Campuses are last P3 frontier

The session at the annual conference on Public-Private Partnerships titled “Bringing the P3 model to post-secondary infrastructure,” looked interesting and certainly offered the chance to learn something about a financing model that’s set to become even more important.

When it was over, while both objectives were met, the overall conclusion was that developing a public-private partnership model for universities is more complicated than originally anticipated.

It’s complicated because the institutions don’t fit the typical P3 model of bridges, roads and hospitals, because universities have been around for centuries and have developed a certain way of doing things; and, because academics, seeking to preserve academic freedom, are wary of the corporate sector.

But P3s are needed because as Bud Purves, the president of York University Development Corp. said, “the golden age and spending and growth for universities is over.” York University, which is north of Toronto, is two years into the development of a new campus at Markham, a bedroom community northeast of Toronto. That project, which will allow for 4,000 students, is being built on five acres of land given by the City of Markham.

Structuring the P3 has been difficult because of the amount of “free stuff” or equity contributions — including land, grants and parking facilities — provided by third parties. “How do you zero-cost that money to the project, yet deliver the P3 model?” asks Purves. The answer, he says, has been to broaden the concept of the P3 model.

University of California-Merced came to a P3 model because other circumstances: the state’s budgetary situation, the need to double the capacity of an existing 10-year old institution based in the depressed Central Valley and the nonfinancial viability of the university’s development plan. “We went down this path so that we could build what we could afford to maintain,” said Dan Feitelberg, vicechancellor. “The facilities being designed are being constructed with preventive capital maintenance in the contract. We had to think about durability (of the plant).”

Last month work started on California’s first university-based P3 project, the US$1.3 billion expansion at the university. Known as Project 2020, work is being done under a 39-year contract that covers design, construction, operation, maintenance and partial financing of all new facilities.

Kerry Alexander, director of Investment Programmes for the Scottish Futures Trust, said it has financed three post-secondary vocational schools worth about 300 million pounds — all of which have opened. But there is one difference about Scotland’s design build finance and maintain (DBFM) models: while investors get a return on their risk capital, that return is capped. “There is no upside, no dividend-bearing equity, a feature looked for by the public,” she added, noting the goal is to deliver value for money.

Ron Burnett, president of Vancouver’s Emily Carr University of Art + Design, is about 25 per cent away from completing a new $134 million campus miles away from its downtown location. That project, which required the institution raise about 20 per cent, was made more complex because of the need to fit the building into the community, from trying to meet the demands of staff and students to the ongoing requirement to outreach with all parties. (Burnett hosted 186 town halls to discuss the project.)

His one wish is that for future P3s, more emphasis is placed on design and not make it “a discipline at the margin.”

THE ANSWER ... HAS BEEN TO BROADEN THE CONCEPT OF THE P3 MODEL.