Changes in state legislation will be required if PPPs are to be pursued by state and city agencies in New York. Other states have adopted considerably more flexible laws relating to construction and procurement. New York State has such a law relating to solid waste facilities, but it does not apply to other types of public infrastructure.
In selecting opportunities for effective PPPs, New York's leaders should give high priority to assets that are currently in poor condition and have a history of poor maintenance. That is, the greatest potential benefit of PPPs is their promotion of efficiencies in life-cycle management of assets and stimulus for adequate maintenance after initial construction or renovation. In most cases, the PPPs should be initiated as pilot programs and viewed as benchmarks for project delivery times and maintenance standards. They should be compared to experience with similar facilities that remain under direct public management, leading to decisions about whether the PPPs should be expanded to more facilities.
For New York City and New York State, initial application of these criteria suggests these candidates for exploration:
1. Highway bridges - Among the more than 17,000 bridges in New York State, 6,650 are functionally obsolete or structurally deficient, usually due to inadequate maintenance. One or more groups of bridges should be selected for repair and maintenance through a PPP with the New York City and/or New York State Department of Transportation as the public partner. The approach is not restricted to large tolled bridges; un-tolled bridges can be included in a PPP by using availability payment or shadow toll models. These models are used for assets that do not have natural revenue streams, and are structured so that the private partner issues the financing and is repaid by the public partner with a regular payment for ensuring the availability of the asset or based on its use. A PPP for the Tappan Zee Bridge has been proposed by private companies and is the subject of a study by financial consultants to the New York State Department of Transportation and the New York State Thruway Authority. Any next steps for pursuing a PPP for the Tappan Zee should be informed by this study.
2. New York City School Buildings - New and renovated school capacity are needed in the City, and the Department of Education has a history of poor performance in this function: schools have been chronically deteriorated and crowded. While the Educational Construction Fund has combined school design and construction with privately-financed residential and commercial development for some new facilities, these arrangements have been limited in number and do not extend to maintenance and other lifecycle costs. This experience could be expanded; a group of planned new schools and/or school renovation projects should be considered for a PPP modeled on the British experience with "strategic partnerships," in which local governments forge a long-term relationship with private partners to create a strategic framework for building or renovating a number of smaller capital assets with similar specifications. These partnerships mitigate the transaction costs of designing and monitoring PPPs for small assets with a small value, and result in efficiencies, such as economies of scale and improved supply chain management, throughout the life of the partnership.
3. New York City Parks - Central Park and other flagship parks have been restored to good condition since their neglect in previous years though a combination of public and philanthropic efforts; however, many other parks, often in poor neighborhoods, still require major improvements and better ongoing maintenance. A group of parks in need of improvements could be packaged for a suitable PPP. In addition, the Mayor's commitment to investment in new parks as part of PLANYC requires committing resources for their future maintenance. Another option is to purse stand alone partnership opportunities for the large underdeveloped parks. Any relatively modest concession revenue opportunities associated with these parks could be included in the arrangement to provide incentives for enhancing such revenues for the private partner and thereby reducing the availability payment required from the City. The City Department of Parks already employs a sophisticated system for monitoring the conditions of its facilities. A critical and challenging next step will be adapting this system to contractual provisions for financial incentives and penalties in management of parks.
4. Higher educational facilities - Both of the state's public university systems - the City University of New York and the State University of New York - have extensive facilities that are old and not well maintained. Recent assessments identified critical maintenance backlogs of $3.2 billion and $1.7 billion, respectively, for these systems. PPPs could be used to renovate some currently deficient educational facilities and keep them well maintained for the expected lifecycle. The initial private capital and operating costs would be paid through the availability payment model, and several facilities could be grouped together. In addition, it may be worthwhile to experiment with a PPP for residential facilities that generate user fees. This provides an opportunity to have PPP and Dormitory Authority managed facilities on the same campuses to ensure competition in prices and comparative performance standards.