As Public Funding Shrinks, Colleges and Universities Turn to Private Sector Partners | Bilzin Sumberg


Historically, the federal government has played the dominant role in funding major infrastructure projects across the country – in many cases funding all or nearly all of the project costs. Over the past few decades, however, public funding has become increasingly difficult to obtain, while the need for infrastructure investment has exploded in various sectors of the economy. Ironically, it is no clearer than the passage of the recent $1 trillion federal infrastructure bill that the historic public funding model is dead. The bill provides only a small fraction of the resources needed to meet the nation’s infrastructure needs and specifically encourages projects that leverage limited federal funds with private capital through public-private partnerships (commonly referred to as PPP).

PPPs are contractual agreements between a government and a private entity in which the private sector assumes the risks associated with the development, financing, operation and maintenance of public infrastructure. PPPs are a proven, cost-effective approach to building critical infrastructure projects in less time, while minimizing risk to the public sector.

In recent years, higher education institutions have been among the most successful users of the PPP model. The P3 model offers a number of benefits to these institutions, including the provision of a higher quality housing product, the transfer of risk to the private sector, and the retention of school staff and financial resources for more aligned educational projects. on the school’s mission.

These benefits are now more pronounced than ever, as declining public funding nationwide has increased financial pressure on public colleges and universities. At the same time, many colleges and universities are growing at a rapid pace and need new educational facilities and other resources on campus. The P3 model allows growing institutions to expand their campuses quickly, without increasing or diverting existing staff or resources to operate and maintain new facilities.

More recently, Louisiana State University has awarded a P3 agreement for power plant retrofits at its Baton Rouge campus to a team led by CenTrio Energy and LAW Energy partners. Louisiana State University is just following suit. Several universities have used a P3 model to modernize and expand their campuses, which has proven to provide significantly more educational infrastructure in less time than a public institution could hope to provide using the traditional delivery model.

We have also previously highlighted a number of successful P3 education projects undertaken by higher education institutions, including Michigan State University’s P3 for a planned expansion of health and research facilities from university to Grand Rapids Campusa P3 for off-campus student accommodation at Florida International Universityand Plenary Properties Merced has completed construction of the landmark 2020 UC Merced Campus Expansion Project – a $1.2 billion, 1.2 million square foot social infrastructure PPP that has been called the world’s largest project of social infrastructure completed in the United States to date.

Of course, not all colleges and universities need larger campuses, and in light of the increased emphasis on virtual learning, many institutions are now finding that they need less physical space. , no more. P3s can also help colleges and universities deal with this situation. The private sector is able to both help modernize and downsize educational institutions and monetize land resources that are no longer needed for educational purposes, thereby reducing the costs of running the institution and creating new sources of income. The PPP model is flexible, and in light of the diverse and changing infrastructure needs of colleges and universities, we expect to see many more PPPs in higher education in the future.

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