June 15, 2016
Evans School’s Justin Marlowe addresses public-private partnerships in third financial guide
Volume three of Justin Marlowe’s Guide to Financial Literacy has been published by Governing magazine.
Public-private partnerships can be important and effective government financing tools, but public officials overseeing them must understand both the risks and whether the political will exists to carry out and maintain long-term projects, says Justin Marlowe of the University of Washington Evans School of Public Policy & Governance.
The advice is among the takeaways from Marlowe’s third Guide to Financial Literacy, titled “Understanding the Risks & Rewards of Public-Private Partnerships,” written for Governing magazine and published late this spring by e-Republic. Previous installments were published in 2014 and 2015.
“These are very complicated agreements with a lot of moving parts and a lot of assumptions,” said Marlowe, a professor of public finance. “You really need to do your homework — the government has to be prepared to do a lot of intense due diligence on the project” to improve the chances of success.
Public-private financing is not generally used for basic infrastructure such as roads and bridges, Marlowe said, but can be an effective tool where “there is a real need for innovation,” such as when bringing new technologies to bear on an infrastructure problem.
But they can also last several decades — longer by far than the tenure in office of most politicians or even staff members. Marlowe said it’s crucial that the government entity, whether at the local, county or state level, have “the political wherewithal” to succeed.
“When your private partners are looking at you as a potential partner they want to know that if a community commits to a long-term agreement, they’re going to stick with it,” he said, “even if the political winds change and public opinion shifts. They want to know their investment is secure.”
The guide focuses in particular on public-private partnerships where the private sector plays a key role not only in building infrastructure but also in its long-term maintenance as well.
“The private sector being involved in building roads and bridges is nothing new. Private partners operating and maintaining and managing those facilities for long periods of time is something relatively new,” Marlowe said.
The guide divides discussion of public-private partnerships, which it calls P3s for short, into three main areas:
- Defining such partnerships and what local policymakers might encounter
- Explaining the role of policymakers to “build the skillset,” and “build the mindset” to prepare their jurisdiction to carefully consider such opportunities
- Suggesting ways to structure agreements to maximize chances for success
In preparing this third installment in his series of financial guides, Marlowe studied dozens of different public-private partnerships across the United States. The Seattle area has a “mixed record” with such projects, he said. He cited relative successes such as the Cedar River water treatment facility, where Seattle Public Utilities worked with engineering firm CH2M Hill for an innovative design using ultraviolet light, as well as for construction and long-term maintenance. The Tolt River Treatment Plant, too, is an effective public-private partnership, he said.
“A lot of what’s been happening in South Lake Union has been done through some interesting public-private partnerships,” Marlowe said. “We have also had situations where that political will has been called into question,” such as a recent Seattle City Council vote regarding development of a proposed multisport arena south of downtown. City leadership must grapple with issues of such long-term commitments much as their counterparts do across the country, he said.
Marlowe’s first guide, “Connecting Money, Policy and Priorities,” explored the basics of public finance; the second installment, “Managing Your Jurisdiction’s Financial Health” addressed maintaining financial health over the long term.
The intended audience for the series is state and local government officials, especially legislators and finance/budgeting staff. Such dedicated people seek office to bring change to their communities, Marlowe has said, but quickly realize that “they won’t change anything if they can’t speak the language of budgeting and finance.”
A core theme throughout the series, Marlowe writes in volume three, is that a jurisdiction’s money “should follow its mission.” The job of policymakers and staff, then, is to “set priorities — that mission — and make certain your government’s money aligns with those priorities.”
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For more information, contact Marlowe at 206-221-4161 or jmarlowe@uw.edu. To access the guide, visit Governing magazine online (email and zip code required) or contact Marlowe.
- Watch a video of Marlowe discussing the latest volume of his financial guide:
