Minimising maximisation

Listening to the press conference announcing the recommendations of New York’s Commission on State Asset Maximisation in June 2009, the sense of the New York market for public-private partnerships opening up was almost tangible.

Paterson: declining
fortunes

“The traditional routing of state resources to infrastructure repair have been routed by our economic collapse over the last year. But this crisis may open an opportunity for us to find a solution . . . and that solution we see as public-private partnerships,” New York Governor Paterson said that day.

The 11-member commission recommended that New York create a strong, nimble oversight body that would, in the words of commission chairman Carl McCall, “assist, enable and authorise public-private partnerships” throughout the state. On the spot, Governor Paterson said he’d create the-so called New York State Asset Maximisation (SAM) Board to do just that.

But what a difference a year makes.

In May, having requested a status update from the Empire State Development Corporation, the arm of New York government where the SAM Board was supposed to reside, Infrastructure Investor learned the whole idea had been scrapped.

“Due to persistent budgetary concerns the formation of the SAM Board has been put on hold until the next administration,” Elizabeth Mitchell, a spokesperson for the Empire State Development Corporation, wrote in a statement.

A few days later, Infrastructure Investor broke news that the commission’s executive director, Samara Barend, who had been spearheading the creation of the commission, left the Empire State Development Corporation for AECOM, where she will lead the engineering and design firm’s PPP efforts for North America.

Not all about the money
The Board’s effective minimisation likely can’t all be blamed on New York’s budget problems. To be sure, no one doubts that finding ways to plug the state’s $9.2 billion must have pre-occupied much of Paterson’s time over the last year.

But, as he acknowledged when he backed the Board’s creation, scarce budgetary resources were a prime motivating reason to launch it in the first place. If anything, this should have galvanised his determination to make it a reality.

However, there was another side to the story: in February, the New York Times reported that Paterson had intervened in a domestic violence case involving one of his close aides, David Johnson. The story was so shocking that the Governor asked his political rival for the Democratic nomination, Andrew Cuomo, New York’s Attorney General, to investigate his administration’s handling of the case. A few days later, it also caused him to drop out of the gubernatorial race.

So if Paterson had not named his appointees for the board at that point (when Infrastructure Investor spoke with Barend in December 2009, Paterson had not done so), he was unlikely to do so now.

Blessing in disguise
Some viewed this as a blessing in disguise. “It’s best in the long run because the appointees will come with the backing of the new, stronger governor,” Sean Patrick Maloney, a lawyer at law firm Kirkland & Ellis, who drafted the executive order creating the State Asset Maximisation Commission when he still worked for Paterson, told Infrastructure Investor.

“The only downside is it’ll take more time,” he added.

But even that is far from certain. As Infrastructure Investor was going to press, Cuomo, the leading contender for the governor’s mansion, made his candidacy official. Hours later, this report appeared in the New York Times: “Attorney General Andrew M. Cuomo will seek to eliminate 20 percent of New York’s agencies, commissions, authorities and other bodies if he is elected governor.”

If there are any lessons to be learned from rise and fall of the SAM Board, it’s that the US PPP market will likely not take hold in the US as a result of commissions, reports and executive orders. Good old fashioned trial-and-error, with positive experiences resulting in more of the same, will remain the best way to convince cities and states to give PPPs a chance.