Presentation Transcript

1. WORKING TOGETHER:PUBLIC/PRIVATE PARTNERSHIPS Robert Wulff, Senior Vice President, B.F. Saul Co. Prepared for Prince George’s County Planning Staff July 18, 2012
2. WORKING TOGETHER:PUBLIC/PRIVATE PARTNERSHIPS Why are there Public/Private Partnerships Prepare for the Public/Private Partnership Public Sector Strategies and Tools
3. Why are there Public/Private Partnerships? From Public Perspective Inadequate Public Resources to Provide Public Good/Services (i.e., Lack Funding and/or Expertise) Public Use Buildings Like the One We Are in Today - Amenities - Schools and Roads TPPA and PPEA
4. Why are there Public/Private Partnerships? From Public Perspective Private Markets Not Delivering Goods/Services Deemed Important to the Viability of the Political Jurisdiction and Its Citizens Workforce Housing Public Parking Convention Center Hotel
5. Why are there Public/Private Partnerships? From Public Perspective Improve the Jurisdiction’s QOL for its Citizens by Attracting or Promulgating Private Economic Development Projects that will Produce a Public Good - Increase Jobs and Taxes at Local Level
6. Why are there Public/Private Partnerships? From Public Perspective Jobs Attract Through Public Incentives, Private Development that Would Not Otherwise Occur Taxes Promulgate Private Development on Public Land that Monetizes a Heretofore Unproductive Public Asset Which Increases the Local Tax Base - Sell/Lease Air Rights for Private Development Over a Public Building
7. Why are there Public/Private Partnerships? From Public Perspective Intervene in the Real Estate Market to Accelerate and Target Economic Development to Geographic Areas Not Experiencing Development Tools Reduce Risk/Costs Enhance Reward/Profit
8. Why are there Public/Private Partnerships? From Public Perspective Accelerate Entice Private Investment into Areas Where Normal Returns are Inadequate and Barriers to Investment TIF Financing to Build Parking Decks Around Commuter Rail Stations Target Reduce Blight and Poverty in Areas that Are Having Difficulty Revitalizing Through Normal Market Forces County ICP
9. Why are there Public/Private Partnerships? From Private Perspective Profit Profit Profit Enhanced Reputation Market Niche Corporate Citizenship Enhanced Community QOL
10. “Why PPP” Answer: But For and The Gap? From Private Perspective Gap “But For” Project Feasibility Analysis Strategies/Tools Not Easy
11. “Why PPP” Answer: But For and The Gap? Gap A. The Common Element to all PPP is the Gap Between What the Private Markets Will Produce (Given the Capital Markets’ Risk/Reward Calculations for ROI) and What the Public Sector Needs
12. “Why PPP” Answer: But For and The Gap? Gap To Make the Private Markets “Work” to Fulfill Public Needs, The Gap Must Be Closed Either by Reducing the Private Sector’s Cost/Risk, or Increasing its Profit/Rewards
13. “Why PPP” Answer: But For and The Gap? “But For” “But For” Must be Demonstrated to Justify Use of Public Funds in a Private Sector Project BUT FOR Public Funds/Involvement, Project is Infeasible and Public Benefit Will Not Be Generated
14. “Why PPP” Answer: But For and The Gap? Project Feasibility Analysis Initial and Essential Analysis Understanding the Economics of the Private Sector Project and Quantifying the Private Sector’s Gap
15. “Why PPP” Answer: But For and The Gap? Strategies/Tools Once The Gap is Verified and Quantified, There are Strategies and Tools Local Government May Use to Forge PPP
16. “Why PPP” Answer: But For and The Gap? Not Easy PPP are the Most Difficult Real Estate Projects to Design and Manage; ULI Experience Has Led to 10 Principles
17. Prepare for Public/Private Partnerships Public/Private Partnerships Growing Trend Combine Strengths and Resources of Public and Private Sectors Requires Give and Take on Both Sides for a Successful Project Replaces Confrontation with Collaboration and Cooperation for Shared Goals
18. Four Stages of PPP Stage 1: Conceptualization Stage 2: Negotiate and Document the Deal Stage 3: Prepare for Implementation Stage 4: Implementation
19. Four Stages of PPP Stage 1: Conceptualization Develop Shared Vision Select Partners Through Competitive Bid
20. Four Stages of PPP Stage 2: Negotiate and Document the Deal Project Elements Roles and Responsibilities Risks and Rewards Decision Process Implementation Process
21. Four Stages of PPP Stage 3: Prepare for Implementation Obtain Support for All Stakeholders Begin Project Financing
22. Four Stages of PPP Stage 4: Implementation Construction Leading and Occupancy Property and Asset Management
23. Ten Principles of PPP Prepare Properly for Public/Private Partnerships Create a Shared Vision Understand Your Partners and Key Players Be Clear on the Risks and Rewards for All Parties Establish a Clear and Rational Decision-Making Process Make Sure All Parties Do Their Homework Secure Consistent and Coordinated Leadership Communicate Early and Often Negotiate a Fair Deal Structure Build Trust as a Core Value
24. 1. Prepare Properly for PPP Public Role Assess Capabilities Create a Public Vision Be Legislatively Prepared Be Resourceful with Funding Have the Land Ready Manage Expectations - Ballston Partnership
25. 1. Prepare Properly for PPP Private Role Establish Feasibility Market Study Appraisal Financial Parameters Know Your Partners Get the Right Team
26. 2. Create a Shared VisionWithout a Shared Vision, the Project Will Fail Create a Vision Stakeholder “Buy-In” Give Chance for Input to All Stakeholders Hold Hearings and Charettes Involved the Media Must be Long Term - Denver Union Station Rail Yards
27. 2. Create a Shared VisionWithout a Shared Vision, the Project Will Fail Sustain a Vision Not Just a Pretty Picture Needs Implementation Strategy Determine Funding Sources Create an Agenda Outline Timeframe Market and Financial Studies
28. 3. Understand Your Partners & Key Players Public Partner Private Partner Non-Profits Stakeholders
29. 3. Understand Your Partners & Key Players Public Partner Validate Public Purpose Tools for Implementation Help with Financial Incentives and Tools
30. 3. Understand Your Partners & Key Players Private Partner Develop Expertise Financing from Private Capital Design and Marketing Construction Asset Management
31. 3. Understand Your Partners & Key Players Non-Profits Can Act as Brokers and Intermediaries Between Public and Private Interests Stakeholders Have a Right to be Heard Need to Keep Communication Going Both Ways
32. 4. Be Clear on the Risks and Rewards for All Parties Prepare for Mutual Success by Using a Balance Sheet of Risks and Rewards Deal with Risk and Uncertainty for Both Sides Identify and Understand Rewards for Each Player
33. 4. Examples of Risk Public Risks Bad Publicity Perceived Conflict of Interest Misuse of Funds Development Partner Might Fail Public Opposition Liability Impacts
34. 4. Examples of Risk Private Risks Higher Costs of Development Time Consuming Process Uncertainty About Public Sector Ability to Deliver Entitlements and Funds Perception of Excessive Profit at Public Expenses Changes in Public Leadership Untimely Leak of Private Business Information
35. 4. Examples of Rewards Public Rewards Increased Community Wealth Increased Revenues Promote City Image Job Creation Better Quality of Life Re-election of Public Officials Job Advancement for Staff
36. 4. Examples of Rewards Private Rewards Short-term Profits Long-term Value Enhanced Reputation Market Niche Community Betterment
37. 5. Establish a Clear and Rational Decision-Making Process Create Road Map of Decisions Approvals Financing Community Meetings Define Roles and Responsibilities Assign People to Committees Designate Public and Private Lead People Create Checks and Balances Hire Consultants for Technical Input Review Draft Materials Before Signing Off
38. 6. Make Sure All Parties Do Their Homework Continue Due Diligence Share Information Adopt Scenario Planning to Anticipate Possible Major Changes Pursue Creative Public/Private Finance Plants
39. 7. Secure Consistent and Coordinated Leadership Each Deal Needs a Champion Springfield Merrifield Seven Corners Richmond Highway
40. Qualities of Leadership Integrity Vulnerability Discernment Awareness Courage Sense of Humor Intellectual Energy Predictability Comfort with Ambiguity Spend Required Time for Project Management
41. 8. Communicate Early and Often Internal Communication Setup On-Going Meetings Establish Working Groups Set Goals and Timelines for Each Group Report on Progress at Each Meeting External Communication Websites Advisory Groups Neighborhood Meetings
42. 9. Negotiate a Fair Deal Structure Define What is Fair Determine How to “Get to Fair” Spend Time Understanding Term Sheet Principals Must Retain the Vision Use Objective Measures of Outcomes Hire Competent Counsel Allow Time for Negotiations Be Prepared for Long-term Partnership Be Prepared for Compromise
43. 10. Build Trust as a Core Value Build Trust Verify Qualifications Review Track Record Ensure Private Capacity Work to Create Personal Relationships
44. 10. Build Trust as a Core Value Maintain Trust Meet Performance Schedules Build Personal Relationships Find Methods of Communication Work to Understand Others’ Perspectives Develop Mutual Goals Be Open to Changing Conditions
45. Public Sector Strategies and Tools Strategies and Tools to Stimulate Private Investment in Local Economic Development for the Public Good Strategies Local Governments Public “Equality” Investments Public Debt Financing Non-Financial Public Assistance
46. Public Sector Strategies and Tools Strategies Reduce Projects’ Costs e.g. Cost of Construction, Land or “Equity” Absorb Need for New or Improved Infrastructure Public Role/Benefits Go Beyond Reducing Project Costs Lower Project’s Operating Expenses Taxes and Debt Services
47. Public Sector Strategies and Tools Strategies Reduce Project’s Predevelopment Risk Minimize Political and Regulatory Uncertainty Enhance Availability of Private Capital for the Public/Neighborhood Public Partner Can Improve Access to Debt/Equity
48. Public Sector Strategies and Tools B) Strategies Public “Equity” Investment Land Assembly/Acquisition to Include Demolition and Relocation Capital Improvements: Infrastructure, Parking, Open Space, Streetscapes, Amenities, etc. c. Grants
49. Public Sector Strategies and Tools Local Government Tools 2. Public Debt Financing a. Inter-government Loans CDBG, Section 108, etc. b. Local Debt Financing Go Bonds, Revenue Bonds, IRB’s c. Off-Budget Financing Lease/Purchase Agreements, Ground Leases, Property Tax Abatements, and Land/Building Swaps d. Dedicated Sources of Local Funds CDA’s TIF, Reuse of UDAG Loan Pay Backs, and Housing Trust Funds
50. Public Sector Strategies and Tools Local Government Tools 3. Non-Financial Public Assistance a. Zoning and Density Bonuses b. TDR (Transfer of Development Rights) c. TAR (Transfer of Air Rights) d. Regulatory Relief - Set Backs, Green Space, Height Limits, Building Codes
51. Summary Public and Private Cooperation Based on Mutual Understanding Heart of the Deal Closing the Deal Public Tools Used to Cut Capital Costs or Improve Operating Income