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Strapped local governments are turning to private developers to finance their projects.
January 20, 2021
By Miranda S. Spivack
For state and local governments, the pandemic has brought financial gloom: Tax collections are down, public health expenses are up and their infrastructure backlog is growing.
For developers and real estate investors, it all spells opportunity. The fiscal challenges could spur new ways for the private sector to collaborate with state and local governments.
Public-private partnerships, known as P3s, rely on developers and investors to shoulder upfront financial risk, often delaying payments from governments until revenue starts flowing or certain construction benchmarks are reached.
The partnerships have been used for projects in parts of Asia, Australia, Britain, Canada and other parts of Europe. But state and local governments in the United States have been slower to embrace them. As their fiscal woes become worse, some government officials are looking more closely at them as a tool to jump-start their economies.
Data suggests governments will need all the help they can get:
The National League of Cities estimates that nearly 90 percent of cities will be less able to meet their needs in fiscal 2021 than in fiscal 2020.
The American Society of Civil Engineers estimated that the United States would need to spend $4.59 trillion by 2025 to repair or rebuild roads, bridges, dams, airports, schools and other infrastructure.
The partnerships have a mixed record, but they could be one way to bring back Main Streets and reinvigorate downtowns, experts say.
“It can be an incredible use of private markets to help further development, planning and smart growth that cities and towns need but are unable to do on their own,” said Lauren Jezienicki, the founder and chief executive of the One Circle Company, a residential real estate firm, who worked on the partnerships when she was a senior vice president at Bozzuto, a real estate developer.