An Initiative A Day 9.1: Study privatization and public-private partnerships as means to fund critical infrastructure projects that cannot be funded solely through public dollars.

March 21, 2014 in Vibrant NEO 2040, Vision

On February 25, the NEOSCC Board voted unanimously to approve and endorse the Vibrant NEO 2040 Vision, Framework and Action Products.  We are sharing an “Initiative A Day” so you can gain a better understanding of the vision and framework!  If you would like to read all of the Initiatives, you can download them here: Recommendation and Initiatives.  You can access a pdf of the entire vision chapter here.  The vision chapter contains all 41 initiatives, development strategies, indicators, and matrices that identify how the recommendations, initiatives and indicators all relate.

Show your support for Vibrant NEO 2040 by adding your name to our Champions of Vibrant NEO 2040 list here.

Initiative 9.1: Study privatization and public-private partnerships as means to fund critical infrastructure projects that cannot be funded solely through public dollars.

WHAT THIS MEANS. Cities and counties are caught between two fiscal fires. On the one hand, the recession has led to depressed revenues; on the other, investment needs are accruing rapidly. Compounding this difficult situation is the mounting cost of planning, constructing, and maintaining physical infrastructure, acutely felt at a time when regional economies are just emerging from recession. It is not surprising that, under these circumstances, many local governments are looking to partnerships with private organization to fill financial gaps and keep cities running. The Vibrant NEO 2040 regional visioning process recommends initiatives and projects that will require significant investment and involve considerable regulatory and jurisdictional complexity.

Image from Denver’s FasTracks Campaign

Transportation is a sector that is particularly well suited for privately-led or public/private partnerships. Northeast Ohio is not unfamiliar with public-private partnerships, having relied on this tool to develop sports facilities and spur the redevelopment of the Euclid Corridor in Cleveland. Partnerships on a regional scale, though not found in Northeast Ohio, are to be found at the state and regional level in other parts of the country. These examples may serve as models for implementing the Vibrant NEO 2040 Vision and Framework. One such state-level model is Virginia’s Office of Transportation Public-Private Partnerships. Most are at a regional or municipal scale, though, including the Denver Regional Transit District (RTD)’s FasTracks Light Rail expansion project and a proposed concession agreement between the Chicago Transit Authority and Goldman Sachs to leverage funds for needed upgrades to the Red Line elevated train.

The case of Denver’s FasTracks initiative warrants particular attention. Facing a multi-billion dollar capital shortfall for its West Side light rail transit line, the RTD opted to enter into a build-operate-maintain agreement with a private consortium of funders. The agreement, which leveraged $1.3 billion of up-front private for the $2 billion project, is expected to yield returns of $4 billion over the course of the 40-year contract.

WHY THIS IS IMPORTANT. The region should consider and study options for fully or partially privatizing construction and maintenance of certain infrastructure, particularly new capital investments that are developed in follow-on planning efforts to Vibrant NEO 2040. This is not a proposition to approach lightly; major questions regarding fiscal benefit, social equity, and security are involved. Chicago’s failure to perform adequate due diligence when privatizing the city’s parking meters will end up costing taxpayers dearly over a long time.

GETTING IT DONE. The decision to privatize or engage in PPP on infrastructure rests with the entity (entities) having jurisdiction. The barriers to structuring a PPP are many: in determining feasibility for a private partner plus long-term costs and benefits for the jurisdiction; legal restrictions on the jurisdictional entity’s contracting powers; and political (especially voter) sentiment. In the transportation sector, where PPP is most common, the Ohio Department of Transportation can assume a leading role in developing a PPP model for the state, scaling up its existing Division of Innovative Delivery to define best practices and standards.

Lead Ohio Department of Transportation; Municipalities, Townships, Counties
Target Community Strategic investment areas, asset risk areas, cost risk areas
Implementation Complexity Moderate

 

These recommendations, initiatives, and products, are not one-size-fits all and some aspects of the initiatives won’t be applicable everywhere in the 12-county region. The Vibrant NEO 2040 Vision, Framework and Products are intended inspire and guide decision-making at the Metropolitan Planning Organization (MPO), Council of Government, and local levels to ensure that land use, transportation, and environmental considerations are simultaneously addressed by their processes. Ultimately, the implementation of Vibrant NEO 2040 is up to Northeast Ohio’s communities and residents. But regardless of the applicability of each initiative to any particular part of the region, the goal for each community within the Vision is the same: stability, prosperity, and a high quality of life for all of its residents.

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