Transcript At the intersection of Finance and Design

Public-Private Partnerships:
At the intersection of Finance and Design
Matti Siemiatycki
Geography and Planning
University of Toronto
Presentation Overview
1. The Global Rise of Transport Public-Private Partnerships
2. PPP models and motivations
3. Implications of PPPs on Hub formation
–
–
–
The project scale: system design and function
Land development: form, function, timing
Community planning: managing short and long term change
4. Conclusions: leveraging the intersection of finance and
design to achieve successful transit oriented communities
Transit and Land Use: The Financial Connection
Transport PPPs: A Truly Global Phenomena
Transit PPPs have Attracted Interest in Toronto
“Our view is we’re open for
business, we’re open to do P3s,
we want to do P3s to help deliver
this $50 billion program. The
question for us is, a simple
question, can P3 deliver better
value than traditional build
methods.”
Robert Prichard,
Board Chairman, Metrolinx
Models of Public-Private Partnerships to Deliver Large Infrastructure Projects
(Source: CCPPP, 2009)
PPP Motivations and Concerns
Motivation for PPP
Concern with PPP
Raise private money to pay for capital
costs of infrastructure
More costly than when delivered using
traditional methods; windfall profits
Stimulate innovative project designs
Non-competition clauses limit system
wide planning and service integration
Deliver value for money by transferring
Contractual obligations reduce long-term
project risks from the public to the private policy flexibility
sector
Encourage competition to bring down
project costs and improve efficiency
High need for data confidentiality can
limit meaningful public consultation
Cost savings achieved by reducing worker
wages and benefits
Are Transport PPPs an Urban Phenomena?
Do they Support Sustainable Transport?
All Transport PPPs, 1984-2009
Urban Rail PPPs, 1984-2009
60
50
40
30
20
10
0
Africa
Asia
Australasia
Europe
Latin
America
North
America
Potential Impacts of PPP at the Project Scale
1.
There can be different expectations, incentives and risks for public and
private sector partners
–
2.
PPP process can limit project innovations and long-term flexibility in the
system design in order to save costs and manage risks
–
3.
Design to reduce costs may not encourage greatest system integration into
wider landscape upon which effective hubs are formed
Value engineering means station designs more likely utilitarian than
inspiring
Fast tracked, integrated, design and construction process can lead to
tension between the public and private partner
“You’ve got the risk on the private side where they really have a timeline
with a lot of financial implications if they don’t meet, and on the public side
you have a lot of years spent getting what they want and those two come
together and can create tension.”
Doug Ewing, Partnerships BC
4.
PPP process may limit meaningful and ongoing community engagement
5.
Long-term contractual arrangements associated with PPP can make it
difficult/costly to retrofit system as the hub takes shape over time
Urban Transport PPPs Highly Sensitive to Strength of Economy
6
5
25
4
Number of Projects
20
3
15
2
Annual % Global Economic Growth*
30
10
1
5
0
Urban
% Growth
0
-1
Year
PPP and Design Process
Construction methods may be
more invasive but lower cost
Can impact on station
design/integration
• Design process proposed by
each concessionaire
– If RFP does not specified to
detailed design features,
proponents may minimize
station length, access points,
escalators, elevators, design
quality, etc.
– Do not necessarily build in
flexibility to expand system
• Eg. stations built only 40m
long; already nearing capacity
Design Features
No underground pedestrian
walkway initially planned to
connect adjacent stations
Trubnaya Station, Moscow
Jubilee Line, London
Canada Line, Vancouver
Community Consultation and PPP
• Tension between commercial confidentiality and
need for transparent, accountable public decision
making
•
"On the one hand, disclosure of proposed projects is necessary for them to gain
public legitimacy. On the other hand, the private sector will be unwilling to
participate if certain information about them and their business secrets must be
disclosed”
Hedlund and Chase, 2005
•
“Recent experiences in Australia would indicate that Government agencies are
tending to use the pretext of commercial confidentiality as a shield against the
disclosure of information which is commercially embarrassing to the Government
or which raises issues of probity.”
Australasian Council of Auditors General, 1997
Best Practices for Data Release
Involving the Private Sector Through Land Value Capture
Transportation
Improvement
Increased
Accessibility to
destinations,
lower travel
times
Value Capture
Higher Land
Values
Land Value Capture Approaches:
How is Private Sector Integrated into Project
The Asian Model: Bundled
• Integrate land developers directly
into the consortium of private
firms financing and delivering the
projects
• Land development joint ventures
(Hong Kong MRT)
– Build rental apartments that
generate long-term income to pay
for transit operation costs
– Leverage publicly owned land
• Private land and transportation
companies integrated (Japan)
Land Value Capture Approaches:
How is Private Sector Integrated into Project
The North American Model: Unbundled
•
Raising real estate related revenues
occurs outside of the PPP concession;
–
–
leverage increased value of privately
owned land
Sell publicly owned land adjacent to transit
stations for development
•
Use taxation powers on added land
value to raise real estate related
revenues. Can apply this money to
offset capital or operating costs of
transit investment
•
•
•
Tax increment finance
Special assessment areas
Density bonuses
Success and Failure of Land Value Capture Approaches
Land Value Capture Approaches: Potential Challenges
•
May not encourage mixed use: residential
most profitable; office or industrial less
valuable
•
Very high density: opposed by
communities in TO
•
Get residential buildings built, but not
necessarily well integrated with transit if
no incentive for developers (wasted
density)
•
Timing and financial value strongly
impacted by strength of property market
•
Special assessment areas/benefit
assessment districts can be challenged in
court; limits ability to borrow against
future revenues
•
Higher localized taxes around transit
stations may displace or delay investment
to lower tax locations
Conclusions: Leveraging the Intersection of Finance and Design
• Align incentives so that private sector DBFO partner has an interest
in encouraging facility designs that are integrated at the local level,
service coordination, and land use development
– Share traffic volume risk
• Performance specifications for PPPs must identify necessity for
project level integration features
• Involve end users early and meaningfully in the project design
process
• Leverage planning policy tools to ensure that buildings are well
integrated with transit; gross density not as significant as good
design. This requires strong planning framework, since in the short
term it does have additional costs