Social stigma

The court building in Long Beach is meant to shape the court system in Long Beach.

“Justice,” says Joe Aiello, chief of business development in North America for Meridiam Infrastructure, explaining the commanding, curtain-walled exterior of the George Deukemejian Courthouse in Long Beach, a coastal and port city of 467,892 residents in California.

“The Superior Court of Los Angeles County and the Judicial Council of California (JCC) wanted people to see the building and understand justice,” says Aiello.

It was Meridiam — with architect and engineer AECOM Technology Corporation and Clark Design/Build of California — that was named winning bidder of the ‘Long Beach Court Building project’ in 2010. More than three years later, the completed courthouse, standing five stories and taking up two city blocks, is as much a symbol of due process as a public building.

It’s also the holder of a singular distinction: the courthouse is the first — and only — social infrastructure public-private partnership (PPP; P3) in the US. While there’s a fattening pipeline and budding track record for transportation infrastructure P3s in the US, the prospect of a similar dawning of deals in social infrastructure is somewhere between slim and zero.

What’s more, changing that will require a change in thinking on Capitol Hill. The private sector is on the case, but it’s got its work cut out.

“I do think that people here have a harder time wrapping their head around using P3s for social infrastructure,” admits Aiello.

LARGE SELECTION

Public buildings — schools, universities, hospitals, prisons and campus housing — are typical social infrastructure PPPs, touching on sectors like healthcare, education, the military and government.

Like roads or airports, social infrastructure assets are long-term and physical, with a high barrier to entry. But in contrast, revenue from social infrastructure P3s is not based on users.

Social infrastructure PPPs proliferated in the UK and Australia in the 1990s. Neighbouring Canada has also produced a large selection of social infrastructure P3s in healthcare and education.

But the only other social infrastructure PPP in the US, barring the Long Beach Courthouse Building, was halted in mid-procurement in September. Ill-fated ‘greenfield’ P3 Nuevo Comienzo in Puerto Rico was supposed to be a 600-bed juvenile detention center.

Meanwhile, a potential P3 to renovate public school buildings and property in Yonkers, New York, has stalled. The school district in 2012 had contracted law firm Freshfields Bruckhaus Deringer, Macquarie Group and URS Corporation to evaluate the project.

Houston also explored using a P3 to deliver a court building, but decided on design-build method for the first stage of the project. Aforementioned Long Beach, fresh off its court building success, is considering a civic center P3.

“The ability to deliver social infrastructure P3s is more difficult than with transportation,” asserts AECOM P3 executive Samara Barend.

‘NO TIFIA’

Barend is strategic development director of PPPs in North America for AECOM. In talking about the dearth of social infrastructure deals, she’s adamant that P3s in the space won’t happen without federal funding.

“We don’t have TIFIA [Transportation Infrastructure Finance and Innovation Act of 1998 financing], we don’t have PABs [private activity bonds],” Barend stresses. “If we want to see any action — real action, like in transportation — then we need financing tools.”

To that end, Barend has established the Performance Based Building Coalition (PBBC), a trade group hoping to pass a bill that would create federal financing mechanism, akin to TIFIA or PABs, for social infrastructure.

She says PBBC has met with 50 member of the US Congress. The challenge, Barend explains, is convincing politicians that a combination of private capital and a federal program would reduce tax-exempt financing.

“TIFIA is actually cheaper than tax-exempt financing,” she says.

The future of social infrastructure in the US may depend on Barend’s persuasiveness.