In March 2012, the ULI Center for Capital Markets and Real Estate and the ULI Rose Center for Public Leadership in Land Use jointly gathered more than 20 public and private leaders with recent involvement in public/private partnerships for the purpose of investigating the current economy’s influence on financing and structuring these partnerships. Innovative Public/Private Partnerships and Finance, the 2012 ULI Charles H. Shaw Forum on Urban Community Issues, explored innovations, successes, and challenges.
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 public/private partnerships. Related issues that are critical to address—although they are outside actual public/private partnerships—include the following: 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 public/private partnership (P3) 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—once again—rightfully taking place and both the public and private sectors must be ready to answer questions and provide supporting information. It is also an essential component in regaining the trust of the community and overcoming its skepticism.
- The “disconnect” between the vision held by the community and that held by the public leadership can be substantial and negatively affect the nature, scope, and timing of any P3 being considered. Perhaps 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 P3 is an impediment when a partnership is being negotiated. The ability to use standard metrics to assess proposals and agreements would go far for transparency, but also would help streamline the process and quickly clarify outcomes.
- The entitlement process is something that the public sector can easily—and at little cost—take on to remove some of the risk facing a developer. When it is not done before a request for proposals (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 a request for qualifications (RFQ) and then an RFP are used, would further reduce some of the risk.
- An entirely fresh recommendation regarding public/private partnerships came at the conclusion of the forum and struck a chord among a number of participants: The private sector, in the role as civic leaders, would take the lead in setting the vision for large areas of a city, or even the entire city. The private sector has the resources to take on this role and the capacity to engage the entire community at a time when public resources and capacity are limited. This paradigm is essentially the reemergence of a historically traditional role, one that has been recently and successfully implemented once again. Participants urged that discussion and promotion of this concept be continued within ULI.
Other recommendations for ULI to pursue include:
- Continue the conversation started at the forum as a mechanism to quickly identify and disseminate innovations as they occur.
- Develop standard metrics to assess the validity and benefits of a P3.
- Catalog innovations; provide details of best practices as an education tool.
- Consider strategic alliances with financial institutions, community groups, and public agencies to pursue the goal of demystifying P3s.
- Engage in an education process for citizens, public officials, and public staff on the transactional nature of P3s, to improve transparency and remove resistance based on suspicion.
- Publish an updated Ten Principles of P3, as completed by the Council.
Other Case Studies
The city of Dublin, Ohio’s transformation through private sector development, guided by public sector vision. Cooper Cary PDF
The importance of community involvement and the challenges that remain. Jersey City Redevelopment Agency PDF
A unique application of tax increment financing (TIF). Fiol.Silva PDF