Cities Look to Public-Private Partnerships for Economic Development

Article excerpt

Although economic development is a cornerstone of local government activity, it certainly is not immune to budgetary constraints and the broader economic downturn. Many cities are exploring alternative ways to facilitate and finance local economic development, and some are turning to public-private partnerships (PPPs) to get the job done.

Public-private partnerships allow cities to pursue economic development while shifting part of the risk, reward, and financial burden to the private sector. According to the National Council for Public-Private Partnerships, a PPP is defined as "a contractual agreement between a public agency (federal, state or local) and a private sector entity" where "the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public."

In the case of economic development, PPPs are used most often to develop commercial properties, parking facilities, hotels, urban renewal projects and many others.

Public-private partnerships are mutually beneficial to cities and the organizations they partner with. Both parties must bring something of value to the table in order for the partnership to succeed.

Local governments can provide access to public resources and financing tools, such as tax incentives, as well as public assets, including land and infrastructure investments. Local governments can also provide leadership by championing the project and involving the community. The private sector provides technical expertise and has the potential to make significant capital investments because of its ability to assume greater financial risk.

Although both public and private entities are working toward a successful project, the local government's primary interest is improvements for the general welfare, including job creation, elimination of blight and infrastructure improvements. The private sector, on the other hand, is primarily concerned with making a return on investment. These diverging interests can raise questions about accountability given that the public sector cedes some financial and decision-making responsibility to the private sector.

In order to create a more open, transparent and accountable process, there are certain aspects that the governmental entity should take in to consideration. There should be a mutual understanding of the shared risks and benefits for each partner and a mutually agreed upon contractual agreement that includes ways to measure the success of the arrangement and methods for conflict resolution. …