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What are Other Governments Doing?

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David M. Lick
Foster Swift Municipal Law News
August 25, 2016

Some state and local governmental agencies have utilized some very unique public-private partnerships (P3) to accomplish their infrastructure investment goals.

  • A Michigan Upper Peninsula road commission obtained a new maintenance facility for its vehicles with a dual RFP for a design-build delivery method and a simultaneous RFP to obtain private financing. The design-build contractor agreed to deliver the project for a guaranteed maximum price to be completed in a rapid manner. A bank financed the project through an installment purchase agreement with an interest rate of less than 2 percent paid back over eight years. The financial and legal consultant cost was significantly lower than a comparable project using traditional financing. The entire project - from the day it engaged private counsel to develop the P3 project concept to the day the project was completed and ready for use - was one year. (author)
  • Santa Cruz, California formed a partnership with a telecommunications company and local internet service provider to establish fiber-like wireless technology to deliver gigabit-class-level internet speeds throughout the city. It wouldn’t replace full fiber internet service, but it is a faster and more affordable way to offer gigabit-speed internet service. It is ideal for rural communities. (Government Contracting Pipeline, April 20, 2016)
  • Another California community proposed a P3 with a developer to design, build, finance, and operate portions of its harbor over a 50 year lease. Thereafter, the property would revert to the municipality. (Government Contracting Pipeline, March 23, 2016)
  • Wayne State University in Michigan is seeking developers to participate in a public-private partnership to add 650 beds to the university’s student housing. The selected contractor will pay to build the project, lease the property from the university, and possibly act as property manager to be reimbursed out of student housing fees. (Government Contracting Pipeline, February 24, 2016)
  • The National Council for Public Private Partnerships reported that the Michigan Department of Transportation indicated that it will use a public-private partnership to upgrade and maintain freeway lights in Detroit’s tri-county area. About 87 percent of approximately 15,000 antiquated lights would be replaced with LED lights. Freeway lighting partners would operate and maintain the newly installed and existing lights for 15 years. The developer will ensure that 90 percent of the new lights work after a year of installation in order to receive maximum payments. MDOT reported that the P3 project will save taxpayers money and permit MDOT to devote its maintenance resources to other projects. Economies of scale will lower equipment costs and the risk will be transferred while creating incentives to the private partner to ensure effective operation and maintenance. MDOT indicated that this is the first freeway lighting project in the country to be conducted as a P3. (National Council for Public Private Partnerships, March 10, 2016)
  • A Florida community has partnered with a private transit authority to address the absence of a bus line. The transit authority would cover half of the fare (up to a certain limit) to enhance the project. (National Council for Public-Private Partnerships Bulletin, March 8, 2016)
  • Royal Oak, Michigan has a $100 Million plan with costs split 50-50 between the public and private sector. The “central park” would replace the current city hall and police building. The city hall would be inside a 7-story office building with mixed use of restaurants and bars. The project also calls for a 6-story parking garage. (Detroit Free Press, March 23, 2016, J.C. Reindle)
  • South Carolina has recently announced a social service program financed through a P3 called “Pay for Success.” It will pair nurses with expectant mothers through the child’s second birthday. The goal is to encourage healthy pregnancies and ensure young people learn to become responsible parents. The program’s costs are paid up-front with private funding which is repaid by the government only if predetermined goals are met as considered by independent analysis. This is the new concept of “Pay for Success.” (Government Contracting Pipeline, February 19, 2016).

The above projects are examples of innovative thinking to leverage private dollars to fund infrastructure investment. The government  can manage performance of new initiatives in a rapid manner through the use of current technologies that can turn a project “on a dime.” P3 is a collaboration of government as an institution partnering with private sector capital and technologies to accomplish a project. The use of public private partnerships allows all governments to create incredible undertakings and be part of a leading edge of investment to the benefit of its citizens.