Public-Private Partnerships – It’s More Than Just the “Deal”

Stephen B. Friedman, FAICP, CRE

Best Practices

• Create a shared vision with public purpose & benefit • Expect public sector role in pro-active predevelopment • Assemble a complete & capable development team • Make a fair deal: “but-for…” • Minimize the public role & cost • Maximize public benefits & impacts • Manage risk • Share success • Be accountable: expect documentation & monitoring

Focus on five areas today…

Today’s Focus Areas

1. Creating a shared vision with public benefit 2. Eliminating hurdles 3. Establishing the public-private partnership 4. Identifying resources 5. Right-sizing & structuring fair deals

1. CREATING A SHARED VISION WITH PUBLIC BENEFIT

Compelling Development Strategy

• Broader Vision: The Region & Community

• The Development Project

The Broader Vision: Participate in Regional, Community & Sub-Area Planning

Q 1. How can the private sector participate without being seen as

self-serving/creating conflicts of interest?

• Involve all stakeholders • Be transparent/open

meetings

• Recuse from clear conflicts • Ongoing participation in

boards & committees

Framing the Successful Project

2. ELIMINATING HURDLES

Policy Alignment Zoning / Act 250 / Parking / Stormwater

Public Facility Location / Anchor & Catalyst

Capital Budget / Infrastructure

?

Relocating Municipal Facilities to Free Development Site

Site Assembly

Demolition

Remediation

Obtaining grants Traffic signals/access

Floodplain realignment Etc.

Coordination of Multiple Government Entities

Site Predevelopment Heavy Lifting by Public Sector Help Get Sites to “Shovel-Ready”

Q 2. Given the Vermont context & Act 250, what are some ways to align land

use policy with development goals?

3. ESTABLISHING THE PUBLIC-PRIVATE PARTNERSHIP • Public seeking developer • Developer seeking assistance

• Financial & organizational capacity

• Business structure • Principals • Confirmable track record

(firm or individual) • Other communities’

references • Balance Sheet

(firm and individuals) • Long-term operating plan

Developer Capacity Important Whether Developer Approaches Locality or Was Solicited

Public Seeking Developer for Public Land

When Developers Approach Localities

• Authority & process on the public side

• Land ownership • Public land to “complete” Site? • Legal processes for negotiated

sale

• Valuation • Process for entitlements &

incentives • Structure • Documentation & monitoring

Public-Private Transactions Require More Than a “Purchase & Sale” Contract

Pre-Application Meeting with Locality Staff

Planning Commission

Approval (Subdivision,

Rezoning)

Design Review (Architecture, Landscaping,

Lighting, Signage)

Financial Review & Incentive

Structuring

Redevelopment Agreement Negotiation

Common Council or Village Board

Approval

Building & Site Development

Permit

Construction Begins

4. IDENTIFYING RESOURCES

Identify Resources

• VT’s Big 6: TIF, NMTC, CDBG, Historic Tax Credits, LIHTC, EB-5

• Public Facilities • Infrastructure Support • Anchor Leasing • Not-for-Profit Facilities & Bonding • Community Improvement Districts • Grants/Foundations • Bond Financing

The Assistance Continuum

• Process Assistance/Entitlements • Infrastructure/Parking • Site Assembly • Public Facility Location/Anchor Lease • Improvement Districts • Philanthropy • Assumption of Extraordinary Costs/Other Gov’t Grants • Financing Tools (“Big 6”) to Reduce Costs/Cost of Capital • Tax Abatements/PILOT • Direct Assistance

Q 3. Are there other Vermont-specific resources?

5. RIGHT-SIZING & STRUCTURING FAIR DEALS

Keys to Right-Sizing & Structuring Fair Deals

• Fiduciary responsibility & the “but-for…” test • Maximize private financing

– Maximize debt – Skin in the game – Risk adjusted returns

Analyzing the Gap – The “But-For…” Test

• Financing Gap in Order to Achieve Market-Competitive Returns on Investment

• Amount Readily Explained by Extraordinary Costs

• Cost of Providing True Public Improvements

• Incentive Deal: Incremental Cost of Locating at Proposed Site or to Compete with Alternative Site

Understanding Public Sector Timing & Risk

Monetization Approaches

• Pay-As-You-Go • Monetizing Future Revenues from Project Itself • Backing Bonds with Other Revenue Pledges • Loan Instead of a Grant • Trigger & Take-Out Bonds

IN SUMMARY…

Successful Public-Private Partnerships….

• Help achieve (realistic) community goals through a shared vision

• Provide community benefit • Can be facilitated by an array of financial & non-financial

public actions • Require different & more complex relationships and

transactions • Must be profitable AND a fair deal to all parties

Resources

• Successful Public/Private Partnerships: From Principles to Practices, Urban Land Institute, 2016, Free PDF: https://uli.org/wp-content/uploads/ULI-Documents/Successful-Public-Private-Partnerships.pdf

• Constructing Effective Public-Private Partnerships, Planning Advisory Service (PAS) Memo, American Planning Association, September/October 2017, Free PDF for attendees of the 2017 Vermont Development Conference: http://whiteandburke.com/wp-content/uploads/2014/12/Constructing-Effective-Public-Private-Partnerships-PASMEMO-2017-09-10_VDC.pdf

Available on Vermont Development Conference Website

https://uli.org/wp-content/uploads/ULI-Documents/Successful-Public-Private-Partnerships.pdfhttps://uli.org/wp-content/uploads/ULI-Documents/Successful-Public-Private-Partnerships.pdfhttps://uli.org/wp-content/uploads/ULI-Documents/Successful-Public-Private-Partnerships.pdfhttp://whiteandburke.com/wp-content/uploads/2014/12/Constructing-Effective-Public-Private-Partnerships-PASMEMO-2017-09-10_VDC.pdfhttp://whiteandburke.com/wp-content/uploads/2014/12/Constructing-Effective-Public-Private-Partnerships-PASMEMO-2017-09-10_VDC.pdf

DISCUSSION

Real Estate Economics Public-Private Partnerships Developer Solicitation Development Management Public Financing Area Plans &

Implementation Fiscal & Economic Impact

221 North LaSalle Street Suite 820 Chicago, IL 60601 (312) 424-4250 www.sbfriedman.com

Development Advisors to the Public and Private Sectors

30

QUESTIONS? SPEAKER

Stephen B. Friedman, FAICP, CRE

President SB Friedman Development Advisors

sbf@sbfriedman.com www.sbfriedman.com

mailto:sbf@sbfriedman.comhttp://www.sbfriedman.com/

Slide Number 1Best PracticesToday’s Focus Areas1. Compelling Development Strategy The Broader Vision: Participate in Regional, Community & Sub-Area PlanningQ 1. How can the private sector participate without being seen as �self-serving/creating conflicts of interest?�Framing the Successful Project2. Policy AlignmentSlide Number 11Q 2. Given the Vermont context & Act 250, what are some ways to align land use policy with development goals?3. Slide Number 14Public Seeking Developer�for Public LandWhen Developers Approach Localities4. Identify ResourcesThe Assistance ContinuumQ 3. Are there other Vermont-specific resources?5. Keys to Right-Sizing �& Structuring Fair DealsAnalyzing the Gap – The “But-For…” TestUnderstanding Public Sector�Timing & RiskMonetization ApproachesIn Summary…Successful�Public-Private Partnerships….Resources�DiscussionSlide Number 30QUESTIONS?