Countys Goldmine Of Publicprivate Deals Requires Caution
Written by Michael Lewis on May 16, 2013
By Michael Lewis
Willie Sutton robbed about 100 banks in a spree beginning in the 1920s. Asked why, he reportedly said, "because that’s where the money is.Ó
That’s why Miami-Dade is now looking to private investors for vital infrastructure: the county has the need and investors have the money.
Last week John Renfrow, head of water and sewers, revealed the county needs $20 billion in system work now. That’s not million with an M, that’s billion with a B.
Since the county suddenly learned less than a year ago that it had let water and sewer pipes and plants rust away and it wasn’t adding capacity fast enough, that’s been the elephant in the counting house.
It’s not the only elephant. We owe $6.2 billion borrowed to upgrade Miami International Airport, and big payments are due.
The seaport plans massive growth to meet need. Like the airport, its projections might not be watertight Ð 20 years ago we began expanding the airport because we were going to have 55 million passengers a year by 2008 but we’re at less than 40 million now.
Forecasting gets harder the farther out you look.
Twenty-plus years ago Homestead needed a stadium for Major League Baseball spring games. The city built it but so far it has been used for only two spring games.
The Miami Marlins needed a stadium that’s costing us almost $3 billion plus interest and now they’re closing the upper desk most weekdays because use is minuscule.
If short-term forecasts were so far off base, think how hard it is to state how many trucks and cars will use tunnels to Port Miami in 30 years or how many transit riders we’ll have decades from now Ð the decades-old Metrorail never met projections.
On the other hand, we clearly under-projected water and sewer need, maybe because they’re far less sexy projects than stadiums, tunnels, transit systems and airports Ð and besides, they’re buried where we can’t see pipes decaying until it’s too late.
But whether or not county forecasts are spot on, most needs are real. Unfortunately, money to finance needs isn’t. Washington long ago slashed such local aid.
And so last week commissioners advanced a Juan Zapata proposal asking Mayor Carlos Gimenez to develop within three months a plan to maximize public-private partnerships, list suitable projects and cite pros and cons of public-private deals.
The big advantage clearly is that the money is there and the county wants it. That’s reason enough for Mr. Zapata to go forward, stating "it is in the best interest of the county to work with… investors.Ó
He’s absolutely right Ð sometimes. But all is not gold that glitters, and some sparkling public-private deals in this county have turned to dross.
One flaw in public-private deals is that motivations differ.
The aim on the private side is profit. But the county shouldn’t be guided by how much it can net. Its chief aim should be to meet public needs with projects that aid citizens and fall in government’s realm.
So when Miami deals for more murals Ð those giant wall ads you hate along the highway Ð the private side gets its profit. The city also pockets money. But advertising isn’t the city’s role, and the claim that massive ads are an amenity rings hollow. The deal works for profits but not for people.
While we applaud a government profit, the county needs to be sure it’s doing the public’s business for the public good.
Another problem is county red tape ranging from paperwork to restrictions on business operations. If you’ve tried to do business with Miami-Dade you know how many hoops you had to jump through that you don’t privately.
That makes dealing with the county not only harder but costlier. So the private partner raises fees or cuts the county’s take to make up for pain in complying. The private side’s payback must be bigger in county deals, not to take advantage but to avoid being taken advantage of.
The third pitfall is that government for whatever reason Ð or whatever lobbyists Ð often chooses bad partners or makes giveaway deals. Look at City of Miami waterfront deals over the last 25 years for examples.
In fact, 25 years ago Miami Today reported that "a wave of public-private ventures is in the works in which developers will finance and develop projects on City of Miami land.Ó
The development department planned in 1988 to bring "a raft of proposals before the Miami City CommissionÓ to cut deals "that cost the city nothing but use its land, for which it will get rent, new public facilities and taxes on the improvements.Ó
Most of the big projects got nowhere. Some smaller lease-only deals are still causing the city headaches. Many promised paybacks never came.
The problem wasn’t concept but execution, especially in choosing partners. The best deal on paper goes bad if your partner fails to deliver.
Years back I made a tongue-in-cheek plea that might have been wiser than I knew: let McDonald’s run the postal service. We’d have gotten more efficiency and more cheerful service at far lower cost. We could even have super-sized package deliveries. And McDonald’s always delivers on Saturdays.
Yes, off-the-wall public-private deals can work.
The county plans deals to target "mass transit facilities, airport and seaport, fuel supply facilities, medical or nursing care facilities, recreational facilities, sporting facilities and water and wastewater facilities,Ó all issues now on the county’s radar.
The idea is appealing. Imagine doing what residents need at far less cost, maybe even a profit.
But we have ample reason to inspect not just the concept but each deal, especially since commissioners get campaign cash from firms that might get involved.
It’s fine to look for money outside of county hall, but have no illusions about also following in Willie Sutton’s footsteps.
Private entities have only one reason to deal: profit. The county is not skilled at robbing banks or anything else. County hall is more often victim than thief.