Momentum for public-private partnerships in Maryland seems to be snowballing, as three major state meetings in the past two weeks focused on arrangements that could bring a large infusion of private-sector dollars to public capital projects.
The most recent meeting was Wednesday of the state’s Joint Legislative and Executive Commission on Oversight of Public-Private Partnerships.
Established last year by the General Assembly, the commission, chaired by Lt. Gov. Anthony G. Brown (D), heard from national and international experts who said that although the most common partnerships involve transportation projects, the arrangements can work elsewhere.
A day earlier, the Blue Ribbon Commission on Maryland Transportation Funding, chaired by Washington, D.C.-based land-use attorney Gus Bauman, made recommendations that addressed, in part, the private financing of public infrastructure projects.
At the meeting, Bauman argued that Maryland law must be more beneficial to both the state and private sector.
And just last week, school officials attended a conference on public-private partnerships hosted by the Interagency Committee on School Construction to discuss how private-sector funds could help some school building projects. They are now investigating how contracts governing private investment are structured in other countries.
The lack of government funding for large public works projects makes courting private dollars a necessity, Brown said.
“I think there is a lot of interest, certainly in the private sector but also in the legislature,” he said after his commission met.
Private consultants and a representative of Virginia state government told the commission that private-public partnerships can work for many — but not all — projects, provided the contracts spell out in detail what risks are shouldered by whom, and the deals last for at least 10 to 15 years.
The commission, which includes state lawmakers, is due to submit a report on the partnerships to the General Assembly before next year’s session. Brown said the commission’s report would guide legislation governing public-private partnerships in the state.
The commission previously met to discuss private financing for transportation projects as well as the general attributes of such arrangements.
Under many standard public-private partnerships, private groups provide upfront money to cover capital expenditures, and over the life of the project can also provide services such as maintenance and repair work.
The government then pays a “lease” over the life of the contract for the services and the capital provided. Depending on the partnership, the government owns the project, or has the project transferred to it at the end of the contract.
Experts touted the efficiency private groups and companies could bring to some infrastructure projects.
“It really drives that long-term perspective on asset management,” said David Choate of American Water, describing a relationship the utility company has with the U.S. Department of Defense. “But there’s a very defined mechanism for how the risk can be shared, and all the risk is not borne by the private entity.”
A stable political consensus is crucial to creating partnerships that won’t crumble, said Michael Peck of MAPA Consulting.
“I can’t underline the word bipartisan enough,” he said.
Peck described a wind turbine project arranged between Pennsylvania state government and a Spanish company that hired laid-off U.S. Steel workers. Part of the mission was to create one job for every megawatt produced.
Experts stressed that the partnerships did not make the projects cheaper in the short term, and that the public was traditionally more comfortable with privately financed transportation projects because they were used to paying direct user fees for them. Toll roads are one example.
For nontransportation projects in Virginia, an 11-member commission, with eight members from the legislature and three from the executive branch, reviews private finance proposals and can make recommendations to state agencies within two months.
“There are certain projects that do not fit in public-private partnerships,” said Richard Sliwoski, director of Virginia’s Department of General Services.
Sliwoski said ideally, a project would have a unique feature, such as a property deal that the private sector could execute more easily, in order to qualify for a public-private partnership.
One area of concern is accountability when problems arise, said commission member Del. Stephen W. Lafferty.
“Ultimately, the citizens who have invested in whatever product there is are going to turn to the public entity for recourse,” said Lafferty (D-Dist. 42) of Stoneleigh.
For projects that the state could have a clear and direct role in, “we ought to drive it, and not just be a cheerleader,” Brown said.
aujifusa@gazette.net
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