Public-private partnerships are not a sexy political talking point, even in an election year when the state’s highest government office is up for grabs. But the two leading gubernatorial candidates are talking about them, and it could have significant implications on future state policy touching on everything from transportation infrastructure and economic development to fiscal […]
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Public-private partnerships are not a sexy political talking point, even in an election year when the state’s highest government office is up for grabs.
But the two leading gubernatorial candidates are talking about them, and it could have significant implications on future state policy touching on everything from transportation infrastructure and economic development to fiscal stability.
There seems to be bipartisan agreement between Gov. Ned Lamont and GOP challenger Bob Stefanowski that we ought to get the private sector more involved in major projects or initiatives that carry big price tags.
The goal, generally, is to offload some of the risk and upside in state projects to private interests so taxpayers don’t have to shoulder more debt.
The policy focus is smart given Connecticut’s long-term debt issues. The more we can focus on private players providing upfront capital to fund government-backed projects the better. But such deals carry risks and aren’t easy to negotiate. Both candidates are cognizant of that.
“You need somebody at the top who knows what they’re doing so they don’t get taken advantage of,” Stefanowski told HBJ in a recent interview. “Because, private equity will come in and rip off your shirt if you let them.”
Stefanowski said his background in corporate finance — including stints at UBS and GE — make him the right candidate to make deals that benefit both taxpayers and partners.
And he’s got a number of areas where he said he’d consider tapping private industry. For example, he said we should look at the benefits of privatizing state-owned airports, including Bradley International Airport.
He’d even consider tapping a private investor to take over a piece of a highway to install high-speed lanes that drivers could access for a fee — as long as non-toll roads are still available to drivers.
He points to private equity firm The Carlyle Group’s nine-figure revamp of the I-95 rest stops more than a decade ago as a potential model. Carlyle Group provided upfront capital and then shared fuel and concessions revenues with the state. It later sold off the rest stops to a European infrastructure fund.
Lamont, during his first term, has been a major proponent of public-private partnerships. In fact, his administration pushed a bill, which eventually passed in 2021, that eliminated several hurdles he said effectively blocked such partnerships from happening, particularly related to transportation projects.
He’s announced several key initiatives with private industry, including a $75 million Connecticut Small Business Boost Fund program, which provides low-interest loans to small businesses and nonprofits. He said private banks — including Citizens Bank, M&T Bank and First Republic Bank — have agreed to match the state funding to broaden the loan pool to $150 million.
One of the bigger public-private partnerships was the state’s harbor development deal with Eversource and Orsted. The two companies agreed to upgrade the State Pier in New London to meet heavy-lift requirements for offshore wind development. The state agreed to spend tens of millions of dollars to help with the upgrades.
That project, however, has been hit by cost overruns: an initial $93 million price tag ballooned to over $230 million. It’s also under federal investigation, underscoring some of the risks and complications of public-private deals.
I don’t wear rose-colored glasses when it comes to these types of deals. They are difficult to negotiate and could put taxpayers at greater risk if not done correctly. (The city of Chicago received criticism earlier this century when it outsourced control of its parking meters to private investors in exchange for an upfront payment. Following the deal, critics decried Chicago’s escalating costs of parking and other issues.)
One area where I think a public-private partnership can work and will happen is with the renovation of the aging XL Center. Proponents who say the nearly half-century-old building is in need of a major renovation have failed to convince legislators to allocate, at first $250 million in funding, and then a smaller $100 million aid package.
Both Lamont and Stefanowski have touted the building’s importance to the region’s vitality, but say they want private funds to co-invest in a renovation. Oak View Group — which manages 300 sports and entertainment venues globally and redevelops others — took over management of the XL Center last year and has expressed interest in investing in the property.
My prediction is an XL Center public-private partnership deal gets struck within the next few years, regardless of which candidate wins this November’s election.
