It’s reminiscent of what happens when legislative remedies for TIF abuse are met with a determined phalanx of mayors from all known political parties, overcoming their ideological differences to focus on the commonality of their addiction to the magic funding spigot.
More on this another time.
Meanwhile, Charles Marohn’s latest post at Strong Towns is introduced.
We’ve all been there: our local government announces a plan to fund a shiny new stadium, or a big box store, or a stretch of highway to a new block of luxury homes. And at the same time, they say how absolutely certain they are that the business who’s getting the benefit will pay the city back tenfold—in jobs, in increased consumer spending, and the rest of the promises we’ve all heard a million times.
Sometimes, the partnership really does pay off. But too often, it’s doomed from the start—and if we just asked ourselves four simple questions, we’d see how many of these silver bullet projects are really bullets we should dodge.
Today, our president Chuck Marohn walks you through the four basic qualities of successful private/public partnerships.
Your city can change the way it chooses what to fund—and it can make your community wealthier than it’s ever been. But first, we need you to help us change the conversation. Can we count on you?
The article appears in truncated form below; we suggest visiting Strong Towns for the original. Graze a bit while you’re there.
4 QUALITIES OF A SUCCESSFUL PUBLIC-PRIVATE PARTNERSHIP, by Charles Marohn (Strong Towns)
… Google suggests that a “partner” is:
A person who takes part in an undertaking with another or others, especially in a business or company with shared risks and profits.
Shared risks and profits. Most public-private partnerships are merely public handouts by a different name … If we want to see the formation of real public-private partnerships where private businesses are truly sharing risks and profits with local governments, a few conditions must be met. Those are:
1. LIMITED AND QUANTIFIABLE RISK
… When entering into a public-private partnership, cities need to get someone disconnected from the project to give an actuarial-like assessment of the risk— and not someone who will be compensated only if the project goes forward, like a bond counsel. Risk must be quantified. And unless the risk is as limited as the private sector investment is, there is very little compelling reason to enter into an agreement.
2. MUTUAL SKIN IN THE GAME
… But at the very least, losses must be shared between partners. It is not acceptable in any public-private partnership for the local government to take on the losses while the private sector partner is able to walk away.
3. A REALISTIC CHANCE FOR A POSITIVE RETURN
… Our cities need to stop participating in projects that don’t offer a solid chance at a positive return on investment. Nebulous justifications like “it will create jobs (we hope)” or “it will grow the tax base (but only over the short term)” are not good enough — not when so much money is on the table. No business would enter into a partnership which they knew they would lose them money. Local governments should not enter such partnerships either.
4. A PROPORTIONATE SHARE IN THE GAIN
… Whatever proportionate share of the risk a local government assumes, it should also be in line for a proportionate share of the gain. That’s real money they should receive, not some abstract social gain that may or may not have any real, tangible value. If things go really well for the private business, they need to go really well for taxpayers as well. Share in the risk, share in the reward.