Unlimited Access. Try it Today! Your First 10 Days Always $0.99

Op-Eds

News Opinion Op-Eds

Public-private partnerships: the new model for infrastructure

There's a P3 in your future.

Maryland is poised to join 34 states and key federal agencies in transforming the way government works. The new mantra, "P3," is shorthand for public-private partnerships.

Maryland's P3 legislation, championed by Lt. Gov. Anthony Brown, enables state agencies to engage business in planning, financing, building and operating public projects, from roads and rail to schools and other infrastructure. These could offset up to 10 percent of the state's capital budget, or $300 million annually, and create thousands of jobs. The new law also allows developers to propose P3 projects the state has not yet conceived — a far-reaching initiative to enlist private enterprise in solving public problems.

With this potential, everyone should ask: What are P3s? Why are they important? And how do they work?

•What: P3s deliver public services through agreements between government agencies and private firms. The public partner owns the assets, typically through a long-term ground lease; the business finances and builds facilities and operates the partnership. P3s are not outsourcing or privatization. Instead, they fuse public purposes, business practices and profits to perform functions more efficiently and effectively than government or business could on their own.

The Port of Baltimore's Seagirt P3 is funding new deepwater berths, mammoth cranes and through-highway access. Virginia has completed over $1 billion in P3 projects and has $5 billion more in its pipeline to generate jobs, close budget gaps, and attract business as well as ease traffic congestion.

A P3 to redevelop the FBI headquarters in Washington would invest at least $1 billion. The taxpayer would avoid this cost and risk; the FBI would get state-of-the art workspace; Maryland could add thousands of jobs, if selected for a new FBI campus; and an eyesore on the nation's "Main Street" would be replaced by a sparkling new centerpiece. If the financing were sensibly structured, all parties would receive a share of the projected economic values.

•Why: P3s enable public agencies to undertake projects they otherwise would postpone or ignore. Engineers estimate that it will cost over $3 trillion to renew America's crumbling infrastructure. Every billion dollars in infrastructure investment creates 15,000 jobs. But our current approach is crisis-driven: It is easier for politicians to repair collapsing bridges than to fund preventive maintenance.

The Capital Beltway now needs rebuilding more than resurfacing. Its poor condition costs the average commuter $600 annually in vehicle wear and tear. P3s could take $9 billion in Beltway reconstruction and interchange costs off Maryland's books while attracting private investment to create more efficient high-occupancy vehicle lanes and rapid transit.

Canada shows the scope for an integrated national and state-level P3 policy covering nearly all types of public facilities, from transportation and hospitals to schools and jails. By incorporating design, financing, construction and maintenance, Canada achieves 10 percent savings on large, long-term projects and redeploys the proceeds for other priorities.

•How: Collaboration makes P3s work. Business partnerships succeed on handshakes and prosper with cooperation but fail if they become adversarial. Although P3 terms must be formalized on paper, a P3 that relies on its contract, not its leaders, to solve policy and operational problems is doomed to fail.

The P3 business model has built-in revenues and risk-sharing. Toll roads, tunnels and ports are natural candidates because they generate user fees to finance construction and operating costs. Military housing P3s are fueled by soldiers' allowances that enhance the developers' credit to attract private capital. Still to come: fiscal structures that convert capital assets to rent payments, propelling governments to unload their huge inventories of office, administrative and logistics space.

As P3s proliferate, oversight is essential. P3s tie government and business executives to shared goals, ground policy decisions on thorough analysis, and measure progress against plans. Because private sources provide most of the capital and insist on market discipline, there is no room for political grandstanding.

President Barack Obama has often spoken of public-private partnerships and included $50 billion for thousands of potential projects in his new budget. Despite political differences, Maryland's and Virginia's governors share the vision of expanded P3s, including cyber- and social infrastructure as well as transportation. World Bank president Jim Yong Kim is incorporating P3s in his agency's global mission. In Australia, Britain and a dozen other countries, more than 1,000 P3s are in operation.

If you are in government, P3s unleash funding and talent. If you are in business, P3s open new markets. If you are a taxpayer, P3s multiply your public contribution five to 10 times. Everyone wins.

Sandy Apgar, a Baltimore resident, advises business and government leaders on strategy and management. He was assistant secretary of the Army for installations and environment in the Clinton administration and launched the federal government's largest P3 for military housing. He keynoted the first National P3 Conference in Dallas and the State of Maryland's Joint Legislative and Executive Commission on P3s. His email is sapgar@apgarco.com.

  • Text NEWS to 70701 to get Baltimore Sun local news text alerts
  • Copyright © 2015, The Baltimore Sun
    Related Content
    • Government should keep at arms length from corporate America
      Government should keep at arms length from corporate America

      Sandy Apgar, an erstwhile pretender to being a public servant during the Clinton era, enthusiastically recommends that Maryland fall into the public-private partnership trap along with benighted states like Virginia ("The future of infrastructure," May 9).

    • Helping Nepal recover
      Helping Nepal recover

      The shaking started just a few hours before a big early birthday party was scheduled for me; I'll turn 90 in June. I was at my house in Nepal, not far from the center of Patan, a city right next to Kathmandu, talking to my driver, Runjin, about hanging some Tibetan flags in my bedroom. As we both...

    • Baltimore, then and now
      Baltimore, then and now

      Of all the images captured of this week's riots in Baltimore, none was more arresting than that of an irate mother chasing, berating and striking her would-be rioter son.

    • School lessons to be learned from Freddie Gray
      School lessons to be learned from Freddie Gray

      Baltimore can be proud of its civic response to the rioters and to the criminal charges brought against six police officers. We can be optimistic that police brutality will decrease measurably. But the aftermath of the tragedy of Freddie Gray should be far from over. As a city, state and nation,...

    • Expand Job Corps to prevent Freddie Grays
      Expand Job Corps to prevent Freddie Grays

      Events in Baltimore remind us that the dropout-to-prison pipeline costs us all. What most of us don't realize is how much it costs: trillions of dollars in uncollected taxes and unearned income that never enters the economy. A 2010 study by Northeastern University estimates the loss in unpaid taxes...

    • You should be angry over Freddie Gray
      You should be angry over Freddie Gray

      I am angry.

    • A better future for Baltimore after Freddie Gray
      A better future for Baltimore after Freddie Gray

      At this particularly vulnerable moment in the history of Baltimore, we have a choice. Either we wait for things to return to "normal" — which is not an acceptable state for many residents of our city — or we can seize this moment, when the light shines on the many inequities present in our society,...

    • Baltimore is not your city
      Baltimore is not your city

      "So sad that our city is being destroyed by our own people," one of the many Facebook statuses on my newsfeed read on the night of the riots in Baltimore. The person who wrote it lives in the suburbs of Harford County.

    Comments
    Loading

    79°