GLOSSARY

Public-Private Partnership (P3)

A public-private partnership (P3) is a long-term agreement in which a public owner transfers some combination of design, construction, financing, operation and maintenance of a public asset to a private partner, which is repaid by the public owner, by users, or both.

PUBLIC-PRIVATE PARTNERSHIP: WHO CARRIES WHAT, FOR HOW LONGPUBLIC OWNERkeeps the assetPRIVATE PARTNERconcessionaireLONG-TERM CONCESSION AGREEMENTavailability payments OR user revenueDESIGNBUILDFINANCEOPERATEMAINTAINAny mix of these can be bundled; the more bundled, the more risk moves to the partner.YEAR 01020304050Build in a few years; operate and maintain for decades.
A P3 transfers some combination of design, construction, financing, operation and maintenance to a private partner under a long-term agreement, paid by the public owner or by users. Terms of 30 to 50 years or more are common. Illustrative.

P3s are defined by bundling and by time. The more responsibilities bundled together, such as design-build-finance-operate-maintain (DBFOM), the more risk moves to the private side, and the longer the partner is accountable for how the asset performs. In parking, P3s range from a private developer building a garage on public land to long-term concessions of an existing parking system, such as Ohio State University’s 50-year parking concession in 2012.

How partners get paid

  • Availability payments. The public owner pays the partner for keeping the asset available and meeting performance standards; the public side keeps revenue risk.
  • User revenue. The partner collects parking fees or other charges and carries demand risk.
  • Upfront payment. In a concession of an existing system, the partner may pay the owner a lump sum in exchange for future revenues.

Common structures

  • Design-build-finance (DBF). The partner builds and finances, the public owner operates.
  • DBFOM. The partner designs, builds, finances, operates and maintains for the term.
  • Concession. The partner operates and maintains an existing system, often with rate rules written into the agreement.

What to watch

  • Rate and policy flexibility. Long agreements can limit how a city sets prices, adds curb uses or changes hours.
  • Compensation clauses. Know what the public owner owes if it takes spaces out of service for transit, bike lanes or development.
  • Handback condition. Define the state the asset must be in when the term ends.

The Parkonomics view

A parking P3 is a bet that the deal written today will still suit the city decades from now. That is a long time in mobility. Good agreements price flexibility in up front: rate-setting rules, the right to repurpose spaces, technology refresh and data ownership. The financing is the easy part. The hard part is writing a contract for a curb and a garage that will be used differently in year twenty.

Related terms: Design-Build, Progressive Design-Build (PDB), Municipal Bonds, Owner-Operator Agreement, Life Cycle Cost

Further reading: Procurement Is Still Buying the Past While Parking Has Moved On