What Is the Biggest Public/Private Hurdle?

Comments by:John ButtarazziManaging DirectorLiberty Hall Advisors LLCReston, VA

The harmonious interplay of government and the private sector is a key to some of the industry’s most expansive development projects. Public/private partnerships though can be a minefield for the unwary. Last week’s Feedback Poll treated those challenges, and most (36%) of our respondents agreed that political will is the biggest hurdle to overcome. Some 27% think the procurement process is the biggest pain, while 24% voted for tax-exempt debt (the rest chose the elusive “other”). Commentator Buttarazzi says the majority is right, and without the political will, there’s little else to talk about. With nearly 50% of Liberty Hall’s work in the public/private arena, he ought to know. He explains his reasoning below:

“It all begins with political will. If you don’t have a champion in a position of political leadership, the other obstacles matter much less. You need a thought leader, a political leader to get behind the project. You’ll always encounter obstacles, but they’re easier to overcome.

“The political will can’t be typecast by party affiliation. On the Republican side, Gov. Pataki in New York has been a leader. But Mayor Daley, a Democrat, in Chicago has been forward-thinking. So it doesn’t go by party type. Their choices are not driven by party but rather by fiscal needs that might have nothing to do with real estate or infrastructure. They have capital projects that need to be accomplished, so they look for private sources of investment to meet those capital needs, which has the ancillary affect of freeing up funds for other needs for which there may not be a private component.

“Of course, sometimes working with government can be like pushing string. You have to have patience and realize that elected leaders face different pressures than private-sector executives do. Their shareholders are the voters, and when something goes wrong it doesn’t necessarily fall to the bottom line and end up in the quarterly report. It shows up above the fold in the local newspaper.

“Voters, whether Democrat or Republican, are tired of tax increases and really don’t want to see their local governments taking on more debt. They have to find another way and public/private partnerships offer that.”