So, I said I would get back to you on the Manhattan conference on “The Private Role in Public Infrastructure” that I attended Thursday. That was, coincidentally, on the day Gov. David Paterson was establishing the “New York State Commission on State Asset Maximization” to study potential public-private partnerships for the state.
So, what did I find out? Lots. What about specifics for New York? Little.
Will a new Tappan Zee Bridge be the state’s big foray in public-private partnerships? Will it be built by, and leased to, a private entity? Could be.
Is that a bad thing? Is that a good thing? Could be.
The Manhattan Institute, a policy think tank, put together quite a panel of leading stars in the public-private partnership world. Those deals that have private entities involved in public infrastructure (from roads to hospitals to airports) are often called PPPs or the techno-cute P3 — makes them sound less scary, no? The U.S. lags behind other countries in using these kinds of partnerships, but new ideas for projects are popping up — with mixed success. Participants at Thursday’s conference in Midtown didn’t agree on the formula for success for a project, or even the same concerns about the risks and limitations of such partnerships. But, almost all agreed on what it took to make public private partnerships an option: Strong political will.
Does Paterson have it? The governor has been almost ruthless in cutting costs to tame a multi-billion-dollar deficit that will only grow as Wall Street retreats. He’s hardly shied away from tough decisions, like vetoing 171 pieces of legislation since June, even bills that would have provided services that would improve New Yorker’s lives, because they would add $531.7 million to state budget costs over the next two years. But he’s yet to get state legislators on board with real property tax reform. While just the act of forming such a commission in the first place shows he’s willing to change the way state government does business, it’s a real question if Albany is capable of the complex and careful negotiations such partnership deals entail.
Of course, the biggest fish in the state’s sea of infrastructure needs is the recently announced plan to build a new Tappan Zee Bridge, plus adding much-needed public transportation to the Interstate 287 corridor. The project now carries a whopping $16 billion price-tag, with no state or federal money committed to it.
Samara Barend, the executive director Paterson’s newly minted state panel, was at The Manhattan Institute to talk about New York’s take on PPPs. Barend was purposefully vague on details. But she did raise the idea of the state using a popular public-private partnership formula for the Tappan Zee replacement. “A build-operate-transfer project? Could be,” she said during her speech.
Build-Operate-Transfer agreements (again, they get a nonthreatening acronym, BOTs) has a private entity finance, design, construct, and operate a facility for a certain period, collecting tolls, fees or rentals for that time period to recoup its investment. When that period ends, ownership is transferred back to the government.
“The governor has not said we have to have privatization,” Barend told the Manhattan Institute gathering, but rather wants the panel to “look to see whether or not it’s right for New York state.”
The luncheon keynote speaker was U.S. Secretary of Transportation Mary Peters. She’s a big fan of PPPs, and congestion pricing, and auctioning landing slots, and just about any other way to use private market models in the public sector. She, of course, lauded the speakers, and New York’s foray into exploring PPPs. She said that by being slow to embrace the concept of PPPs, Americans are hurting our “ability to compete worldwide” because our infrastructure is weak. She said we’re putting “the brake, rather than accelerator, on our economy.”
Not everyone, though, gathered Thursday was as eager to tell New Yorkers just to sign on the dotted line.
“There’s no cookie-cutter contract; each is idiosyncratic,” said Jose A. Gomez-Ibanez, a Harvard professor of Urban Planning and Public Policy considered a leading expert on the PPP concept.
Balance that, though, with the Manhattan Institute’s E.J. McMahon’s observation that New York City and state are the “best case study on how not to address infrastructure needs.”
Then there’s the governor’s own words: “Public-private partnerships are not the only answer, but we need to honestly assess whether they can be part of the solution.”
The takeaway? Proceed, yes, but with caution.