Understanding Local Public-Private Partnerships

By Ed Green
P3 Kentucky Editor

It’s been nearly two years since Kentucky passed legislation to enable more public-private partnerships, legislation that provided a road map for communities interested in pursuing such deals with private partners. Still, many communities have been slow to embrace the concept, perhaps waiting to see a P3 success story from another city or county.

In talking with leaders across the state, I believe many don’t know where to start. It’s not easy. Leaders must decide if P3s are the best way to manage, maintain and grow public assets, and the agreements can be complicated. Also, there’s no template for success.

Ed Mortimer, executive director of transportation infrastructure for the U.S. Chamber of Commerce has summed it up this way. “I like to say – If you’ve seen one P3, you’ve seen one P3.”

Here are some things to keep in mind:

Put simply, a P3 is a contract between a private firm or firms providing a service or assets to a government entity. It’s a deal that can be structured in countless ways. For local P3 projects, the law passed last year formalized the process, allowing local governments and entities to put forth their own ideas for P3 projects and potential private partners to bring ideas to the public sector through unsolicited proposals.

Finding the right partner – not just the ones with money to invest – is crucial to success. Communities across America that are successful using P3s find innovative partners who bring expertise in their fields and understand the importance of being good stewards for the public. In addition to funding, partners should bring ideas and value. If they can’t manage an asset more effectively than government, P3 may be the wrong model to consider. As Kentucky Tourism and Arts Secretary Don Parkinson told me earlier this year, “We look at P3 as an opportunity to grow state assets, to have more revenue coming in but so we don’t have the losses. We’re bringing in new people to invest and do it differently.”

Madison County Deputy Judge-Executive Colleen Chaney recently told a group meeting at the Kentucky Chamber of Commerce that finding the right match in a partner has been a critical element in their Healing Center P3 project. Chaney said getting the right deal is important to officials but also finding partners that show a willingness to be creative, flexible and patient as they work through their options is important.

What makes P3s different from most deals is that the private party assumes a greater risk associated with their investment. Private partners might make an investment upfront for the right to operate, maintain and improve public assets, such as parks, community venues or infrastructure such as water works. In all cases, the asset will be owned by the state/local governments, with risk and responsibility assumed by the private partner. The deals would include accountability measures. For example, government payments to private partners would be contingent on those partners achieving certain benchmarks. Ultimately, a wisely structured P3 deal will benefit the public.

Evaluating proposals is extremely important when considering a P3. As the state educates leaders on the new P3 process, it has outlined some good points to consider when evaluating a proposed P3 deal. The P3 law and regulations also established a process for the state to help local government ensure deals are in the public interest. If a local entity decides to issue an RFP and award a contract, the state’s Capital Projects and Bond Oversight Committee will review the deal. For Madison County Deputy Judge-Executive Colleen Chaney, that review process is a key reason leaders there were comforted enough to issue the state’s first local RFP under the new P3 law.

If, as a local leader, you’re still wondering whether your project is P3-worthy or where you can find funding, there are no simple answers. I would encourage you to browse our website to find inspiration and see how other communities have used P3. If you see a key need in your community and want to explore P3 to see what innovative ideas that private partners might have, reach out to the experts.  You can use our “Ask the Expert” feature to learn more about how to get started.

P3 Kentucky was created to educate, inspire and connect leaders with resources, so if you have a question about where to go next, please reach out: (502) 544-2917 or ed@c2strategic.com.

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