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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. WORKING TOGETHER: PUBLIC/PRIVATE PARTNERSHIPS. Why are there Public/Private Partnerships

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    working together public private partnerships
    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

    working together public private partnerships1
    WORKING TOGETHER:PUBLIC/PRIVATE PARTNERSHIPS
    • Why are there Public/Private Partnerships
    • Prepare for the Public/Private Partnership
    • Public Sector Strategies and Tools
    why are there public private partnerships
    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
    why are there public private partnerships1
    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
    why are there public private partnerships2
    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
    why are there public private partnerships3
    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
    why are there public private partnerships4
    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
    why are there public private partnerships5
    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
    why are there public private partnerships6
    Why are there Public/Private Partnerships?
    • From Private Perspective
    • Profit
    • Profit
    • Profit
    • Enhanced Reputation
    • Market Niche
    • Corporate Citizenship
      • Enhanced Community QOL
    why ppp answer but for and the gap
    “Why PPP” Answer: But For and The Gap?

    From Private Perspective

    Gap

    “But For”

    Project Feasibility Analysis

    Strategies/Tools

    Not Easy

    why ppp answer but for and the gap1
    “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
    why ppp answer but for and the gap2
    “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
    why ppp answer but for and the gap3
    “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

    why ppp answer but for and the gap4
    “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

    why ppp answer but for and the gap5
    “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

    why ppp answer but for and the gap6
    “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

    prepare for public private partnerships
    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
    four stages of ppp
    Four Stages of PPP

    Stage 1: Conceptualization

    Stage 2: Negotiate and Document the Deal

    Stage 3: Prepare for Implementation

    Stage 4: Implementation

    four stages of ppp1
    Four Stages of PPP
    • Stage 1: Conceptualization
      • Develop Shared Vision
      • Select Partners Through Competitive Bid
    four stages of ppp2
    Four Stages of PPP
    • Stage 2: Negotiate and Document the Deal
      • Project Elements
      • Roles and Responsibilities
      • Risks and Rewards
      • Decision Process
      • Implementation Process
    four stages of ppp3
    Four Stages of PPP
    • Stage 3: Prepare for Implementation
      • Obtain Support for All Stakeholders
      • Begin Project Financing
    four stages of ppp4
    Four Stages of PPP
    • Stage 4: Implementation
      • Construction
      • Leading and Occupancy
      • Property and Asset Management
    ten principles of ppp
    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

    1 prepare properly for ppp
    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
    1 prepare properly for ppp1
    1. Prepare Properly for PPP
    • Private Role
    • Establish Feasibility
      • Market Study
      • Appraisal
      • Financial Parameters
      • Know Your Partners
      • Get the Right Team
    2 create a shared vision without a shared vision the project will fail
    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
    2 create a shared vision without a shared vision the project will fail1
    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
    3 understand your partners key players
    3. Understand Your Partners & Key Players

    Public Partner

    Private Partner

    Non-Profits

    Stakeholders

    3 understand your partners key players1
    3. Understand Your Partners & Key Players
    • Public Partner
    • Validate Public Purpose
    • Tools for Implementation
    • Help with Financial Incentives and Tools
    3 understand your partners key players2
    3. Understand Your Partners & Key Players
    • Private Partner
    • Develop Expertise
    • Financing from Private Capital
    • Design and Marketing
    • Construction
    • Asset Management
    3 understand your partners key players3
    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
    4 be clear on the risks and rewards for all parties
    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
    4 examples of risk
    4. Examples of Risk
    • Public Risks
    • Bad Publicity
    • Perceived Conflict of Interest
    • Misuse of Funds
    • Development Partner Might Fail
    • Public Opposition
    • Liability Impacts
    4 examples of risk1
    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
    4 examples of rewards
    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
    4 examples of rewards1
    4. Examples of Rewards
    • Private Rewards
    • Short-term Profits
    • Long-term Value
    • Enhanced Reputation
    • Market Niche
    • Community Betterment
    5 establish a clear and rational decision making process
    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
    6 make sure all parties do their homework
    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
    7 secure consistent and coordinated leadership
    7. Secure Consistent and Coordinated Leadership
    • Each Deal Needs a Champion
      • Springfield
      • Merrifield
      • Seven Corners
      • Richmond Highway
    qualities of leadership
    Qualities of Leadership
    • Integrity
    • Vulnerability
    • Discernment
    • Awareness
    • Courage
    • Sense of Humor
    • Intellectual Energy
    • Predictability
    • Comfort with Ambiguity
    • Spend Required Time for Project Management
    8 communicate early and often
    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
    9 negotiate a fair deal structure
    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
    10 build trust as a core value
    10. Build Trust as a Core Value
    • Build Trust
    • Verify Qualifications
    • Review Track Record
    • Ensure Private Capacity
    • Work to Create Personal Relationships
    10 build trust as a core value1
    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
    public sector strategies and tools
    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
    public sector strategies and tools1
    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
    public sector strategies and tools2
    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
    public sector strategies and tools3
    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
    public sector strategies and tools4
    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

    public sector strategies and tools5
    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
    summary
    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