Dealmakers interested in advising New York City on public-private partnerships (PPPs) are going to have to demonstrate they’re more creative than the average investment banker.
Issuing a request for proposals (RFP) for financial advisory services across a raft of assets, Stephen Goldsmith said: “We’re not interested in selling future revenue streams to private cost of capital, so we’re looking for more creative PPPs.”
And to ensure he hires the most creative PPP advisors, the RFP calls for interested advisors to respond with at least three PPP ideas in three categories of assets, including its parking meters, garages and lots.
Goldsmith: looking for
New York City will evaluate advisors’ primarily according to their ideas, with 60 percent of the grade coming from the PPP suggestions. Typically, requests for financial advisory services are much more heavily weighted toward a firm’s resume and representative transactions.
But Goldsmith said “creativity and sensitivity to local conditions” are more important to him in an advisor than the ability to simply provide advice on PPPs’ financial terms and conditions.
“It’s not the financial terms that become the trickiest,” Goldsmith said. “It’s the service level agreements, it’s the city retaining control of important features, like pricing, it’s the sensitivity to labour disruptions and how to create opportunities and ameliorate the problems for your existing labour force.”
Goldsmith gained experience in PPPs during his tenure as Mayor of Indianapolis from 1992 to 1999. During that time, he opened more than 80 city services up for competitive bidding to the private sector, according to his resume.
We're not interested in selling future revenue streams to private cost of capital
Looking at New York City’s PPP pipeline, he said “it’s too big a number for what we’re doing here”. But he’s already eyeing PPP opportunities in water and wastewater, sludge removal, schools, and energy in addition to any PPPs that come out of the RFP for the city’s parking and other assets.
With so many diverse PPPs under consideration, Goldsmith said its “possible” the city may hire “more than one” financial advisor who has expertise in the different sectors the city is looking at.
The goal, he said, is to find efficiencies and cost savings the city can realise across its assets and “monetise the future delta” between their current and improved performance level – not a wholesale monetisation of the entire asset, as has been done in deals like Chicago’s infrastructure leases.
The RFP was issued the same day as New York City’s Office of Management and Budget released a financial plan forecasting operating deficits of $500 million and $3.1 billion in 2011 and 2012, respectively. But Goldsmith insisted the city’s perilous financial situation is not the main driver behind his PPP initiatives.
“I think we have an obligation no matter what the budget is to unlock that value but the chances of getting it done in a tough time are greater than they are otherwise,” he said.
Interested financial advisors have until 4pm on 11 March to respond to the RFP, which is available here.