Some of the top leaders involved in public-private partnership projects gathered at the University of Texas at Dallas last Thursday to discuss “The Governance and Financial Tools of Public-Private Partnerships.”  The event was hosted by the Center for Finance Strategy Innovation at UT Dallas in collaboration with Greg Hirsch of ETB Systems Inc.

Attendees participated in an interactive conversation with panelists and explored the best practices, financial tools, new techniques and next steps for public-private partnerships. Panelists discussed how successful PPPs combine open, transparent governance with effective financial tools to properly allocate risks and rewards between the government and private sectors. 

David Epperson and Elizabeth Jones of the Center for Financial Strategy Innovation at UT Dallas began the discussion. They explained that PPPs bring the strengths and resources of the public sector together with the private sector to ensure that many needed projects around the state are accomplished.  PPPs are one of the fastest growing tools in public financial management, and are often used because they bring together the entities most capable of taking on the risk of a project.  While infrastructure PPPs are a relatively new phenomenon in the US, they have been utilized for a number of years in fields such as real estate and economic development. Jones explained that PPPs address the cost of the total life of the project, allowing leaders to plan for the entire life cycle of the project, not just for today and tomorrow.  Epperson identified the three critical success factors of PPPs: governance (open and transparent process is key), financial structure and risk management.  

The first panel discussed infrastructure public-private partnerships. Key panelists included Sasha Page, IMG; David Leininger, DART; Paul Wageman, North Texas Tollway Authority (NTTA); Bob Brown, P.E., TxDOT; and Michael Morris, P.E., Transportation Department of the North Central Texas Council of Governments (NCTCOG).  Panelists reminded the audience that without significant action by the Legislature, our transportation funding will continue to diminish.  A new funding source is imperative in order to maintain our current transportation system.  Brown pointed out the average age of our interstate system is 47 years old!

In Texas, the gas tax produces about $3 billion a year, not nearly enough to meet our state’s infrastructure needs. PPPs provide about $7.5 billion in funding to deliver project needs that cannot be met by traditional funding methods.  PPPs also provide discipline to the project’s scope, prioritize projects based on need, and award projects based on the best value presented.  Wageman expressed that local support is key for the success of PPPs.  

Morris continued that more emphasis is needed on the partnership in the P3 process.

Our state needs to address the funding issues as we become more strapped for resources. In the absence of revenue, local officials must find resources wherever they can to get roads built.

The second panel explored non-traditional PPPs such as the High Plains Diversified Energy Corporation, a special purpose entity formed to develop energy and transmission resources for use in the Panhandle region of Texas. 

The event presented an important question: What is the economic impact of doing nothing?  Many agreed the state budget as a whole needs to be examined. If we don’t do something about our transportation system, we are cutting off our ability to grow.  It is important to communicate with our legislators and discuss how to reach a balance on the best way to build transportation while addressing the revenue shortage problem so that we can continue to build roads in the future.  

Three public-private partnership infrastructure projects currently underway in Texas include the DFW Connector, the North Tarrant Express and State Highway 130. For more information on these projects and public-private partnerships, be sure to view TSRT’s Road Building Innovations video.