Three Ways Kentucky Has Used P3s

By Ed Green
P3 Kentucky Editor

In recent weeks, we’ve heard a lot about Kentucky’s growing infrastructure needs and the apparent lack of short-term funding to meet those needs – both at the state and local levels. A Kentucky Chamber of Commerce report released last month shows:

  • More than 4,000 bridges and overpasses rate as deficient or functionally obsolete need an estimated $2 billion for repairs or replacements.
  • Water and sewer systems in communities across the commonwealth need about $12.44 billion in upgrades.
  • Schools need an estimated $453 million of capital improvements.
  • Sixteen percent of Kentuckians have no access to broadband.

The P3 legislation passed last year and amended this year provides state and local leaders with another tool to meet some of those needs, but P3 deals have been slow to come together. Some leaders seem to view this legislation as a new and unproven model to address infrastructure needs.

However, looking around the Commonwealth, it’s easy to find examples of how the state and private sectors have partnered in the past. There are numerous examples of public-private partnerships as well as privatization efforts that have created savings for institutions and ultimately taxpayers.

As the Kentucky League of Cities CEO/Executive Director Jonathan Steiner and Williamsburg Mayor Roddy Harrison wrote last year:

“P3 is progressive. It brings collaboration between business and government and has the possibility to change the course of a community’s future. Cities are ready for P3, and city leaders are more than able to envision, create and negotiate what is best for their residents.”

To illustrate Kentucky’s success using P3 and privatization models, I point to several notable examples.

University Housing

Anyone who has visited the campuses of the University of Kentucky, University of Louisville or Eastern Kentucky University probably has noticed the significant upgrade in housing options for students. For more than a decade, private companies have worked with university administrators to increase capacity and living options for students. At UK, officials are working with a private developer to accelerate construction of 14 resident halls that will contain about 7,000 beds.

“We put out a competitive bid and found a publicly traded company, EdR, that could build these things faster, of better quality and lower cost than if we did them ourselves,” UK President Eli Capilouto recently told The Lane Report. “More importantly, they provided the equity to construct these facilities. We think it’s a fair and good agreement. They do an excellent job maintaining these facilities.”

Owensboro Downtown

Another shining example of government working with the private sector to make marked improvements is in downtown Owensboro, along the banks of the Ohio River. Local leaders worked with private industry to develop a strategic plan for the area and increased a local tax to help generate funding for public improvements.

In eight years, the city’s downtown has undergone a $1.5 billion transformation, adding numerous amenities such as a $48 million publicly financed convention center attached by skyway to a $20 million privately financed hotel. A second hotel also was built nearby. These facilities sit alongside a revitalized river walk, and construction is underway nearby on an International Bluegrass Music Museum – a tourist attraction scheduled to open next year.

Local leaders have credited the revitalization effort with helping draw a major employer to the community. California-based Alorica plans to open an 830-job customer engagement center in a former bank building within blocks of the riverfront.

“This announcement today is an absolutely perfect fit for the vision we had when we designed the downtown development,” Owensboro Mayor Mike Payne said last year. “For a company of this size, with over 150 locations and 92,000 employees throughout the world, to locate in downtown Owensboro is wonderful. This is the reason we invested in our downtown.”

State Fuel testing Lab

The Kentucky Chamber of Commerce pointed to the development of the state fuel testing lab as a model for how public-private partnerships can work.

The Kentucky Department of Agriculture turned over operations and responsibility for operating the lab to a private firm. The company, Core Laboratories of Deer Park, Texas, is able to conduct fuel tests for about a third of the cost of operating the state lab. Saving to taxpayers is estimated by the Department of Agriculture to be nearly $600,000 a year.

For P3 to work at a local level, leaders will need to prioritize community needs and seek partners who have the expertise and creativity to develop solutions that benefit citizens and private partners. The P3 legislation created a process that is transparent and allows communities to consider P3 opportunities without significant risk to taxpayer dollars.

In coming months and years, I expect more local leaders to consider P3 as a potential solution to the state’s infrastructure challenges. It’s not the only financing tool available, but it’s worth considering when more traditional solutions haven’t worked.

P3 Kentucky was created to educate and connect, so if you have a question about where to go next, feel free to reach out: (502) 544-2917 or ed@c2strategic.com.

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