New, innovative concepts always breed skepticism. If the concept involves public officials and money, there is even more doubt, cynicism and scrutiny.
That’s the environment in America today where public-private partnerships are analyzed and evaluated. There is a general lack of understanding about such partnerships despite the fact many describe them as the best funding option available in America today for large public projects.
This type of collaboration has the potential to deliver an immediate positive impact to the country’s economic prosperity. The Great Recession resulted in huge cuts in federal and state revenues and in cities and counties. Educational systems, especially, have had budgets slashed. Public-private partnerships offer an attractive source of funding as well as private-sector expertise. The trend toward them is sweeping the country.
Lawmakers in 33 states have passed statutes that provide encouragement and basic guidelines for such collaborations. Cities, counties and state agencies can no longer kick the can down the road when it comes to maintaining and building new roads, constructing new schools and widening and deepening port channels. America must also launch public projects to ensure safe and adequate drinking water, conserve energy, provide upgrades to public health care facilities and expand rural broadband Internet networks.
So, taxpayers should make an effort to understand public-private partnerships.
When a public entity is ready to launch a large project and there is no funding, a private source of capital is often required. Numerous highly specialized firms are interested in government engagements, so competition is keen. Public officials are able to carefully select the type of partner they require. Outside companies are willing to put up the capital required for a project, accept the risk and enter into agreements with public officials to design, build, finance, maintain and occasionally even operate new facilities or systems.
A contractual agreement between the partners sets benchmarks for success. Public officials oversee the private-sector partner and ultimately own the new facility or system. Almost always, however, there is a period when the private-sector partner is responsible for maintenance and/or operation with oversight from government officials.
Public-private partnerships offer many benefits. Projects that otherwise would languish can be started immediately. And while all large projects have some degree of risk, in a public-private partnership, risk gets shifted to the private-sector partner. Transparency is mandatory. The governmental entity owns the new facility after the initial investment is repaid. Additionally, new jobs are created, and a region’s economic vitality is boosted.
Not all public-private partnerships are successful. Most are. Such partnerships are gaining traction with decision-makers at all levels of government. One-time skeptics are quickly becoming advocates. This is a trend worth watching.
Mary Scott Nabers is president and CEO of Texas-based Strategic Partnerships Inc.
