Public-Private Pitfalls

Written by Nick Powell on . Posted in Real Estate/Construction, Transportation.

Kenneth Adams, Gov. Andrew Cuomo’s top economic development official, pointed out the benefits as well as the risks of public-private partnerships. (Photo by Aaron Adler)

At a City & State panel on public-private partnerships (P3s) last month, the conversation ranged from the procurement process for private sector firms to the advantages of P3s as an economic development tool. But there are still a number of improvements that can be made to the P3 process, especially where public money is involved, current and former government officials pointed out.

Because New York law only authorizes the “design-build” projects—in which the private sector bids either on the opportunity to design and build a new facility or for an operation and maintenance contract on an existing facility—the brunt of a P3 project’s cost inevitably falls on the backs of taxpayers. This runs counter to the common misperception that P3s are “money from the heavens,” as Seth Pinsky, the former president of the New York City Economic Development Corporation, put it.

“One of the things that frustrated me at EDC was how expensive everything was,” Pinsky said during the panel discussion. “The people designing our projects didn’t actually have to build those projects. There were no consequences for the additional expenses they put into those projects that made it more difficult for those projects to be carried out.”

Kenneth Adams, president and CEO of Empire State Development, added that any P3 project depends a certain amount on public trust, which requires transparency. He mentioned Chicago’s deal to privatize parking meters as an example of public trust gone awry. Former Mayor Richard Daley rammed the $1 billion deal through the City Council without releasing many details to the public.

“In the case where, through a concession agreement, you are doing some lease on a public asset … you are committing a government asset to a private enterprise in order for them to finance the project,” Adams said. “For the public to support that, you’ve got to have the trust, the credibility. Government can’t do this and grab the money and spend it on something else.”

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