Local government executives throughout the country are sending out “Help Wanted” messages. Because property tax revenues have declined and budgets are stretched to the breaking point, there is an immediate need for new revenue options for critical projects.

As a result, cities and counties are hiring advisors who offer assistance in the area of “alternative financing.” Contracting with financial advisors to provide guidance like this is relatively new – but a growing trend.

Here are some examples:

  • Proposals are due later this month to the Nevada County Transportation Commission for firms to help update the five-year Western Nevada County Transit Development Plan. The objective is to make adjustments for recent changes in funding levels and to recommend ways to fill the gaps with alternative funding options;
  • The city of Denison, Texas, is discussing solicitation of proposals for alternative revenue consulting services for various projects;
  • The city of Huntington Beach, California, sought assistance for the development of financing alternatives for its Poseidon Resources desalination project; and
  • Memorial City Tax Increment Reinvestment Zone 17 in Texas has hired consultants to seek federal and/or alternative funding option for projects in its capital improvement plan.

In Austin this week at the National League of Cities Annual Congress of Cities and Exposition, I participated in a three-hour session titled “Developing Public-Private Partnerships” (P3s). These types of collaborative partnerships offer an alternative funding option.

In a very hands-on session, the panelists discussed types of projects that work well for partnerships that involve private capital investment. Participating with me were Bill Johnson, Director of the Miami-Dade County Water and Sewer Department, Tom Pelnik, formerly a director with the Virginia Department of Transportation who is now with ACS Infrastructure, and George Tapas, vice president of URS’s Alternative Financing Projects and Public-Private Partnerships.

The good news for public officials is that there is an abundance of available capital – both public and private. And, there are numerous alternative funding options to consider.

Some of the more popular options include the use of EB-5 money, grants from federal programs, state loans and private capital investment through P3 engagements.

One of the most-asked questions is always: “Why would private-sector investors want to put millions into my public project?” The answer is rather straightforward. Investment groups are always seeking ways to expand and diversify their portfolios. And, they like to invest with credible and trustworthy partners. Governmental entities rank high in both categories. Private firms also like large, complex opportunities and the public sector has lots of those right now.

Government contractors believe they can build roads, bridges, public facilities, parking garages, schools, water and wastewater systems, hospitals, airports, recycling facilities, public transit systems and prisons more efficiently than governmental entities. And, because they are so confident in their capabilities, they are willing to finance the projects and accept responsibility for ongoing maintenance for decades.

Public officials need funding and they like the transfer of risk that goes with a P3 engagement. They also like the ongoing maintenance assurance. It leaves them with little concern about the quality of equipment or the construction techniques that will be used on the project. P3 engagements usually require the private contractor to leave the asset in pristine condition when it is turned back to the public entity.

Whatever alternative funding option public officials choose, there is little doubt that public officials will find revenue and innovative sources in the near future.

 

Mary Scott Nabers

As President and CEO of Strategic Partnerships, Inc., Mary Scott Nabers has decades of experience working in the public-private sector. A well-recognized expert in the P3 and government contracting fields, she is often asked to share her industry insights with top publications and through professional speaking engagements.