Development leaders see public-private partnerships as cure for ‘lazy’ public dirt

State Sen. Sarah Eckhardt created a new branding term for proponents of public-private partnerships at Urban Land Institute Austin’s monthly breakfast panel last week.

“Something I’ve discovered after 20 years in local government is governments have a tendency to have very lazy dirt and own a lot of dirt that’s not being maximized because there’s no carrying costs on government dirt,” she said, discussing the appeal of the property and development agreements between local governments and for-profit developers involving publicly owned land.

“We’ve got to demand local governments have a plan for their opportunity infrastructure and real estate, and that they execute it in a continually refreshing way, otherwise you will see lazy dirt in the hands of government.”

Panelists highlighted recent and in-progress P3 deals that have helped transform the Austin area over the past two decades, with the Mueller development, Austin Community College’s transformation of the former Highland Mall and the forthcoming Colony Park project some of the leading examples.

P3s are expected to grow in popularity as Austin’s population and housing needs continue to expand. Andy Moore, program manager in the Financial Services Department, said the city will be moving forward with the creation of a public facilities corporation that can construct more and different real estate deals than the still-new Economic Development Corporation that has the option to use P3 structures in its charge to preserve and open creative spaces.

“As the city continues to grow rapidly we’ll be applying it in many other areas where we hadn’t traditionally. We’re having to provide these services to a rapidly growing population … we’ll end up finding more and more applications for it,” he said. “How we decide when to use them and why, it’s because they deliver faster, they’re on budget and they’re generally better facilities than we are used to.”

ACC is likely to continue to be a heavy player in P3 projects in the years to come. Molly Beth Malcolm, executive vice chancellor of operations and public affairs for the ACC District, noted that the college has over 1,000 acres of property in four counties to put to use for new facilities and campuses.

Nina Farrell, an executive with the real estate firm JLL, said successful P3 deals begin with the local government or other public entity deciding from the start what it needs to accomplish with the transaction that puts public land assets in play for private interests. She explained that the process starts with everyone involved agreeing on the basic goals and principles for the project from the start, so there’s less chance for conflicts to arise if cuts or changes need to be made.

Looking at the needs of small municipalities for infrastructure and other development, Eckhardt said state law needs to allow for P3 considerations beyond real estate, with the state ideally providing a clearinghouse of development and legal experts that frequently are needed for deal-making purposes but are too costly for small cities and counties to afford.

When properly planned for, she said, the deals can help salvage stranded projects, such as the much-needed county courthouse that was delayed after a bond vote defeat in 2015 even though Travis County had pre-purchased the land it needed for the building.

“We invested in some significant pre-development costs and hired some great professionals to help us put (a request for proposal) together with an open-book, competitive process and that was one of the elements that was extremely important. It resulted in finding a great site, a fabulous developer partner, a guaranteed maximum price, a wonderful process, and we brought the project in on time and on budget.”

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