Public Private Partnerships

Part
01
of five
Part
01

Public-Private Partnerships: Education

Some successful examples of case studies of US public-private partnerships in education are Northland Innovation Campus, Texas A&M University - Park West, and Wayne State University Campus Housing. We have provided the details below and in rows 3-5, columns A-H of the attached spreadsheet.

Case Study #1: Northland Innovation Campus

Strengths

  • The Northland Innovation Campus is designed to "advance learning for students from kindergarten through post-secondary education."
  • The building also uses sustainable and WELL building design approaches which offer maximum transparency without the need to compromise its energy efficiency.

Weaknesses

Case Study #2: Texas A&M University - Park West

  • Texas A&M University - Park West project is a public-private partnership between Texas A&M University Systems and Servitas, with the purpose of expanding access to the university's student housing and to increase the physical capacity.
  • The Texas A&M University - Park West is an "on-campus, mixed-use, Class A student housing community on Texas A&M University System land in College Station."
  • Its construction started in July 2017 and was completed in August 2017.
  • The project's total development cost for development was about $371 million, and is "expected to generate a revenue of about $600 million for Texas A&M University over the term of the ground lease."

Strengths:

Weaknesses

Case Study #3: Wayne State University Campus Housing

  • The Wayne State University Campus Housing project is a public-private partnership between Wayne State University and Corvias Campus Living, the student housing division of Corvias, with the purpose of fulfilling the increasing demand of existing and incoming students to live on the Midtown campus.
  • It is a 40-year, $307.5-million partnership to develop 841 new beds, renovate 370 existing beds, and manage all of Wayne State University's 2,654 existing beds on campus.
  • The partnership also includes 9,000 square feet of Campus Health Center and more than 17,000 square feet of new retail space.
  • Corvias will be responsible for the "maintenance, janitorial, repair, and replacement services for all housing on Wayne State University's campus."
  • The Anthony Wayne Drive Apartments' development started in 2017 and concluded on August 2018.

Strengths

Weaknesses:

Part
02
of five
Part
02

Public-Private Partnerships: Parks

The City of New York and an independent agency named, Central Park Conservancy developed and maintain the Central Park of New York, in a public-private partnership venture. Details of this partnership as well as two other partnerships have been provided in the attached spreadsheet.

Case Study 1: New York Central Park

  • The City of New York and an independent agency named, Central Park Conservancy developed and maintain the Central Park of New York, in a public-private partnership venture.
  • During the 1980s, the financial condition of the City of New York was grim and hence the public-private partnership was formed to improve the way the park was maintained and also to make the park operations more effective.
  • In 1993, a memorandum of understanding (MOU) was signed and in 1998, it was superseded by a contract that officially recognized the Conservancy as the entity responsible for the management of the Central Park.
  • The written MOU developed from many years' experience and a successful track record between the partners is one area of strength of this partnership.
  • One weakness of this partnership is that the operational spending remains high; the Conservancy has had an operating loss of $34 million in the fiscal year, 2016.

Case Study 2: the Crescent Moon/Red Rock Crossing Recreation Area in Sedona, Arizona

  • The Crescent Moon/Red Rock Crossing Recreation Area in Sedona, Arizona is run by the US Forest Service in Arizona and Recreation Resource Management (RRM), a private company, based on a public-private partnership.
  • The park operations were handed over to Recreation Resource Management (RRM) in 1994 and it is a P3 partnership.
  • According to a study conducted by Recreation Resource Management (RRM) in 2011, the partnership is bringing in annual revenue of about $45,000 to the US Forest Service whereas a nearby government-run park is making huge losses.
  • A blog on Sedona describes the Crescent Moon/Red Rock Crossing Recreation Area, particularly, the Crescent Moon Ranch, which is a part of the park, as a place where if one wants to stay, one has to make booking months in advance, suggesting that the partnership is a real success.
  • There is a traffic infrastructure problem looming over the project.

Case Study 3: The South Rim of The Grand Canyon National Park

  • This South Rim of The Grand Canyon National Park is run by Xanterra Travel Collection, a private company under a Concession agreement with The US National Park Service.
  • The contract is one of the largest in the park service history "in terms of revenue and lodging inventory."
  • The services under the contract annually generate about $66 million in revenue, according to the National Park Service.
  • The contract enabled the park to have a "re-constructed Maswik South Lodge, improve food offerings including food trucks, and other improvements to operations and services."
  • The park officials had to reduce the franchise fee to attract this public-private partnership.
  • In 2014, the National Park Services had to borrow $50 million from other national parks to buy down the $100 million financial interest Xanterra had accumulated over the decades by investing in the South Rim's concessions infrastructure, which can be a recurring problem in the future as well.

Research Strategy:

The research team could not find a third case study on public-private partnerships in park development in the US, therefore, we broadened the search to a slightly different kind of PPP, which is described as concessions. Deloitte states that "Concession is part of the extended category of public-private partnerships." Deloitte also explains the difference between concessions and PPPs in the following words- "concessions of works and services, as well as the public-private partnerships, are instruments allowing the cooperation between the public and private sector for the purpose of developing public interest objectives or performing public interest services." As such, we have assumed that a concession agreement can be viewed as very close in principle and operations to a PPP, and hence included a concession partnership between the public and private sector in running a park in the US, among the 3 case studies list.

To find out the strengths and weaknesses of the Crescent Moon Park PPP, we had to be creative as no direct information was forthcoming after an exhaustive search of the public domain. We had to make deductions from other sources which points to the park's success. We have also had to use sources beyond Wonder's two-year standard as they provided more details about some of the partnerships.
Part
03
of five
Part
03

Public-Private Partnerships: Gaming

Illinois and Northstar Lottery Group, Indiana and GTECH Corporation, and New Jersey and Northstar New Jersey Lottery Group are some examples of successful US public-private partnerships in the gaming industry. While all three deals earned large revenues, they shared the same weakness of unrealistic expectations. The relevant details have been provided in rows 9–11 and column A–H of the attached spreadsheet.

Illinois and Northstar Lottery Group

DESCRIPTION AND PARTIES INVOLVED
STRENGTHS
WEAKNESSES

Indiana and GTECH Corporation

DESCRIPTION AND PARTIES INVOLVED
  • State Lottery Commission of Indiana and GTECH Corporation partnered for expanded lottery marketing, sales, customer service, and distribution services in October 2012.
  • This 15-year agreement is expected to generate an increased revenue of $2.1 billion.
STRENGTHS
WEAKNESSES

New Jersey and Northstar New Jersey Lottery Group

DESCRIPTION AND PARTIES INVOLVED
STRENGTHS
  • Despite failing to meet the targets, lottery spokeswoman Judith Drucker said that the lottery is still better off with Northstar implementing sales, marketing, and advertising service compared to state employees.
  • This was backed up by lottery director Carole Hedinger who said that "the state has put a good face on the numbers" and she was "extremely pleased with the lottery's management."
  • The company is currently on pace to hit the $1.4 billion profit despite sales slump.
WEAKNESSES
Part
04
of five
Part
04

Public-Private Partnerships: Information Technology

Examples of case studies of successful US public-private partnerships in information technology are Threat Intelligence Sharing Platform (TSIP), the Neighbors Law Enforcement, and the Advanced Technology Program. The requested information about these IT partnerships—the names of partners, partnership description, purpose, strengths, and weaknesses—have been added in rows 12 to 14, columns A to H, in the spreadsheet attached. Below are some highlights of our findings.

THREAT INTELLIGENCE SHARING PLATFORM (TSIP)

  • The Department of Homeland Security (DHS) funded an LA-based non-profit organization to develop the Threat Intelligence Sharing Platform (TSIP) to help small private and public organizations fight against malware and phishing attacks.
  • Two of the most visible partners are the US Department of Homeland Security and LA Cyber Lab.
  • One of the strengths of the project is that it resulted in two initiatives that tackle phishing and malware attacks: a web portal for sharing threat data and a mobile application that helps small businesses prevent email-based attacks.
  • However, the mobile application developed for the platform is only limited to two mobile phone operating systems: Android and iOS. This means users of phones with other OS cannot take advantage of the platform.

NEIGHBORS LAW ENFORCEMENT

  • Neighbors Law Enforcement is a project between over 400 police forces and Ring, an Amazon company, that aims at giving access to millions of video footage acquired from Ring's doorbell cameras to law enforcement officers to aid them in investigations and solving crimes.
  • Law officers have to request to gain access to these videos, which is considered a plus to the project.
  • However, there are concerns that the project threatens civil liberties and has the potential to turn residents into informants and innocent people going about their businesses could easily be labeled suspicious.

THE ADVANCED TECHNOLOGY PROGRAM

  • This is a partnership program between the Department of Commerce's National Institute of Standards and Technology and US business in high-risk research to develop technologies that facilitate the economic growth of the US.
  • The program has a very strict selection process that ensures that only technically feasible and commercially beneficial projects are selected.
  • Although the selection process is effective, the program has no provision to make sure that all the projects are successfully completed.
Part
05
of five
Part
05

Public-Private Partnerships: Best Practices

The best practices for ensuring a successful public-private partnership in the United States are creating relationships, making a fair deal, proactive predevelopment, creation of a shared vision and public purpose, and sharing risk and reward.

1. CREATING RELATIONSHIPS

  • Regulatory requirements can make the establishment of relationships between private and public entities complex and risky for both sides. The level of motivation between public and private entities is different.
  • The entities in the public sector are primarily focused on the avoidance of risk and failure, while the private sector entities are concentrated on achieving the highest cost while minimizing cost.
  • Establishing a solid working relationship is important in bridging the divide that exists, thereby ensuring a successful partnership of public and private entities.

2. MAKING A FAIR DEAL

  • Entities in the public sector should not place public resources into a deal that is required to provide returns to investors while meeting public objectives.
  • Public funds are a fiduciary duty for public officials and knowing where the balance is brings the need for full disclosure and seriousness for the private and public sectors respectively. This requirement of is fulfilled through extensive gap analysis of structure and need.

3. ENGAGEMENT IN PROACTIVE PREDEVELOPMENT

  • The process of predevelopment is complex, time-consuming, risky, and costly.
  • In PPPs, there are unique challenges that are not experienced in conventional transactions of development, and therefore, can be more time-consuming and costly. In most cases, the risks are difficult for the private sector to bear, and the public sector may not be sure of the outcome of the partnership.
  • In this regard, it is important for the entities to have a detailed understanding of the necessities for the facility and its operations.

4. CREATION OF A SHARED VISION AND PUBLIC VISION

  • In PPPs, there is a mixture of private and public funding, and this brings the need for an engagement between the sectors and correspondence of their agendas and purposes.
  • The processes that lead to a shared vision demand additional expenses, time and a skillful political touch.


5. SHARING RISK AND REWARD

  • In ensuring successful PPP, it is challenging to arrive at a comfortable agreement on the ways of sharing rewards and risk. It is important for the public sector to appreciate the adverse effects of risk and comprehending the plan of how risk will be remunerated.
  • Therefore, to overcome the barriers, the public and private sectors need to understand the transaction from each other's viewpoints.

Research Strategy:

There are numerous practices for ensuring a successful PPP in the US. Our focus was on the best and most recent ones. We ensured that we searched for expert information for 2017, 2018, as well as those featured in 2019. To identify the most relevant practices, we consulted articles and informative sites such as UrbanLand, Yale, HBR, Investopedia, and StrongTowns. To ensure they were the best methods, we picked those with more than three mentions across different sources. Based on these resources, we identified the best practices, including creating relationships, making fair deal, proactive predevelopment, creation of a shared vision and public purpose, sharing risk and reward, as well as assessment of fiscal effects and benefits to the community.
Sources
Sources

From Part 03
Quotes
  • "In announcing the contract, Illinois officials noted that the deal is expected to generate $4.8 billion for the state through 2016, a $1.1 billion increase over the revenues projected under state management. The results after the first year in operation were more mixed, as Northstar fell short of its $822.8 million first-year revenue target (something Northstar attributes to certain state actions that limited its ability to execute parts of its business plan)."
  • "In October 2012, the State Lottery Commission of Indiana selected GTECH Corporation in a procurement for expanded lottery marketing, sales, customer service and distribution services. The state has signed a 15-year agreement projected to generate an additional $2.1 billion for the state over the life of the contract (relative to in-house operation), increasing the Hoosier Lottery’s use of contracted services from 88 percent to 95 percent of total operations."
  • "The administration of Pennsylvania Governor Tom Corbett launched a procurement in 2012 for a potential lottery PMA designed to maximize lottery revenue to the state, which is used to fund programs that benefit the Commonwealth’s senior population."
  • "In return for a 20-year contract to manage day-to-day lottery operations, Camelot would commit to increasing net lottery revenue to the state, with a minimum guaranteed amount of $34.6 billion over the full contract term, an amount reflecting a significantly higher growth rate than the state has delivered over the last 20 years under in-house operation.5"
Quotes
  • "The move comes after the earlier-than-expected ending of its first private lottery management agreement, with Northstar Lottery Group, a relationship mostly defined by conflict since its start, in spite of some improvements in lottery finances."
Quotes
  • "According to unaudited, preliminary numbers released Tuesday, The Hoosier Lottery sold $1.27 billion worth of tickets in the fiscal year ending in June, resulting in a total net income of $318.2 million — $18.2 million more than the $300 million required under the state's updated lottery contract needed to avoid paying a shortfall."
  • "As a result, Indiana will receive $306 million, after paying for state lottery operations, while IGT Indiana will pocket a $9.1 million incentive. "
  • "During fall 2017, Bill Zieke, chairman of the Indiana Lottery Commission, said he viewed the partnership as a success."
Quotes
  • "Jackpots in draw games like Powerball were underwhelming, dragging down sales goals. And the state had denied the organization's plan to launch keno-style games in bars and restaurants."
  • "So the administration agreed to slash the income targets of Northstar New Jersey by $1 billion over the remaining years of the contract. Then changes to Powerball grew jackpots to record levels. And New Jersey added keno-style video lottery games to 400 locations last month. "
  • "But despite these changes, the lowered income targets for Northstar remain the same."
Quotes
  • ""The lottery is better off today with Northstar implementing sales, marketing and advertising services than when it was being managed exclusively by state employees," lottery spokeswoman Judith Drucker wrote in an email to the AP."
  • "New Jersey has put a good face on the numbers. In July, lottery director Carole Hedinger announced record sales for the year that ended in June and said she was extremely pleased with the lottery's management."
Quotes
  • "The private company that runs New Jersey's lottery is on pace to reap more than $1.4 billion in profit — even as sales slump and the firm has successfully lobbied to lower its promised revenue targets for the state by $1 billion. "
  • "For example, Northstar oversaw a $103 million drop in lottery sales during 2017, but was still paid $103 million in fees and incentives, according to the lottery's yearly report."