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January 11, 2011

Comptroller DiNapoli issues report on public-private partnerships: needed are full and fair value, realistic agreements

Atlantic Yards Report

State Comptroller Thomas DiNapoli has released a new report, Controlling Risk Without Gimmicks: New York’s Infrastructure Crisis and Public-Private Partnerships [PDF], an effort to evaluate both the opportunities and risks with turning infrastructure over to partnership with the private sector.

The report notes that the state faces an estimated $250 billion in infrastructure needs over the next 20 years, notably transportation ($175 billion), municipal wastewater ($36 billion) and clean water ($39 billion). (Here's coverage from City Hall News.)

The Atlantic Yards example is not mentioned, but is at least partly on point: the main issue was the marketing of public land without a fair process, and secondary issues involved the packaging and valuation of public infrastructure such as a new railyard and transit entrance.

Essential principles

So DiNapoli's conclusions are worth noting:

There are four essential principles that New York must adopt in order to mitigate the financial risks inherent in public-private partnerships:

Full and Fair Value: Identify and use the best practices for the valuation of public assets to ensure that the public receives the full, fair value for the use of its property.

Reasonable Pricing: Keep private sector profits within reason to ensure that P3 agreements do not burden the public with unwarranted expenses, excessive fees, or high toll increases.

Realistic Agreements: Carefully draft P3 agreements to ensure that they do not include unrealistic expectations or inaccurate financial calculations.

Responsible Budgeting: Avoid budget gimmickry by adopting financing rules that prevent a disproportionate shift of current capital costs onto future taxpayers. This must be based on a comprehensive reform of the State’s debt and capital financing practices.

What about AY?

Given the history of Atlantic Yards, I'd argue that public assets were not fairly valued, nor have costs and benefits been accurately assessed.

Meanwhile, developer Forest City Ratner's efforts to renegotiate the Vanderbilt Yard deal with the MTA suggests that private sector profits--bolstered by a mayor and governor firmly on board with the Atlantic Yards project-- held sway over public value.

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Posted by eric at January 11, 2011 11:23 AM