The Private Sector

• Author: Michael Curley
• Pages: 101-104

101

Chapter 11—The

Private Sector

Public Private Partnerships are called P3s. P3 is one of the new buzz-

words in government. It’s like the word “innovative.” Everyone in gov-

ernment wants a reputation for being innovative. So, too everyone

thinks t hey can solve intractable problems by throwing P3s at them. is is

easier said than done.

A P3 is simply a contract between a public entity, like a government

agency, and a private sector organization, like a business, to provide a service

to the public. When a village hires a ca rting company to pick up garbage or

leaves in the fall, this is a P3. e F-18 can also be considered a P3 between

the McDonnell-Douglas Corporation and the U.S. Navy.

In addition to P3s, the private sector has a major role to play in nutri-

ent credit trading, which will have signicant impacts on the nancing of

nonpoint source pollution control projects. is chapter will deal with both

aspects of private-sector participation in the environmental nance business.

A P3 is not a panacea for any thing. It isn’t a nance mechanism; it is

simply a structure for implementing projects. is book is about “paying

for tomorrow,” so we will examine t he nancial considerations of dealing

with P3s.

he nancings for P3s depends on which of the Ps is bringing the money to

the party.

If the public P brings the money, then the nancing will generally be done

through the municipal bond market. is mea ns that the lowest interest

rates and the longest possible terms will be available. is means the lowest

possible cost for the project.

If the private P brings the money, then it will depend on the private P’s

appetite for ROI and term or exit strategy, i.e., how fast she wants her money

back. If the private P wants an ROI north of 15% and wants out after ve

years, the project wi ll be very, very expensive. If the private P wants 10% in

10 years, the project will still be very e xpensive.

To determine whether a P3 might be useful in nancing a project we need

to categorize projects into two basic classes.