In this article, Peter Nichols discusses the growing use of public-private partnerships in the municipal sector.

A recent article in The Financial Post discusses a proposed plan to raise $400 million through a public offering to finance a new limited partnership that will lease, operate, and maintain the municipal wastewater treatment facilities in the Hamilton-Wentworth region of Ontario. The partnership will provide processing services over a 21-year period for a population approaching one-half million people. The deal constitutes an innovative approach for financing municipal infrastructure: much of the funds generated through the offering will be used by the region to finance facility upgrades and expansions over the lease term. The article provides a reminder of the increasing movement toward public-private partnerships involving all levels of government. Some of this trend is driven by the financial imperatives of cash-strapped governments but it goes well beyond that and recognizes the economies, access to capital and expertise, and risk-sharing that can come through cooperative public-private ventures.

The term "public-private partnership" is a term loosely used and can encompass a whole range of different types and levels of initiatives, including:

• sponsorships by private organizations. For example, some municipalities have "Adopt-a-Park" programs under which private companies fund and maintain public parks. Similar programs have been extended to libraries and other local facilities and services.
  
• service contracts (sometimes called contracting-out), under which private firms perform particular operating or maintenance functions for a fixed period of time and for specified compensation. These contracts can provide real "win-win" benefits to both the municipality and the contractor. An obvious example: the numerous arrangements across the province for reducing duplication and gaining service economies in utilities meter reading and billing by having one party handle water, sewer, natural gas, electricity, and garbage billing and collection systems on an integrated basis.
  
• management contracts, in which a contractor assumes responsibility for a full range of operation and maintenance functions, with authority as well for day-to-day management decisions. Compensation can be based on services rendered and/or performance.
  
• leasing, where a private party contracts with the municipality to operate a facility for a specified period of time. Here, the lessee assumes the financial risks for operation and maintenance. A variant to this is a concession agreement, in which the private party also assumes responsibility for financing specified new investments during the agreement period.
  
• build-operate-transfer (BOT) agreements, in which the private group agrees to construct a facility, operate and maintain it for a specified period, and then transfer the facility to the public jurisdiction. It is understood that the Town of Cochrane has this form of agreement in place for its new water treatment facility. Variations include build-own-operate-transfer (BOOT) and build-own-operate (BOO) agreements. In the latter arrangements, ownership is not transferred back to the public sector.
  
• joint ventures, in which the private and public parties share ownership and control of some facility, service or enterprise. A number of municipalities across North America have co-ventured with private developers in real estate projects. Other examples have included waste recycling and co-generation joint ventures between municipalities and private organizations.
  
• divestiture, in which a public facility or enterprise is sold to a private organization. Privatization may seem not to conform to a partnership arrangement, but the public body may negotiate as part of the disposition various terms and conditions for the continued delivery of services.

The most significant public-private alliances appear to be in those areas where there is some predictability in cash flow: for example, water and wastewater treatment, toll roads and bridges, airports, parking garages, industrial parks, and telecommunications projects. But clearly, partnerships are being extended in innovative ways to other areas of public activity as well and are seen increasingly by municipalities as offering a real alternative for maintaining or improving services and facilities at greater efficiency.