Prominent Investor in P3 Projects Speaks About Florida’s Prospects
Jane Garvey, the North American Chair of Meridiam Infrastructure, knows a thing or two about public/private partnerships (“P3”). Meridiam is one of the country’s leaders in P3 projects, from compiling the P3 team and fertilizing it with ideas and experience to investing in the enterprise as a shareholder or lender. Jane is their top person in North America and shared her thoughts with me about Florida’s potential for P3 development. In this blog post and some that will follow, I will share her thoughts with you.
P3s are not ideal for every job. They’re more appropriate for large, complex, innovative projects not neatly fitting into traditional capital programs. The project must be critical to the public owner, as criticality will ensure the facility will be operated for the long-term, thus generating the necessary operational revenue to repay private investors and contractors for their risks. Criticality also ensures strong public sector buy-in, as lack of public commitment to the job may dilute the prospects of success. Historically, critical projects have included transportation as well as social infrastructure, such as schools, courthouses, and teaching hospitals.
The proposed P3 project must have a good revenue stream or it won’t attract investors or lenders. Stable revenue tied to the job, such as shares of federal funds, sales taxes or impact fees, will lure investors. Riskier prospects may deter investors. Without private funding, the P3 delivery method will fail, so it is important for funding to be attracted through assurances of stable revenue sources from which investors may earn an appropriate return on their investment.
Jane echoes the sentiment of everyone who has been through a successful P3 project that one of the most critical components is someone to champion the project or at least champion the notion of an alternative delivery method. Someone from the business community or a public official must advance the cause through the political channels and in the arena of public perception to avoid the project’s defeat at the hands of questionable, controversial or adverse concerns about the project’s viability, feasibility or appropriateness.
Finally, a successful P3 project must be a good fit with the public. The affected public entity must have institutional capability, meaning its various departments and operational structure must be able to seamlessly implement and monitor the job without disruption, delays or excessive red tape. Because disruptions are common when a public agency unfamiliar with P3 exercises its new set of P3 skills, delays can be reduced if the public agency’s decision-makers are well structured and the agency hires a financial advisor and outside legal counsel possessing the required P3 skill set.
Keep an eye on this blog for future posts, including more from my interviews with Jane Garvey, as well as other P3 experts, as we continue picking their brains for nuggets of wisdom we can all use to begin or continue to implement the P3 delivery system in Florida.