The Alaska Contractor: Fall 2006

PUBLIC / PRIVATE
partnerships f lourish
H
ypothetically speaking let’s say there is
a big project out there; call it a highway.
This project is sorely needed in a
community where traffi c congestion is terrible
and commuters are spending two to three hours
a day in their cars traveling the 20 miles to
work. Land is at a premium. There are no roads
that can be built because of a lack of available
land.
There is another problem; money. Where
will it come from? Who will pay for the existing
two-lane highway to be upgraded to eight
lanes? Taxpayers are strapped and unwilling to
absorb a great tax burden. What can be done?
Enter the private investor. This investor has agreed to
partner with the state to redesign, build and operate a new
road that will accommodate existing traffi c as well as the
forecasted traffi c for the next 30 years.
How does this happen? What is in it for the investor?
With a little help from the state and a range of private
funding sources, when fi nished, the private partner will reopen
the project as a toll road allowing speedy payback to
private investors and state backers while shortening commute
times.
Any money left over from loan repayment is considered
surplus, which the private investor gets to keep. And thus
puts money back in the pockets of investors to reinvest in
the economy.
Confused?
Here is how it works.
The National Council for Public Private Partnerships explains
a public-private partnership as a contractual agreement
between a private sector entity and a federal, state or
local agency. Through this agreement, the skills and assets
of the public and private sectors to the benefi t of the general
public. Each party also shares in the project’s potential for
risks and rewards.
In essence public-private partnerships are a basic relationship
between state or federal bodies and private companies.
This relationship allows a private fi rm to design, build
BY LAURA BRUCK
and maintain a public infrastructure (such as a bridge, toll
road, even a high school) while tapping into private and
governmental resources.
Such partnerships are developed to fund large projects
that might not be practical with only public funding or with
only private funding. It is an arrangement between private
and public entities that can result in greater fl exibility and
fi nancial freedom for both the private partner and the government
body.
Concerns for the growing amount of public debt in the
1970s and 1980s prompted people to start looking for alternative
ways to fi nance large projects. Governments both
local and state were encouraging private investors to build
public infrastructure.
In a December 2004 report to Congress former U.S. DOT
Secretary Norman Y. Mineta said “... [G]iven the fact that
there are just limited fi nancial resources all the way around,
I think the need for [public-private partnerships] is going to
grow much more in the future. When you think about the
amount of money that goes into research and development
on specifi c transportation modes or when you think about
the long timeline it takes in terms of trying to build infrastructure
and especially where we’re trying to - lessen the
gap between the demand for transportation and the ability
of our transportation infrastructure to supply that demand,
that it really requires public-private partnerships both in
money, thought, and effort.”
Private-public partnerships have been around for centuries.
Many public works and projects all over the world have
been built using this model.
Projects such as the Royal Ottawa Hospital in Ontario,
Canada, the National Maritime College of Ireland, the London
Underground, and the Sydney Harbor Tunnel in Australia
were all been built through such fi nancial partnerships.
In the United States many notable projects have been
brought to life, too, through such partnerships. Central Park
in New York City, Downtown Chattanooga Redevelopment
in Tennessee, Chicago Skyway Bridge in Illinois, Southern
Indiana Toll Road from Martinsville to Evansville, Indiana,
and State Route 125, which is under construction in Southern
California.
Alaska’s own Anchorage Museum began life as a publicprivate
partnership. This coincided with the 100th anniversary
of the purchase of Alaska from Russia.
22 The Alaska CONTRACTOR Fall 2006