by Geoff Durham, Durham Chamber President & CEO
For Durham, a booming downtown chock full of arts, culture and entertainment offerings, the economic development future is bright. But this skyline of cranes are only made possible because of public-private partnerships.
A recent article by “City Lab” questioned the private sector job growth for smaller downtowns. The article framed it this way “…America’s smaller cities are winning people back with an explosion of new residential and entertainment options. Now they need to get serious about private sector job growth—and tech isn’t the silver bullet.”
Development projects like multi-family residential (the typical 300 unit apartment complex) and low-density commercial developments (low-rise office, extended stay hotel, strip-style retail and supporting surface parking) play a role in supporting the economy, but the true job creator project is the high-density project (HDP). High Density Projects add 1000’s of jobs to the economy and help to grow the tax base. But high-density projects are difficult to finance without public-private partnerships.
What is a Public – Private Partnership?
Public-private partnerships exist between a government agency and private-sector company. Financing comes partly from the private sector but requires payments from the public sector and/or users over the project’s lifetime. The private partner participates in designing, completing, implementing and funding the project, while the public partner focuses on defining and monitoring compliance with the objectives. Risks are distributed between the public and private partners according to the ability of each to assess, control and cope with them. Financing a project through a public-private partnership can allow a project to be completed sooner or make it a possibility in the first place.
FIVE Reasons Why Durham Still Needs Public-Private Partnerships (P3)
- Be intentional and control Durham’s growth– in many the cases the market can and will deliver projects that are easily financeable and do not address the immediate demands of a specific community. Engaging in public-private partnerships are helpful in attracting the high density projects that attract jobs and opportunities…what Durham needs. P3’s can deliver space where people can work, collaborate, create and innovate in the form of A-class office buildings. Approximately every dollar invested in these projects can yield four dollars in return through the term of the agreement. Once the term is complete, 100% of those revenues revert to the public sector. The extra revenues generated by these projects can be used to support the needs of the community such as public building improvements and youth and educational services.
- Supports small businesses and ventures – the development of high density projects does NOT occur at the expense, but instead to the benefit of, the smaller developments that Durham has come to prize. In fact, when HDP occur, small businesses also benefit greatly in the form of new customers and ancillary spending.
- Maintain Durham’s positive energy – the continued growth that Durham is experiencing is a direct result of public-private partnerships. Right now Durham is losing ground in the employment race to other communities and downtown needs the class A-space to land new brand-name tenant to keep us regionally competitive.
- Position Durham for a national headquarters – In 2004 advertising giant McKinney took a risk and moved their headquarters to Durham. This led the way for several other companies to follow, relocate and remain in Durham. It’s time for another major company to consider Durham.
NOTE: The public-private partnership that created the American Tobacco campus alos allowed homegrown companies like Bronto, Windsor Circle, Square 1 Bank, Appia, Adwerx, Automated Insight, Ansible and Validic to incubate in Durham’s downtown and grow.
- Public-Private Partnerships engender a culture of good corporate citizenship. Entering into these partnerships helps to ensure the private sector partners remain invested in the community beyond the term of the agreement.
“Civic centers, government hubs, tourism and entertainment districts, and educational and medical clusters are all great things; they’re an important part of what makes downtowns tick. But commerce—true private sector commerce—is the beating heart of a downtown.” City Lab
Public-private partnerships need to be looked at like an accounting general ledger; there is an expense column and a revenue column and both sides are important. In the case of a Durham P3, the revenue side of the ledger is significantly larger than the expense side. In a P3 agreement, not a dollar changes hands until the project is complete and generating revenues. It is the generation of these revenues that is use to incentivize the project. The Durham tax-payer is at NO POINT at risk nor are their funds ever used to finance the project.