PPPs can be a useful tool in the delivery and management of infrastructure; they have demonstrated the ability to improve design and reduce construction time and costs. Furthermore, the private sector's ability to procure specialized expertise and harness innovation and technology offer the potential to enhance operations and improve maintenance standards over the life of an asset. In these respects, PPPs offer the potential to overcome important deficiencies in public sector performance and are an important option for infrastructure management that should be made available in New York. The following are useful guidelines for the application of PPPs.
1. PPPs should be focused on achieving efficiencies in the life cycle costs of facilities and ensuring their long-term maintenance at standards higher than typically achieved by direct public sector operation. State and local entities in New York, as elsewhere in the United States, have a long and regrettable history of delivering projects late and over budget, of designing projects without giving adequate consideration to the long-term maintenance needs associated with the design elements chosen, and of failing to keep key components of infrastructure including bridges, schools, dams, and parks in a state of good repair. PPPs can be a mechanism for correcting these serious shortcomings in public sector performance.
2. PPPs are well-suited to revenue-generating facilities, but user fees are not essential for a PPP. PPPs are attractive for facilities that generate substantial revenue, such as toll roads and bridges and water systems. Such projects can be segregated from a larger network, and the revenue stream can be collected and managed by a discrete operating entity. They also offer the advantages of linking costs and revenues and permitting innovative pricing policies.
Effective PPPs are not limited to facilities that generate substantial revenue from user fees. Many viable PPPs have been developed for public facilities through two other models in which the public partner pays the private partner directly. Under these models, the private partner is able to recover initial investments, meet operating costs and make a profit through regular "availability payments" or "shadow tolls" conditioned on keeping the facility in satisfactory condition. For the pubic sector, these PPPs provide savings only if the availability payments are less than the projected capital and maintenance costs for building and adequately maintaining the facility under direct public management.
3. PPPs need not be limited to large facilities; smaller assets can work, as well. The complexity and distinctiveness of PPPs have tended to limit them to large, individual facilities, but this need not be the case. Innovative financing mechanisms have been used for relatively small solid waste incineration projects in New York's localities and other jurisdictions. In addition, there is notable British experience with primary care health centers and secondary school buildings indicates that effective PPPs can be developed for multiple, similar smaller facilities and a private partner. This model can be applied to facilities in New York.