New York may not be the first US state to create an oversight body for public-private partnerships (PPPs), but the State Asset Maximisation Board approved by Governor Paterson on Monday would still be a first thanks to a unique structure it envisions for fast-tracking projects.
Project development agencies of this sort are, of course, nothing new. In the UK, Partnerships UK has been helping the public sector implement private finance initiative projects since 2000 and in Canada, Partnerships BC has done the same for British Columbia for six years.
But in the US, the wisdom of creating similar organisations is just taking hold. California beat New York by just a couple of months, authorising the creation of a Public Infrastructure Advisory Commission (PIAC) in its enabling legislation for PPPs, passed in February.
When you see the organisation being created, it means you have the first element of success, which is political support
Some see the creation of these types of organisations as an indication that the key ingredients for a US PPP market may finally be coming together.
“When you see the organisation being created, it means you have that first element of success, which is political support,” says Larry Blain, chief executive officer of Partnerships BC.
In New York state, that political support was scarce. Public conception of PPPs revolved around asset sales and leases, which legislators viewed with distrust, as evidenced by their lack of support for a proposal to privatise the state’s lottery. As Sean Maloney, Governor Paterson’s former first deputy secretary, explains in a guest op-ed for Infrastructure Investor, the State Asset Maximisation Commission was born out of the failure of that proposal. The commission’s task was essentially to figure out a political way forward.
Its recommendation for a New York State Asset Maximisation Board was instantaneously accepted by the Governor at the Monday press conference announcing the commission’s findings – a rarity in government and a big step forward for New York. To date, like in many states across the US, PPP-type transactions have been attempted as one-off projects, each with its own ad-hoc rules and no clear method for evaluating their effectiveness on a consistent basis.
The board, as envisioned by the commission, would ameliorate that by formalising a consistent policy framework for assessing the merits of proposed PPPs. Partnerships BC’s Blain calls this the second element for success for PPPs. The third, he says, is the creation of a project delivery agency like the proposed board.
Once the board is up and running, though, it wouldn’t simply be a policy think-tank. It would take a strong, central, hands-on approach to delivering PPPs in the state by approving projects and granting relevant state agencies the authority to execute them using the financing techniques and delivery approaches it deems appropriate, according to the commission's report.
“It is a stronger mandate than Partnership BC,” says Blain. “In our case . . . the approval process is clearly delineated to be the responsibility of elected officials and our role is to do business plans and make recommendations.”
It’s also a far cry from California’s PIAC, which doesn’t approve anything. Its task is more to advise the state’s regional transportation agencies and the California Department of Transportation (CalTrans) on project delivery. “It puts a great deal of responsibility on regional agencies and CalTrans to decide which projects go forward,” Jim Bourgart, California's deputy secretary for transportation and infrastructure, told Infrastructure Investor.
But Jane Peatch, executive director of the Canadian Council for PPPs, does see a model for New York’s proposed Asset Maximisation Board. “The models are all different but this one, the one New York has structured, sounds more like the Infrastructure Ontario model,” she says.
That organisation, which formally testified before the New York State Asset Maximisation Commission in December of last year, has projects assigned to it by Ontario’s Ministry of Energy and Infrastructure. But once projects are assigned, the board of Infrastructure Ontario gets to decide whether a request for proposals will be issued to the private sector.
Still, Infrastructure Ontario is not entirely an apples-to-apples comparison. “I would think one difference between New York and Ontario would be that Infrastructure Ontario manages the project through procurement and construction,” Steve Dyck, spokesman for Infrastructure Ontario, told Infrastructure Investor.
Indeed, in New York, contracting control would remain with the state agencies, according to the commission's final report.
We're not looking to create a new bureaucracy but to create a nimble process through which ideas can be screened through and fast-tracked
This may be because New York’s various state agencies already are able to manage procurement on their own. All they need is some advice on how to do it consistently for PPPs.
“We’re not looking to create a new bureaucracy but to create a nimble process through which ideas can be screened through and fast-tracked,” Samara Barend, executive director of the New York State Asset Maximisation Commission, told Infrastructure Investor.
She added that the commission wanted to come up with a process unique to New York.
If Governor Paterson creates the State Asset Maximisation Board along the guidelines prescribed by the commission, it seems like they certainly will have succeeded at that goal.