How Local Governments Came to Embrace Business Partnerships

[M II A II R II K]

How Local Governments Came to Embrace Business Partnerships


NOV 10, 2017

KRISTON CAPPS

Read More: https://www.citylab.com/solutions/20...siness/542487/

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For many Americans, “public–private partnerships” may summon to mind gloomy visions of concrete mixmasters or the social good sacrificed to corporate masters. Toll roads were the most prominent example of public–private partnerships across the country for many years. Today, though, they are more nimble and easier to find, especially at the local level.

- Critics see the perils of privatization, particularly for some core government services. But for small cities in particular, the partnerships provide new opportunities to achieve goals that otherwise seem out of reach. --- “The U.S. market [for public–private partnerships] developed much like the markets outside the U.S. in this area. We started with large-scale transportation infrastructure projects,” says Peter Raymond, global advisory leader for capital projects and infrastructure at PricewaterhouseCoopers. “This concept is now starting to catch on in very interesting ways at the city level in the U.S.”

- The U.S. market was slow to cotton on to public–private partnerships (or PPPs, or P3s) made popular in Europe. Ten years ago, anything less than $200 million had little hope of connecting the public and private sectors. That’s starting to change. Today, a market that Moody’s has described as “slow and fragmented” is poised to become “one of the world’s largest.” --- The amount of capital raised but not yet invested (or “dry powder”) for infrastructure is much higher than the amount of available opportunities for this investment. At the end of the first half of 2017, there was some $100 billion in dry powder for infrastructure deals, according to PwC. The value of actual deals over the same period was $22.5 billion. There’s room for growth.

- In some arenas, public–private partnerships have served as the quiet engines of longstanding and popular government programs for decades. Consider housing: Most programs at the U.S. Department of Housing and Urban Development, from housing vouchers to mortgage insurance, are structured as public–private partnerships. Housing Choice (or Section 8) vouchers are a form of PPP that has served low-income households for 80 years. HUD’s Rental Assistance Demonstration program, an Obama-era federal program that is popular under the Trump administration, has given voucher property owners opportunities to find the capital to upgrade and maintain those affordable properties, mostly through tax credits. In turn, those credits—Low Income Housing Tax Credits, which are responsible for creating most of the new affordable housing in the country—are still another kind of public–private partnership.

- Many officials now view these partnerships as key to unlocking change at the state and even the city level. In Los Angeles, transit officials said that public–private partnerships would mean delivering new public transit initiatives years head of schedule. In the Twin Cities, it means thinking past traditional bikeshare to dock-less bikeshare or whatever comes next. --- For small cities in particular, private companies can provide opportunities to adopt solutions that they could not necessarily design on their own. Contrary to popular belief, private firms aren’t necessarily more efficient than state-owned enterprises. But the private sector can marshal new technology in research and development that is intended improve and modernize cities. Consider Alphabet’s work to create a ”living laboratory” on Toronto’s waterfront or overseeing transit in Columbus, Ohio—both ventures that are still in the very early phases and fielding at least some push-back.

- Street lamps are one example of hard infrastructure that affords an opportunity for new thinking through public–private partnerships. Here’s a straightforward example: Two years ago, the Michigan Department of Transportation entered into a 15-year contract with a private company for new and existing highway and tunnel lighting systems around the Detroit metro area—a design-build-finance-operate-maintain (or DBFOM) privatization deal to replace some 15,000 antiquated lights. The deal is predicated on the notion that Freeway Lighting Partners can deliver economies of scale that result in taxpayer savings. Again, a straightforward deal. --- In Dallas, however, a public–private partnership envisions turning old street lights into energy-efficient lamps that also monitor pollution and noise. In New York, LinkNYC aims to replace some 7,500 pay phones with interfaces called “Links” that will provide free public WiFi, device charging, and access to various services.

- On paper, the match-up between the private sector and local government can shift the balance of expectations in taxpayers’ favor. Consider a convention center: In a traditional set-up, a government contracts with firms for the design and construction of the building. The architects or contractor may bring down costs by building cheaper (at the expense of future maintenance). When a government bundles the operation and maintenance of a convention center with its design and construction, then private firms have a greater incentive to ensure the lifecycle costs of the project—to build with the future in mind. This goes not just for school buildings or highways but wastewater treatment plants, broadband initiatives, or the energy grid. --- That’s if everything goes according to plan. One problem with public–private partnerships is how often the plan changes. According to the Hamilton Project, an economic policy think tank at the Brookings Institution, 8 of 20 public–private partnerships for major transit initiatives since 1991 were subject to renegotiation.

- The dark side of public–private partnerships entails bailouts and bad deals. Infrastructure is in part defined by natural monopolistic tendencies, and without an effective public regulatory monitoring mechanism, private actors who take on public services might raise prices to an inefficient level or degrade service quality to an inefficient degree, says Hunter Blair, budget analyst for the Economic Policy Institute. Governments run the risk of mistaking the financing that public–private partnerships can leverage for the funding of projects themselves—of missing the forest for the trees. --- “A lot of people in the government, when they talk about [public–private partnerships], they see it as this free lunch,” Blair says. “We’re going to bring in private money, so that means, somehow, it’s going to cost us less to pay for the infrastructure. Funding at the end of the day still has to come from taxes or user fees. There is no free lunch here.”

- There are other risks, critics say, to the entry of private companies into basic government services: insufficient government oversight, bad contracts, and companies cutting corners for profit. And when the municipal services in question are largely invisible to most citizens—managing a city’s water supply, for example, or running prisons—the risk for abuse can be severe. Critics say for any government service where monitoring quality is difficult or costly, it’s all the more important that contracts with private partners include detailed parameters for outcomes. That’s typically more true of “soft” infrastructure (emergency response or public education, for example) than of “hard” infrastructure (such as levees or rail). --- In public–private partnerships, both sides need to share a vision of what success looks like (and failure, too). “On a road, it’s fairly easy to see and to know there’s a lot of potholes,” says Blair. “If you’re talking about a prison or a school, it can be harder to tell that service quality is being degraded.”

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[Pedestrian]

Originally Posted by M II A II R II K

Street lamps are one example of hard infrastructure that affords an opportunity for new thinking through public–private partnerships. Here’s a straightforward example: Two years ago, the Michigan Department of Transportation entered into a 15-year contract with a private company for new and existing highway and tunnel lighting systems around the Detroit metro area—a design-build-finance-operate-maintain (or DBFOM) privatization deal to replace some 15,000 antiquated lights. The deal is predicated on the notion that Freeway Lighting Partners can deliver economies of scale that result in taxpayer savings. Again, a straightforward deal. --- In Dallas, however, a public–private partnership envisions turning old street lights into energy-efficient lamps that also monitor pollution and noise. In New York, LinkNYC aims to replace some 7,500 pay phones with interfaces called “Links” that will provide free public WiFi, device charging, and access to various services.

I prefer the example of toilets.


http://www.sfbetterstreets.org/wp-co...lic-toilet.jpg

In 1995, San Francisco hammered out a deal with a French advertising company, JCDecaux, to furnish 25 self-cleaning toilets along the downtown corridor. Squat and olive green, they promised to cheaply meet the city's utopian aspirations. Anyone could pump in a quarter, open the door, use the toilet, and watch as the machine sealed itself shut for a mysterious 60-second cleaning cycle in which the JCDecaux hosed all its surfaces and blasted itself with disinfectant.

In a city bedeviled by change, the French toilets seemed like a miracle. Tourists, homeless people, and shoppers on Market Street would all pee in the same hole, and JCDecaux would deputize its own maintenance crew to clean up every morning. The French company charged nothing for its boxy toilets, which resembled big oil drums or artillery bunkers, because they also served as advertising kiosks. The company rented that signage and pocketed the revenue.

But it didn't take long for a foreign toilet with lofty aspirations and good business sense to fall into ill repute. The JCDecauxs became known as "20 minute hotels" for prostitutes and drug users. Vagrants slept inside; addicts wedged knives beneath the doors to keep cops from getting in.

"I've actually seen shit on the floors," a homeless vet named Peter Skelley says, rattling off the other iniquities he's witnessed in those shiny European johns: people cooking up dope or shooting heroin.

Granted, his horror stories pale in comparison to a JCDecaux maintenance man at Fifth and Market streets, who easily recalls the worst thing he's seen: "A dead body. From a drug overdose."

The JCDecaux toilets have come to represent a form of cheap civic beneficence — a way for San Francisco to feel it was aiding its downtrodden at a time of budget austerity. And their structures convey as much: big, can-shaped bunkers with glossy panes for advertisers.

It only took a small margin of the population to ruin the democratic restroom model for everybody else. But, as is often the case in San Francisco politics, that small sliver wielded a lot of influence. Toilets quickly came to illustrate all manner of livability issues, and the utopian dream of tourists sharing clean, cottagey space with their homeless counterparts withered away. The restrooms of San Francisco had failed as a utopian experiment; they were commandeered by a small minority but inaccessible to the masses . . . .

https://archives.sfweekly.com/sanfra...73&storyPage=2