Are Public-Private Partnerships a Solution to Your Organization’s Financial Challenges?

Public Private Partnerships (P3s) have grown in popularity over the last two decades in Texas as government entities have experienced rapid and sustained growth.  Unfortunately their revenue streams have not grown commensurate with the services they’ve been asked to deliver.  Accordingly, government agencies have increasingly become reliant on private sources of equity to meet their development goals.

Initially, P3s in Texas were used to address traffic congestion.  Quickly, transportation projects involving various forms of private equity became a “go-to” method to meet growing demands with declining real dollar gas tax revenues. The Texas Legislature soon took notice of the transportation sector’s success with P3 projects and passed enabling statutes through Chapters 2267 and 2268 of the Texas Government Code to provide governmental entities the ability to contract with private entities to deliver a wide variety of public projects.

One recent example of a large scale P3 facilitated by the legislature’s effort is the Park West project at Texas A&M University in College Station (TAMU).   TAMU contracted with Servitas to provide a $368M mixed use, student housing project adding 3400 beds to the campus.  The project was funded by privately managed revenue bonds sales and resulted in a tremendous expansion of student housing that would not have been possible using only TAMU funding sources. In addition to the capital infusion provided by these arrangements, private entities can often design and construct facilities faster and at a significantly lower price than the public sector as they are exposed to fewer government procurement requirements under these arrangements.

That said, P3s are not to be entered into lightly.  The statutes require a great deal of planning and thoughtful execution in order to deliver projects that comport with the statutes’ letter and intent.  The Texas Facilities Commission has promulgated a document entitled “Public-Private Partnership Guidelines” found here that provides the basic framework for a successful P3 project.  While this document is helpful in assisting agencies to think through the basic project selection and execution elements, there is no substitute for an experienced team of attorneys, financial advisors, design professionals and contractors to make a project a success.

Not every project is a candidate for a P3 success story, but by strategically leveraging this tool when appropriate, government agencies can help to reduce that gap between expectations and available revenues.

Prepared by the offices of Richard Abernathy, this article should not be construed as legal advice related to any specific facts or circumstances. Although this article covers legal subjects, it is intended to educate readers and not to provide advice that will be the basis for action or inaction in any specific circumstance. Viewing these materials does not create an attorney-client relationship between Abernathy, Roeder, Boyd & Hullett, P.C. and the reader or the reader’s institution. For circumstance-specific legal advice, please directly contact a licensed attorney.