A Can-Do Approach to P3's

Authors: Albert Dotson, Jr. and Lucas Pizzutti

Fort Lauderdale has reached financial close this year on a new P3 project that is slated to bring a new water treatment plant online by 2026. An article published on Partnerships Bulletin highlighted the “can-do” approach by the private sector and the City in order to get this P3 project to where it is today. More than a “can-do” attitude however, is needed to get more P3 projects off the ground. A previous post in our blog series touched on the real legal advances being made as many jurisdictions modernize their procurement procedures and codes. A combination between legal modernization and the will and resilience of the public and private sectors is what is needed to bring bigger and better P3’s to our communities.

In recent years, many municipalities around the country have adopted ordinances that specifically lay out the procedures for receiving unsolicited proposals and P3’s. Back in 2014, for example, the City’s adoption of a P3 ordinance specifically signaled the City’s “receptiveness to public-private partnerships and innovative input from the private sector,” as mentioned in another one of our blog posts. For their recently completed Smart Street Lighting P3, Washington D.C. kept an updated page on their website filled with information for potential proposers and the public.  These types of changes are a great start, to be sure, but without the desire from the city and the private sector, nothing will happen. It takes active commitment from both sides to achieve this. The new project in Ft. Lauderdale serves as a great example of how this puzzle piece fits into the puzzle.

The project, which is to Design, Build, Finance, Operate and Maintain the plant, started back in 2019 in Israel, when Fort Lauderdale Mayor Dean Trantalis visited the Hadera Desalination Plant as part of a delegation of elected officials and business leaders. Lihy Teuerstein, CEO of IDE’s Water Assets division, who developed the desalination plant, mentioned that “We’ve been following the city and the city's leadership, the mayor and the commission, and all of the activities that they've been able to accomplish. Mayor Trantalis says that they are the can-do commission. And indeed, I think that is correct for this city.” Thereafter, in 2020 IDE submitted an unsolicited proposal that spurred the City to issue a solicitation for the water treatment plant. This solicitation ultimately failed due to labor concerns, but was revitalized after discussion with local union leaders. Throughout that process, the IDE team came up with a number of creative solutions to ensure the project was successfully selected. The article explains:

“A key differentiator in this DBFOM model is that the plant employees will remain city employees … Also unique to this P3 is the financial structure which combines tax-exempt debt raised by the city with a concession agreement that places private capital at risk for performance failures. IDE and Ridgewood will fund 25% of the project costs and own the risk of construction and the long-term risk of operation and maintenance of the project.”

A few insights can be garnered from this process. First, as always, robust local engagement and guidance are critical for P3 projects to be successful, as evidenced by the fact that the first proposal for the treatment plant was rejected over labor concerns, which were afterwards successfully addressed. Second is that flexibility in negotiations and project development are always a must, due to the prolonged timelines for these projects, many things may change in the years that it takes from start to finish. Third, the “Partnership” aspect of Public-Private Partnerships cannot be overstated; P3’s are a two way street that require vision, know-how, and will from both sides to accomplish. Work on this project, in the form of building relationships, understanding needs, and active pursual of a solution (from both the public and private sector) started years before any proposal reached the Board of County Commissioners. Finally, the last piece of advice comes direct from Susan Grant, assistant city manager for Fort Lauderdale, “Start now. If Fort Lauderdale had started 10 years ago, certainly it would've been much cheaper. It only gets more expensive and impacts [end user] rates.” It just goes to show how important starting the groundwork for these projects is, not only for the public and private sectors, but for the end users as well.

These insights have been developed by years of on-the-ground experience, but much can also be learned from academic involvement and research into the P3 space, such as annual conferences held by Center for Transportation Public-Private Partnership Policy at the George Mason University. These types of conferences, which brings together P3 practitioners from the public and private sector, can help bridge the gap in experience and develop best practices. This is especially true when it comes to instilling that can-do attitude.

Hopefully, more and more P3 projects take these insights to heart and begin the process of improving our communities sooner rather than later. The need is there and so is the will, and with local guidance it can be done.