Public-private partnerships (P3s) are springing up all over the country. Simply defined, P3s leverage the private sector to provide the capital and expertise to partner with the public sector to develop and/or operate and maintain infrastructure and facilities on publicly owned land. From housing, to mixed-use developments, and broader campus improvements, the applications and justifications for P3s are broad.
This was precisely the topic of conversation at our recent higher education event at the MIT Media Lab. The event was aimed at better understanding how to make a public private partnership work for colleges and universities. In front of a room filled with institutional representatives from New England and across the country, a panel of guests from UC Merced, UMass, and Drexel University shared their experiences and lessons learned from large-scale P3 projects.
According to Patricia Filippone from UMass Building Authority (UMBA), their reason for entering into a P3 was “to keep the project off our balance sheet so it wouldn’t go against our debt and impact our credit rating.” Ultimately, the goal was to “transfer risk” for the $139 million project, which was the first ever on-campus housing development at UMass Boston and expected to provide 1,000 beds for first year students.
For Keith Orris, who works at Philadelphia’s Drexel University, the motivation and the project were much different. “We didn’t have the capital or the expertise,” he said, referring to the mixed-use development underway called Schuylkill Yards. The 14-acre parcel owned by Drexel is just steps from campus and the 3rd busiest rail station in the nation. The University envisioned creating a destination innovation district on the land, but according to Orris, “We could only do it one way, with a massive developer.”
Out west where P3s have been more readily adopted, University of California, Merced is utilizing a public-private partnership for its four-year project that will nearly double the physical capacity of the campus by 2020. According to Daniel Feitelberg, the reason for entering into this type of agreement “had nothing to do with finance but was about the long-term pro forma, with life cycle costs in mind.”
After listening to the panelists experiences and insights, much of the audience in attendance shared a similar concern – could this all be possible while still maintaining “control” of the project. The resounding answer from the panelists was “yes.” In fact, Patricia even admitted that her campus representatives entertained a P3 despite “not believing it would work because they didn’t want to give up control.” Turns out, they were able to have a loud voice at the table throughout the process and will maintain control of the building’s operations.
When asked about lessons learned, the panelists once again shared varying perspectives. Perhaps the most notable lesson came from Keith Orris who professed, “the P3 model is not just a financially-driven delivery method, it is an incredibly powerful creative opportunity.”
Please feel free to contact me with any additional questions you may have regarding public-private partnerships.