Thursday, September 09, 2010

Rethinking Public-Private Partnerships

It is always dangerous to mix private business matters with public policy. Often, private entities find cost absorption solutions from revenue generated from the common taxpayer. This effort should not be confused with third party initiatives, which directly apply to policy matters of the general public. These partnerships are different in the justification of the expenditures, because they are driven primarily to benefit private business(es).
This NY Times article is a prime example of misaligned cost absorption and displaced future funding. That being, these funds could address current and future policy matters, which could arguably apply more to serving the economic development needs of the community than the benefits associated with helping a private partner.

We are witnessing more new discoveries of taxpayer burdens related to private organizations that are thriving much better than the public entities, because they are supplementing their operational costs through tax revenue, or some other funding source of public means. I predict major reforms in this practice, where resources will be "reclaimed" to support public policy. The obligations of private organizations utilizing ARRA funds has set a precedent for any public-private interactions. This may not reach the level of impacting how private organizations conduct business, but it may surely find a way to be included in the balance sheet. There are direct financial incentives for a private organization to assist public matters, in the form of tax incentives. However, the benefits of a city floating millions in bonds for a private enterprise are indirect, in the form of projected tax revenue. One has concrete guarantees, which the other has a notion of hope.

I see this imbalance changing quickly - possibly moving toward another imbalance.