New York City’s public-private partnerships

May 24, 2012

New York seems to have developed the best form of public-private partnerships in the nation. The city revitalized itself, after its rapid decline in the 1970s, by allowing private, non-profit interests to take a larger role in public affairs. For example, the city hosts 67 business improvement districts (BIDs) and two major park privatizations, and these show that cities can receive support from the private sector without having to hand over, in exchange, major profit-seeking opportunities and assets to private interests.

Most of the current national discussion about public-private partnerships (P3s) is about selling public assets or leasing them long term to private investors. A recent example is the long-term lease of two major Puerto Rico toll roads to a consortium led by Goldman Sachs whose investors will likely reap revenues of $3.6 billion over 40 years for a $1 billion investment. In the project, the Commonwealth of Puerto Rico granted a monopoly right to private investors to control the asset and charge users for access.

In contrast, the New York City P3s to date have been true partnerships between the public and private sectors with no profit motive. The largest P3 is the Central Park Conservancy:

The Central Park Conservancy was founded in 1980 by a group of dedicated civic and philanthropic leaders. They were determined to end Central Park’s dramatic decline in the 1970s and restore it to its former splendor as America’s first and foremost major urban public space.

In 1998, the Conservancy and the City of New York signed a management agreement formalizing their then 18-year public-private partnership. The relationship was reaffirmed in 2006 when the agreement was renewed for an additional eight years. As the official manager of Central Park, the Conservancy is responsible for the day-to-day maintenance and operation of the Park.

Presently, 90 percent of the Park’s maintenance operations staff is employed by the Conservancy, which provides 85 percent of Central Park’s $42.4 million annual Parkwide expense budget through its fundraising and investment revenue. The City, in addition to the annual fee to the Conservancy for the services it provides, funds lighting, maintenance of the Park drives and enforcement. The New York City Department of Parks & Recreation retains policy control, has discretion over all user permits and events in the Park, and provides 10 percent of the field staff.

The Central Park Conservancy’s board of directors publishes a clear conflict-of-interest policy that specifically prohibits the leadership from profiting financially from the relationship with the city. Prior to its privatization, Central Park had haphazard care, and its buildings and hardscape were debilitated. The change since 1980 has been remarkable, and it’s been done as a free service to the people.

Bryant Park Corporation, another city P3, oversees the small park of the same name at 42nd Street and Sixth Avenue. Similar to the Central Park Conservancy, it was established to refurbish and manage a public park space. The corporation was also founded in 1980 but operates as a business improvement district. BIDs levy assessments on local businesses and landlords and use the revenue to clean streets, provide security and generally keep up neighborhoods. BIDs are non-profit and also provide a free public good.

New York City recently made a request for qualifications for bidders to privatize approximately 85,000 parking spaces. Some press accounts suggest that the city would be open to privatizing operation of the meters but would retain control of rates and share revenue with a private firm. New York already has a successful template for privatization that recognizes the value of open public goods. One hopes that this philosophy will guide the thinking for any further privatizations.

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