $2 trillion needed for infrastructure. 3Ps will most likely be used to fill in some of the funding gaps.
Numerous private sector contracts for transportation projects in Texas have been awarded in recent years. And although financed and constructed by a private firm, the roadways remain the property of the state. Even in cases where there is a long-term toll agreement, the roadway is leased - not sold - to the private sector firm.
Other state agencies, too, are turning to the private sector for partnerships on projects. The Texas Department of Agriculture (TDA) recently selected a nonprofit corporation to map the state for broadband availability. Texas will be competing for $7.2 billion in Recovery Act funds that have been set aside for broadband infrastructure loans and grants. When selected by TDA, the company already had partnered to map one state and was working with nine others to produce broadband maps.
Another of the state's most ambitious and successful public-private partnerships was contracting with the private sector to develop TexasOnline, the state's Web portal. The state took advantage of Internet and e-Commerce industry leaders to help develop and maintain the site which threw off millions to of dollars in revenue to the state once it was operational. Watch for more 3Ps in the future in Texas and throughout the country.
