City to build on partnerships

Denver leaders lay down the foundation of public-private plan to streamline projects

Denver city leaders Thursday rolled out their vision of how best to streamline the construction and management of massive public projects through partnerships with the private sector, a strategy increasingly being adopted by cities nationwide.

Their blueprint entails launching a new city office dedicated to vetting and shepherding such projects — which can cost hundreds of millions or even billions of dollars — through construction and management agreements that can span decades. Details of the plan were revealed after the city spent $1 million on an outside consultant and wrangled for months with the City Council last year about oversight.

Mayor Michael Hancock’s administration is proposing a “performance-based infrastructure” program, which would draw on effective practices from around the world for how best to design partnerships to get major infrastructure projects built and tend to their long-term upkeep, while the private-sector partners share in project benefits and risks.

“The City and County of Denver is committed to making life better for Denver residents by leveraging all of the tools in the toolbox to build, operate and maintain public infrastructure projects,” Emily Hauber, Hancock’s senior adviser for federal affairs and government relations,

said in an email.

The practice has gained traction with cities and government agencies across the U.S., including the Colorado Department of Transportation. In Hancock’s office, it’s viewed as especially important at a time when Denver is growing and federal investment in infrastructure is waning.

But it will be up to council members, in coming weeks, to decide whether to fund the effort.

City government’s first foray into partnership deals was a big one: Denver International Airport’s 34-year, $1.8 billion contract with Great Hall Partners, led by Madrid-based Ferrovial Airports. Approved by the council last year, the deal mixes public and private money to fund a $650 million renovation of the terminal building that will begin soon, including the eventual relocation of security screening to the upstairs level. Ferrovial then will oversee expanded concession spaces in the terminal for three decades, sharing revenue with DIA while the airport makes annual operating payments to Ferrovial.

Administration officials unveiled details about that projectvetting process Thursday morning to council members, several of whom have scrutinized that aspect in detail in the past.

Projects deemed large enough to warrant public-private partnership, or P3, treatment would go through five stages: planning, screening, structuring, procurement and implementation.

“Extensive public input” would be sought at various points throughout, according to a city fact sheet, with inclusiveness, accessibility and economic opportunity for all as guiding principles. Completed projects’ ability to meet preset performance standards would dictate compensation for private partners during the life of a contract.

So far, council members have expressed openness to the idea of a P3 office — along with con- cerns about some of the specifics.

Last summer and fall, Hancock aides who were working out the initial proposal for the new office faced resistance. That’s largely because the initial proposal would have given council members a voice in framing a partnership solicitation, while removing their standard authority to approve final large contracts.

The Hancock administration backed off that idea after the council for months withheld $480,000 in funding for the continued services of a consulting firm that was helping the mayor’s office developing its P3 framework and policies. The firm, Arup Advisory Inc., was eventually authorized for $955,000 in work.

During Thursday’s meeting, Robin Kniech and Rafael Espinoza were among members who asked questions about the public outreach strategy for communicating with stakeholder groups as each potential deal is formulated and evaluated.

The administration officials expressed a willingness to keep council members updated on negotiations with potential partners, perhaps through closeddoor meetings — rather than simply presenting a completed agreement at the end of the process.

“What I like is the ability to be transparent and forthcoming through the process, so that if they are (ill-advised) then maybe we can derail the administration from going down the wrong path,” Espinoza said. “I like the fact that there are briefings at stages. It comes down to how candid they are with us at those points, and how receptive they are to addressing our concerns — both from members of council and the public.”

The administration will again rely on council funding support if it hopes to launch the new office by late summer, as planned. The city budget this year includes $2.5 million for creating the program, but its use requires council approval. The office could eventually include three full-time staff members: executive director, attorney and financial specialist.

Public-private partnerships notably have been employed for roadway projects in Colorado, such as the expansion of U.S. 36 between Denver and Boulder.

But Denver’s preliminary pipeline also calls for exploring them for other projects, including at the National Western Center.

The city is working with the Western Stock Show Association and Colorado State University on $1 billion in plans for initial phases that will transform that campus, with the city portion amounting to $765 million. But still unfunded are later phases that call for a 10,000-seat arena, a large exposition hall, the redevelopment of the Denver Coliseum and the retrofitting of the century-old Stadium Arena to turn it into a market.

This is where city officials envision private partners bringing both money and ideas to the table for how to build those projects. They are slated for 60 acres of land referred to as “the triangle,” roughly between Brighton Boulevard and a rail corridor, and project officials say the four required projects would need about 18 acres.

That leaves 42 acres that developers could propose for a mix of private-sector redevelopment, open space and other uses. But Gretchen Hollrah, the director of the city’s project office, says that when the city starts seeking potential partners later this year, it will require that they include community input on potential types of development to plot out on the site.

After narrowing the list of potential long-term partners, the city could seek concrete proposals for the triangle area as soon as next year, Hollrah said.

Administration officials say partnerships will be analyzed for large-scale projects only if they’re worth the time and cost of working out complex contracts. Sam Mamet, executive director of the Colorado Municipal League, endorses that approach.

“For big city mega-projects like the Stock Show redevelopment, a P3 makes good sense,” Mamet said in an email this week. “And, it makes good sense for Denver to establish an office to provide the oversight needed. These are complex undertakings.”

Kniech had said ahead of Thursday’s presentation that she and other council members were eager to see more details about how the administration would evaluate the financial wisdom of potential partnership ideas.

Afterward, she said she was glad to hear of a plan to have outside analysts scrutinize partnership ideas — in what’s called a “value for money” analysis — at the outset, to gauge whether they make fiscal sense.

“We are moving in the right direction in terms of council input, but there are still a couple more edits to the plan needed,” Kniech said. “But it’s headed in the right direction in response to the concerns that have been raised, I would say.”

Some public-policy groups urge caution in pursuing such partnerships. For example, an Oakland, Calif.-based group called In the Public Interest says contracts that last decades and cover details that are subject to unpredictability or varying trends make P3 deals complex, and overly difficult, to negotiate effectively.

“You’ve got to anticipate what both sides want and everything that could go wrong,” Donald Cohen, the group’s executive director, told The Denver Post last year.

Randy Harrison, a senior research follow with the University of Colorado Denver’s school of public affairs, has spent years studying and advocating for public-private partnerships. Thanks to entities such as CDOT’s HighPerformance Transportation Enterprise, which explores partnerships for highway projects, Harrison says Colorado is developing a reputation for expertise and capability in crafting P3 deals.

“I think Denver structuring an office to really improve all aspects of their ability to develop and manage these (partnerships) really gives the city a higher level of accountability and a better chance of performance and success,” Harrison said.