In March 2012, the ULI Rose Center and Center for Capital Markets and Real Estate jointly hosted a forum on innovative public-private partnerships and finance. Under the guiding principles of the Shaw Forum, the objective of the meeting was to facilitate a discussion between public sector representatives and private contractors who engage in public sector projects. As many communities in the United States are dealing with restricted budgets and tax-revenue shortfalls, ULI believes there is value to coordinating cross-sector discussion regarding public/private partnerships (PPP) that will help identify what new or improved methods of partnership have developed and whether or not these new tactics are applicable to other communities.
The forum brought together nearly 30 practitioners, from the public and private sector, with recent involvement in public/private partnerships for the purpose of investigating the current economy’s influence on financing and structuring these partnerships. Over the course of two days, attendees listened to case study presentations, heard remarks from Rose Fellowship alumus, Mayor R.T. Rybak, about the role of city leadership in public/private finance, and discussed with much interest:
- How does development proceed in a time of less?
- What new roles are the two sectors each taking on?
- What new forms of partnership and governance have been tried?
- Which community needs are being met by these partnerships, and how?
At the conclusion, the following themes and calls-to-action were identified by the attendees:
- Diminished public funds and capacity will be the driving force over the next few years in shaping the public/private partnerships. Related issues which are critical to address, although they are outside actual public/private partnerships, include: public legacy costs, term-limits that focus the political process on the short-term, and the politicization of the planning process.
- Skepticism on the part of the community about the public sector’s role in real estate development dictates that the PPP process become transparent. The partnership is essentially a transaction and everyone should be able to easily understand what is being provided and by whom, and what the benefits are.
- Scrutiny of financial fundamentals is rightfully, once again, taking place and both the public and private sector must be ready to answer questions and provide supporting information. It is also an essential component in regaining the community’s trust and overcoming its skepticism.
- In some instances, the disconnect between the vision held by the community and that held by the public leadership can be substantial, which negatively affects the nature, scope, and timing of any PPP being considered. In such cases, it is time for the private sector to take the lead in long-range, strategic planning for large areas, working collaboratively with the community prior to entering the public process.
- The lack of standard approaches to measuring the validity and benefit of a particular PPP is an impediment, when negotiating a partnership. The ability to use standard metrics to assess proposals and agreements would go far for transparency, but also in streamlining the process and quickly clarifying the outcomes.
- Having the public sector undertake the entitlement process is something that can easily, and at little cost, remove some of the risk facing a developer. When it is not done before an RFP is released, it is a challenge for the private sector to develop a financially sound and stable plan. Recommendations for a two-step process, whereby an RFQ and then an RFP is used, would further reduce some of the risk.
In the current fiscal climate, many attendees agreed that PPPs provide tremendous value to communities. Aside from the immediate financial benefits of underwriting and sharing risk, PPPs create a platform for public officials and private developers to strengthen relations and work from a broader perspective. As city development is primarily relationship oriented, collaboration under PPP provides reciprocal benefits of knowledge sharing and creative problem-solving to implement vision between all participants. This paradigm is essential to the future success of the PPP dialogue as well as successful urban development. Participants urged that discussion and promotion of this concept be continued within ULI.
- White Flint Sector Plan , Montgomery County, Maryland
- The Bridge Street Corridor, Dublin, Ohio
- Bayfront Redevelopment Plan, Jersey City, New Jersey
- Steelstacks, Bethlehem, Pennsylvania