Public/Private Partnerships: More than Money

Written by: Frank F. Turner, FAICP, Urban Opportunity, Principal

Southern Land Company consultant on the public/private partnership between SLC and the City of Plano.

I once heard a developer say that a public/private partnership is nothing more than getting government to pay a portion of the project’s cost. True, most public/private partnerships do involve public financial participation, but most partnerships are far more complex than the mere contribution of public funds.  For discussion, let’s consider a public/private partnership to be a written agreement between public and private entities enabling a project through an exchange of considerations.  There are two important underlying principles to public/private partnerships.  First, the project should serve a substantial public purpose or need.  Second, all but for the agreement, the project would not occur or be otherwise feasible. Both principles are central to ensuring public confidence that the partnership is nothing more than favoritism or an improper gift of public funds.  Although simple concepts, adherence to principles can be hard to validate.

Early American history has many examples of public/private partnerships including the development of railroads, canals and turnpikes. Public/private partnerships are still used to build major public infrastructure projects and facilities.  Public/private partnerships are also frequently used to promote economic development.  My focus is on the more recent use of public/private partnerships to stimulate urban and neighborhood revitalization.

American cities have traditionally depended on planning, regulation and capital improvements to shape their form and to direct growth.  Private developers and businesses initiate most land development; government regulates development and provides core services.  This model has successfully expanded cities and metropolitan areas, yet it has not served well to maintain or foster reinvestment in older commercial and residential areas.  All too often, aging development enters a spiral of economic and social decline.  Both public and private sectors see the needless waste and associated pathology of urban decay, but generally neither alone has the capacity to reverse this process. Following WWII, American cities experienced rapid suburban expansion further accelerating the urban disinvestment that occurred during the depression and war.  Through urban renewal and similar programs, cities sought to clear and rebuild their core urban areas.  Today, these programs are judged to have heavily damaged the heritage and character of cities and failed to attract private investment.

Today, public/private partnerships are being used to incentivize private reinvestment to the benefit of the existing built environment.  Plans and projects are developed in a collaborative process involving the city, developers and the community.  Often reinvestment zones are designated and strategies are employed to increase and diversify housing, generate economic activity, revitalize neighborhoods and create pedestrian/transit-oriented development.  Revitalization requires multiple partnerships conducted over an extended period. Each partnership project builds on previous success until normal market investment processes are restored.

The scale of this kind of public/private partnership ranges from small adaptive reuse projects to major brownfield redevelopment.  Regardless of scale, these partnerships are complicated and require more than public money and developer expertise.  Successful revitalization begins with creating a shared vision among city, community, business leaders. A detailed plan for the area is not needed; opportunity requires flexibility and the details will follow as specific projects materialize.  The city (elected officials and staff) must become educated on the development process.  Each project will have its unique needs (e.g., land assembly, utilities, regulatory adjustments, hazardous materials, front-end costs, capital and taxes) and the city must be knowledgeable to negotiate workable development agreements.  Developers need to understand community and broader public objectives.  Development plans must be context sensitive and address issues such as impacts on adjacent properties, parking and affordable housing.  Neighborhood residents and local business owners must become educated on development economics and considerations of density and design.

Public/private partnerships blur the lines that typically separate government and developers.  Negotiating successful projects requires time and an openness not commonly found in development.  Both sectors must consider new metrics for measuring private risk and reward, and public benefits and costs.  Public/private partnerships are often tied to a competitive process for developer selection.  All too often, cities require prospective developers to submit a detailed proposal to measure against ranking criteria.  This may be appropriate for some projects, but I prefer a selection process that focuses on the developer’s qualifications, specially their experience in creating partnerships and understanding the community and project objectives.  The pretty renderings come later.

There are many good resources for learning about public/private partnerships.  Two that I frequently recommend are:  Public/Private Finance and Development, by John Stainback, John Wiley and Sons, Inc. and Ten Principles for Successful Public Private Partnerships, Urban Land Institute.