March 5, 2014

Cash-strapped city, state officials seek private dollars for public projects

Gov. Pat McCrory and others express support for public-private partnerships during a conference Wednesday in uptown Charlotte

Faced with a growing population and $5 billion in unmet transportation needs, Charlotte officials are looking to an increasingly popular option for cash-strapped governments: partnerships with private firms willing to share the costs and profits of public projects.

Top state and city officials gathered Wednesday at the Westin Hotel for a two-day conference aimed at educating officials from around North Carolina and across the East Coast about public-private partnerships. A growing number of governments are using such deals in light of shrinking federal dollars and tight local and state budgets.

One expert warned that, while such deals can help get public projects done more quickly and with less public expense, they can go wrong without proper oversight.

The conference, convened by the Charlotte Chamber, Charlotte Area Transit System and the Foundation for the Carolinas, comes as Mecklenburg County leaders struggle to find a way to pay for $5 billion worth of unmet transportation projects in CATS’ 2030 plan.

City Council member David Howard, co-chair of a panel of local leaders trying to plug the shortfall, said conference organizers hope to increase local and state officials’ understanding of such partnerships, and also to draw attention to the Charlotte region’s needs.

Among those needs: Commuter rail to the Lake Norman area, expansion of the city’s east-west streetcar and transit lines to Matthews and Charlotte Douglas International Airport.

New solutions are needed because the days of financing big projects via “earmarks” written into federal legislation are gone, Mayor Patrick Cannon told the crowd.

He said federal money now more commonly comes from grants. And the city, he recalled, was passed over last year in its attempt to secure federal TIGER grants to expand the streetcar line to Johnson C. Smith University and along Hawthorne Lane through the Elizabeth neighborhood.

Cannon likened the grant process to a crapshoot.

“We’re basically shaking those dice and rolling them, hoping we don’t crap out. I’ll tell you, there’s a lot of us across the Southeast who are crapping out,” he said. “We have to find a way to make sure some of these needs are being met.”

Gov. Pat McCrory and N.C. Transportation Secretary Anthony Tata also addressed the group. Both expressed support for broadening the state’s use of public-private partnerships – known as “P3” – with Tata calling them an intriguing option at a time when fuel-efficient cars are reducing gas tax collections.

“We’re rapidly gaining citizens in the state and our revenues are flat or are declining,” he said. “We need to reform the transportation finance formula.”

He and McCrory said the state is coming up with a long-range plan this summer that will do that, and likely will include consideration of public-private partnerships.

Tata used the planned high-occupancy toll lanes from Charlotte to Mooresville as an example. He said that project – which has been heavily criticized by Lake Norman-area residents – calls for a private firm to design, build, finance and operate the lanes.

Tata said he expects to have “shovels in the ground” in 17 months building the lanes, adding that if the project exceeds revenue expectations the state will share in those extra profits.

He also said that the northern loop of Interstate 485 should be completed by the end of this year.

The conference program includes presentations from Colorado, Michigan, Tennessee and South Carolina officials who have experience with such partnerships.

One official from a Denver suburb that has won national recognition for its public-private partnership said the idea can work well, but he also sounded a note of caution.

For such projects to work well, public officials must have a firm grasp of private sector issues, and private firms must have a good understanding of the challenges public officials face, said David Zelenok, chief innovation officer for Centennial, Colo. Centennial has been recognized for its partnership with engineering firm CH2M Hill, which supplies all of the city’s public works services.

Executed poorly, he said, such projects could leave public governments on the hook for huge cost overruns or other problems.

“This is a very hot topic across the country,” he told the Observer in an interview. “These can be treacherous waters if you’re not careful. Just like taming a lion, they can do wonderful things if you’re careful. Or they can turn and eat you.”

State law currently allows the transportation department only three such public-private partnerships each year, Tata said. Legislation would be needed to allow more such projects around the state.

State Treasurer Janet Cowell, who also attended the conference, said she wants to work with state officials “to put some of the guardrails” around the concept as it evolves in North Carolina.

“You still need to get that political buy-in,” she said. “We don’t want to see agencies go out and obligate state taxpayer dollars without the approval of the General Assembly.”

City council member Howard said officials likely will ask for more public money to meet CATS’ long-range shortfall, but they hope to exhaust all other options first.

“We have to find every source of money that we can,” he said, “so we can say to the public that we did the best we could. Now we need you to close the gap on this.”

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