Public private partnerships: Inviting others to the table

By Christopher Steele, President, CWS Consulting Group LLC

Sometimes it’s worthwhile to remind ourselves that real estate development is not simply a matter of supply and demand -- there are other forces at play. A more accurate consideration of the development environment should explicitly recognize the government as a member of the development team.

Developers who regard the public realm as unimportant do so at their peril. At best, they ignore a potential partner. At worst, the public realm squashes the project outright.

In the development process, the stereotypical role of government is as a permitting and regulatory party. Instead, they can and must be regarded as an explicit partner. This partner can be silent or active, but having the community as a development partner can be a powerful advantage.

Benign Agreement
In the simplest case, getting the local community onboard with a development is the simplest way of greasing the skids and ensuring a “normal” development schedule and budget. By working with community groups and the government up front, all participants are in on the deal, are aware of the goals, benefits and tradeoffs, and the payback to the community can be shown early.

If done honestly and skillfully, this level of consultation can minimize objections later in the process either by addressing the objection before it becomes one, or by enlisting other government or community stakeholders to countermand these objections. In this case, the community and public agencies remain squarely in the regulatory and permitting realm, but also act in the role of a partner who recognizes how the developer’s plans meet community goals and standards.

Incentives and Inducements
The next level of government participation – agencies - can provide enabling programs, but still act indirectly. Here the government offers credits and inducements to encourage a certain form of development. The best incentive packages are those that invest in both the long-term success of the company and the community. They are not zero-sum games but are instead practical tools for building a partnership between business and the public sector.

For example, infrastructure required to attract one manufacturer may also be used to spur a more complete cluster of development in a portion of the community. Likewise, training programs used to develop skills for a specific company may also provide a broader base of skills for the community, drawing attention for other potential activities.

Regardless of the form, incentives and inducements are an active but indirect way of positively impacting the local development economy.

Direct Involvement
Lastly, governments can directly become investors and developers themselves – either alone or in concert with private developers. In this case, governments can enable projects where there is a demonstrable public good, but where a private developer alone would face obstacles, such as an inability to raise the necessary capital, get an acceptable return on investment, etc.

These forms of development bring particular benefits when considering transportation, distribution, and logistics development for a variety of reasons. First, these developments often involve facilities (such as sea- and airports) of considerable public interest and import. Second, they require significant capital outlay, often well beyond the capabilities of the private sector. Third, these developments may impact a broad variety of communities, require assembly of lands, or otherwise require that the community as a whole take a leadership role in expressing support for the development.

While such partnerships often originate through public agencies working towards community goals (as has been the case in most port authorities), they can also result through the efforts of private developers whose dreams and concepts are larger than their ability to execute them. As in the case of inland ports, private developers work in concert with the public realm to create these larger partnerships. These projects in turn produce benefits for both the developer and the public at large. In these cases, public participation can take a variety of forms but most often include land-as-equity, low- or no-cost financing, or direct access to public bond markets.
In these times of economic stress, governments wield the power to move mountains. Moreover, governments are motivated to make these projects happen, given how they can positively impact the overall economic prospects of a community. Truly, these can be very important partnerships indeed!

I’d like to get us back to happier topics next month. We’ll start by looking at uses and industries that may be the first to point to resurgence in the real estate markets.

In This Issue

News, Trends & Analysis
New Items

One big reason for a weak global trade outlook

Supply Chain
Public-private partnerships:
Inviting others to the table

Keeping your cargo cool

Compliance Corner: What you need to know about export commodity control numbers

Supply Chain product review
Communication technologies

Features
Gateway at a glance – Latin America

U.S. domestic shipping looks ahead

Ports & infrastructure
East Coast ports and terminals moving dirt, doing deals

Port Product Review
Refrigeration technologies

Commentary
Difficult times create opportunities

Who, What, Where, When

Final Say