Public-Private Partnerships R. Grimes

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Public-Private Partnerships R. Grimes Powered By Docstoc
					           Public Private Sector
               Partnerships
   Perspective from dealing with municipalities
    and institutions (e.g., Colleges/Universities)
    Do they always have to involve all 4 major
    elements?
       Build
       Design
       Finance
       Operate

   Are they for everyone?
   Are they always Government, Institutional and
    Private?
     London Sports & Entertainment
          John Labatt Centre
   City of London – Public
     Ellis Don Contractors (Build)
     Global Spectrum (Operators)
     BBB Architects (Design)

   Financing: Total Capital Cost $47 million
     City of London, Province/Federal, Private Sector
      Equity/Debt

   9000 seats
     Home of OHL London Knights
     Total # of Event Days 130 (concerts, community
      events, other sporting events)
     London Sports & Entertainment
          John Labatt Centre

   Benefits to the City
    One of the key elements of Downtown
     Revitalization
    Single entity to build, design and operate
     facility
London Sports & Entertainment
     John Labatt Centre
      Reasons for Success
           City Clear on Objectives
           City undertook necessary background studies
             REALISTIC EXPECTATIONS
           Strong Advocate / Staff @ City Hall
           Experienced Private Sector team with proven
            track record in design, construction and
            operations
           City willing to take on some of the operating
            risk together with Private Sector team
           City able to independently confirm capital
            costs represented fair value
Student Residences @ Community Colleges
   Seneca College, Niagara College,
    Sheridan College, Algonquin College

    New concept for Colleges
     to provide residential
     student accommodation on campus

    Consistent with mandate to provide
     Specialization of Programs
Student Residences @ Community Colleges
                (cont’d)
   Seneca College, Niagara College, Sheridan
    College, Algonquin College

     Successful Model Developed Over Time
     Original Design / Build / Finance / Operate Model
      didn’t work
     Realty Tax, Development Charge and Municipal
      Approvals Consideration did not permit simple
      model of selling/long term leasing of land to
      private sector proponent to be economically
      viable
Student Residences @ Community Colleges
                (cont’d)

   Generalized Model
    Design / Build Consortium (Architect /
     Contractor)
    Design / Build - Fixed Fee / Partnering with
     Experienced Operator
    College arranged their own financing
Student Residences @ Community Colleges
                (cont’d)

   Benefits to Colleges
    Received turnkey student residences at
     competitive price
    Allowed them to provide student
     accommodation previously not available
    Management of student residences provided
     by experienced outside operator who was
     also able to realize third party revenues
Student Residences @ Community Colleges
                (cont’d)

   Reasons for Success

     Colleges able to finance cheaper by their own
      sources 50 to 100 B.P.S. less that lenders to the
      private sector consortium

     Colleges did necessary background to clearly
      understand the market potential and price points
      student willing to spend for accommodation 
      REALISTIC EXPECTATIONS
Student Residences @ Community Colleges
                (cont’d)

   Reasons for Success

     Design / Build teams able to work effectively to produce
      desirable building @ economic and fair market price

     Operator proven record of managing similar facilities and
      ability to attract third party revenue that College probably
      not able to attract at least in the short to mid-term

     College able to independently confirm capital costs
      represents fair value
          Development Charges
Are they a Public Private Sector Partnership?

   Development Charges Act allows municipalities
    to recover growth costs from developers

   Development Charges 1997, Bill 98:
    “An Act to promote job creation and increased
    municipal accountability while providing for the
    recovery of development costs related to new
    growth”
      Development Charges (cont’d)
   Act benefits both municipalities and developers and
    ultimately the end users of the new development by
    providing for timely installation of needed services

     Hard Costs include:
        - Water
        - Sewer
        - Roads

     Soft Services include (only 90% of these growth
      related costs are DC eligible):
        -   Transit
        -   Libraries
        -   Parkland Improvement
        -   Indoor Recreational Facilities
 Development Charges (cont’d)

 Certain facilities currently excluded:
   -   City Halls
   -   Tourism Facilities / Convention Centres
   -   Cultural Centre (e.g., theatres, art galleries)
   -   Hospitals

 Interest Cost i.e., interim financing cost to
  provide these facilities in advance of
  development (revenue) – an eligible expense

 In this sense, Development Charges represent
  Finance portion of PPP
 Development Charges (cont’d)

 In addition, DC contemplates front-end financing / services
  in lieu provided by developer. This represents Build and in
  many cases, Design elements of PPP.

    - Costs generally subject to independent verification or
      competitive bids through tender process.

 Several municipalities in addition to DC Act eligible costs
  have been successful in negotiation of:

    - Payments for Non-DC eligible services, e.g. performing arts
      centre, hospitals, 10% soft service mandatory discount
    - Cash Flow Assistance (Repayable Loan Payments) in addition
      to Front End Financing Requirements for Certain Facilities
 Development Charges (cont’d)

 Developers agreed to these as conditions of
  obtaining municipal approval and allowing their
  development to accelerate in the planning and
  servicing process

 Benefits to the Municipality

   - DC part of the way business is done
   - Extended DC regime provides in some cases monies not
     otherwise available and source of funding / financing
     not otherwise available
 Development Charges (cont’d)

Reason for Success

  - Long history of lot levy / DC regimes
  - Municipality undertakes necessary background
    studies  REALISTIC EXPECTATIONS
  - Developers keen to get their projects to the
    market
                CONCLUSIONS
   Not for everyone

   Need:
     Willingness (benefits) of both parties
     Strong advocates on both sides
     Understanding that PPP are not a panacea 
      REALISTIC EXPECTATIONS
     In certain cases adopt only really beneficial
      elements of PPP
     Risks / Rewards to both parties
     Ability to independent confirm fair market prices
      for buildings provided