Higher-Education P3s Continue to Gain Momentum

Last week, the Michigan State University Board of Trustees authorized the negotiation of a comprehensive public-private partnership (P3) agreement with the winning proposer for a planned expansion of the university’s health and research facilities at the Grand Rapids campus. The decision marks one of many recent success stories for higher-education P3s. We previously wrote about a recent judicial decision that facilitates P3s for student housing, and a P3 for off-campus student housing at Florida International University recently reached financial close. This is consistent with a larger, national trend towards P3s for student housing.

The P3 model provides several benefits to higher-education institutions, including:

• the provision of a higher quality housing product (student housing often plays an important role in recruitment)
• the transfer of risks to the private sector, and
• the retention of school personnel and financial resources for educational projects more aligned with the school’s mission.

These benefits have become more pronounced in recent years, as dwindling public funding nationwide has increased financial pressures on public colleges and universities.

At the same time, many colleges and universities are growing at a rapid pace and have a need for new educational facilities and other campus resources. The P3 model permits growing institutions to expand their campuses quickly, and without expanding and diverting existing staff or resources to operate and maintain the new facilities. The University of California, Merced P3 is one of the best known examples—when UC Merced planned for a doubling of its student body in less than 10 years, it utilized a $1.3B P3 to comprehensively expand its campus, and the project remains on track to meet the university’s very ambitious goals. Several other colleges and universities have since followed suit with their own campus expansions utilizing a P3 model, which has proven to deliver far more educational infrastructure, in less time, than a public institution could hope to provide using the traditional delivery model. As the list of success stories continues to grow, we should expect public higher-education facilities to increasingly look to the P3 model.