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Experts: Public-private partnerships a good tool for government

Experts: Public-private partnerships a good tool for government

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OCEAN CITY — Barriers to partnerships between private firms and government for major projects should be knocked down, and elected officials should embrace — rather than shy away from — such deals, according to a panel of experts speaking at a summer conference here.

Public-private partnerships will not solve problems caused by diminishing government revenue, David C. Birtwistle told an audience of state and local elected officials at the Maryland Association of Counties’ annual summer conference at the Roland E. Powell Convention Center.

“It’s not a panacea. It does not resolve all procurement issues,” said Birtwistle, board member for the National Council for Public-Private Partnerships. “And it is not a way of getting something for nothing.”

But, he said Friday, such partnerships — when executed fairly and effectively — become a good “alternate procurement tool.”

Lt. Gov. Anthony G. Brown led an effort during the General Assembly’s regular session for an administration-backed bill that would have created a framework for such partnerships, where a public company takes over day-to-day operations of government property.

The legislation passed in the House of Delegates, but a pair of controversial amendments to the administration’s bill caused it to lose steam in the Senate. The amendments, which would have allowed the state an immediate and expedited appeal to a judge’s decision in the State Center development case — a thus-far failed public-private partnership involving the massive redevelopment of state office space in Baltimore — effectively killed the bill.

But State Center was not necessarily a good candidate for a public-private partnership even before it became entangled in litigation, said Laurene B. Mahon, senior practice expert at business advising firm McKinsey & Co.

“For a [public-private partnership] to work, there has be a revenue stream,” Mahon said. She used the state’s other two public-private partnership attempts — the Seagirt Marine Terminal at the Port of Baltimore and two Interstate 95 travel plazas — as good examples of desirable deals for companies.

At Seagirt, she said, Ports America Chesapeake sees ships arriving with cargo, and sees a guaranteed revenue stream. At the travel plazas, Areas USA Inc. envisions drivers on the East Coast’s main north-south corridor stopping in for cups of coffee and cheeseburgers all day, every day.

“It’s a market-driven transaction,” Mahon said. “They can make a business decision.”

The state is winning too, she said, because the Maryland Department of Transportation has nowhere near enough money to make improvements at the port or the travel plazas — but the private companies do, since the state had already assumed all of the development risk.

At the port, Ports America Chesapeake purchased supersized cranes and built a 50-foot berth to accommodate large ships that will come to the East Coast once expansion of the Panama Canal is completed. Baltimore is one of only two East Coast ports that can support such ships.

“That port will be fully operational … and not a dime of public money was spent,” Mahon said.

Another frequent concern is the length of a public-private partnership, generally not less than 30 years. That period of time may make government officials feel uneasy, she said, but it’s necessary for an investor, who realizes there is a great deal of “political risk” with state and local leadership potentially changing every four years.

That’s why the administration bill, which sets rules for the road for executing such partnerships, is important, she said. Brown is expected to lead the administration’s charge for similar legislation in the 2013 legislative session.

Maryland needs to “clarify some fairly murky” procurement rules and “establish a framework that gives a little more comfort for investors,” Mahon said.

And elected officials should remember that partnerships are not “privatization,” and that it’s OK for businesses to profit from the deal — so long as the government is winning, too.

“Remember that the ‘p’ word isn’t a bad word,” she said.


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