P3 Means Jobs

Crestview, a city in Florida’s panhandle, provides a good illustration of how public-private partnerships can provide a win-win to both communities and businesses.

Crestview’s News Bulletin reports on how a P-3 initiative has led to recent construction of a new administrative building for L3 Crestview Aerospace at Crestview’s Bob Sikes Airport. L3 Crestview Aerospace is a division of L3 Integrated Systems. The company is a provider of aircraft modification and aerostructure fabrication and assembly. L3 Integrated Systems’ parent, L3 Communications is a prime system contractor in command, control, communications, intelligence, surveillance and reconnaissance systems.

Crestview’s News Bulletin also reports that work on an 80,000-square foot hangar on L3’s local campus will begin later this year. The construction is a result of a public-private partnership among Okaloosa County’s Economic Development Council, local government and business. It is believed L3’s expansion will bring 340 new jobs to L3, while enabling the company to also retain 80 positions. The expansion represents a capital investment of $13.7 million. The EDC is a non-profit, independent organization funded by private business owners.

The paper further reports that “EDC has 20 active projects, including four in the Crestview area that together could provide nearly 1,500 new jobs."

The original article in Crestview’s News Bulletin can be found here.

Could Fiscal Cliff Talks Provide Fuel for Public/Private Partnerships?

The Wall Street Journal reported today that, among the talking points for fiscal cliff avoidance, the government is considering removing the tax exempt status of municipal bonds, which would severely limit the borrowing power of local governments. If this happens, the cost of private capital to fund public facilities and infrastructure would not be so out of whack compared to the cost of public borrowing. This would encourage more public/private partnerships. Currently, when considering alternatives for financing public construction, public agencies compare the higher costs of private capital to the lower costs of issuing municipal bonds. That is one of the factors that could weigh in favor of traditional procurement techniques over public/private partnerships. However, if the tax exempt status of municipal bonds is removed, this would no longer be a factor in favor of traditional procurement.

Keep an eye on this. If in fact public financing becomes less attractive and the pending public/private partnership bill passes in Florida, P3s in Florida may become much more prevalent in future public construction.

P3 and Cybersecurity

Robert D. Rodriguez, founder of the Security Innovation Network, will open the Complex Adaptive Systems Conference, to be held November 14-16 in Washington, D.C., with a discussion on the application of public-private partnerships to online security.  The conference, which is sponsored by Lockheed Martin, Tata Consultancy, the Missouri University of Science and Technology and others, and features presentations on computational intelligence, big data analytics and the "Smart Grid" will include discussions by several leaders in the complex systems area.  On the conference site,  the abstract of Robert Rodriguez's presentation refers to both the Manhattan Project and Silicon Valley as examples of public-private partnerships.

The subject of Rodriguez's presentation seems especially timely as The Economic Times has just reported that Shivshankar Menon, the National Security Advisor to the Prime Minister of India, has recommended that a permanent mechanism be set up for the use of public-private partnerships in the development of online security in India.  The report, titled Recommendations of Joint Working Group on Engagement with Private Sector on Cyber Security states, "one of the primary challenges facing both government as well as industry is to ensure the security of their computer networks and systems.  Cyber security cannot be achieved in isolation by either government or industry alone.  It requires joint efforts and collaboration."

As cybersecurity has become a key component of both national and industrial security, it is critical that the public and private sectors work closely together in innovative ways to achieve the online infrastructure that is necessary to protect both national and business assets.  Based on the subject of the opening presentation at this year's Complex Adaptive Systems Conference and the recommendation of India's National Security Advisor, it appears this is an area ripe for public-private partnerships both nationally and globally.

P3 Could be a Competitive Advantage for US Manufacturing

Public-Private Partnerships help the public sector develop various projects and improve infrastructure in ways that benefit the public at large.  These projects and infrastructure improvements, which always raise economic and financing issues, can be particularly challenging during difficult economic times. While P3’s contribution to making capital improvements and similar initiatives a reality is well recognized, we might consider other areas of our nation’s economy that could also be assisted through the joint initiative of the public and private sectors.  One other area to consider is manufacturing.

Rebecca O. Bagley, CEO of Nortech, a regional nonprofit focused on technology based economic development in Northeast Ohio, recently wrote on Forbes.com that “collaborative public-private partnerships have emerged as an important component in this new era of American manufacturing.”  In support, Bagley describes her recent attendance at a Department of Energy/NIST roundtable, which focused on American manufacturing.  An assertion made at the roundtable was that P3 could play an important role as the US manufacturing sector transitions into what is now a highly innovative and globally driven manufacturing marketplace.  As an illustration, Bagley points to the recent announcement of a 30 million dollar federal grant made to the National Center for Defense Manufacturing and Machining in order to establish a National Additive Manufacturing Innovation Institute in the Techbelt (described as the Cleveland to Youngstown to Pittsburgh corridor).  In Bagley’s piece, Carnegie-Mellon President, Jared L. Cohon, says the “new manufacturing institute is about industry teaming with university partners…”.

As Bagley points out, solutions and innovation are to be found not only in the technology and processes we as a nation develop, but in the creativity we use in making these things happen (e.g. through P3), which in itself represents a competitive advantage.  Bagley’s piece, “Are Public-Private Partnerships The 'Secret Sauce' To A Resurgence In American Manufacturing?” can be found at
http://www.forbes.com/sites/rebeccabagley/2012/09/04/are-public-private-partnerships-the-secret-sauce-to-a-resurgence-in-american-manufacturing/

A Creative Solution for Non-Revenue Producing P3 Facilities?

Now that public/private partnerships are starting to proliferate, morphing from the traditional transportation-based programs to vertical construction for universities, municipalities and more, the next question is how to apply the P3 delivery method to non-revenue producing public facilities.  P3 projects are possible because private equity investors and lenders seek revenue-producing public facilities, such as toll roads, dormitories and stadiums, in which to invest or loan design and construction funds in return for an anticipated rate of return. Toll roads have been the benchmark for such construction, with vertical construction picking up steam.  However, thus far, private money has gravitated only to projects that would generate their own revenue, from which the rate of return can be repaid or supplemented. While this is understandable, such a philosophy has left vital non-revenue producing public facilities out in the cold. But perhaps that isn’t necessary. A little creative thought may be all that is needed to find a way to make P3 applicable to such projects.

Witness the state of Virginia, who recently augmented the revenue-producing capability of its turnpike rest areas with sponsorships. According to the Street Smart blog of the Daily Press on August 30, 2012 by Jon Cawley, GEICO is sponsoring “Safe Phone Zones” at Virginia’s rest areas as a means of generating more revenue to entice a Pennsylvania-based caterer to run the facilities’ concessions as part of a public/private partnership.  The Virginia governor claims Virginia as the first state in the country to secure a sponsor in a program of this sort.  Kudos to Virginia for its creative thinking. 

Why can’t sponsorships be part of a revenue-generation plan for non-traditional, non-revenue generating public facilities? Sponsorships could be joined with other creative techniques, such as land-swapping deals, tax concessions and reallocations, low-interest bond financing, and mixed-use office space rentals to cobble together a financial package that could make sense for otherwise non-revenue generating projects.  The beautiful thing about P3 is the sky is the limit. Parties are constrained by only their imagination (and politics).  So follow Virginia’s lead. Work sponsorships and other non-traditional revenue sources into your programs and let’s build America!

Is a Florida Public/Private Partnership Statute Imminent?

Seeing the potential of public/private partnerships (“P3”) as the preferred means for funding and building public projects now and in the future, Governor Rick Scott has pushed a P3 statute near the top of his agenda for the upcoming legislative session. Since the last session, he led a trip to Spain to court some of the biggest P3 financiers and builders in the world, espousing the vast potential for P3 jobs in Florida. Legislators have already been tapped to sponsor P3 bills in the House and Senate and bill drafting is currently underway. As a result of the current crisis in public university funding, the Florida Board of Governors appointed a task force on facilities funding that is looking into possible legislation, including P3 legislation, with a charge to report its findings by November 7, 2012, in time to seek a legislative cure.

P3 legislation is not just a pipe dream. A comprehensive bill (some would say too comprehensive) passed the Florida House in the last week of this past legislative session, but without enough time for the Senate to vote on it, especially in light of other legislative priorities such as budgets and reapportionment. However, that was the furthest a non-DOT P3 bill had traveled in the legislature, suggesting increased momentum for P3 legislation. This year, with gubernatorial support and a wellspring of concern about the need for public funds for construction, infrastructure and maintenance, we expect to see the much-needed statutory framework for P3 this year.

If any of you are interested or participating in the drafting or support of P3 legislation, please contact me so we can coordinate efforts. You can reach me at Lee Weintraub, phone number (954) 985-4147, email lweintraub@becker-poliakoff.com, fax (954) 985-4176.

Together we can kick start this new era of public construction and jobs growth in Florida.

Florida Gets Its First Public-Private Partnership Trade Association

As the momentum for public-private partnerships (“P3”) continues to accelerate, both within Florida and elsewhere, the first Florida P3 trade association is preparing to launch. With an inaugural board already empaneled and setting its first meeting in August, the Florida Council for Public Private Partnerships (“FCP3”) will provide educational content, case studies, relationship development and networking, and other programs to stimulate P3s in Florida and help its members start to do business with each other. Educational programs will include studies of P3 projects from around the state, both successes and failures, to explore what went right and what went wrong. National consultants and advisors will provide educational components and, in the process, members will develop relationships with each other with a goal of working together on P3 jobs.

Membership in FCP3 will be open to anyone interested in P3s, with membership categories including public owners; equity financiers and lenders; contractors, lenders and developers; and associate members including lawyers, accountants, and members of the insurance and surety industries. The inaugural board consists of members from large and well-known governmental entities, investment firms, banks, contractors and engineers. The board membership will be announced after the inaugural meeting in August. The goal is to launch FCP3 this fall.

If you’re interested in more information about membership, please contact me. Otherwise, stay tuned to this blog in the fall for more details.