Board of Education continues discussion of public private partnerships

At its Dec. 12 Facilities Committee meeting, the Board of Education heard from Deputy State Treasurer Vance Holloman and Wake County Budget and Management Services Director Johnna Rogers on public private partnerships.

Holloman said capital leases are allowed under legislation passed earlier this year that permits schools to enter into leases to finance construction, repair or renovation of schools. The leases are subject to approval of the county commissioners and the local government commission.

Holloman said under build to suit capital leases, the board of education must adopt a resolution stating that the lease agreement is in the best interest of the schools considering time, cost and quality. The school board must find that the private developer is qualified to deliver the service. The contract and any pre-development agreements must be approved by the county commissioners.

Holloman said the local government commission would look at the lease agreement to determine if it meets several factors. The commission will consider the necessity of the project, amount and nature of outstanding debt, debt and fiscal management practices and current and future tax rates. He said the school board in its findings to the commission should show the debt is necessary, debt management practices are good, tax increases will not be excessive and the capital lease is preferable to a bond issue.

Holloman said general obligation bonds are a less expensive way to finance school construction than the installment purchase process for a capital lease.

You can see Holloman's presentation here.

Rogers told the board there are different types of public private partnerships that could range from little to complete privatization. She said private participation could occur at various stages of the capital project development. The school board and county commissioners must analyze costs versus benefits on a case-by-case basis.

Rogers said public private partnerships are effective for multi-faceted projects where both public and private components exist and some infrastructure is shared; the private sector is willing to bear certain risks that the public sector wishes to minimize; or other benefits such as timing or construction costs can overcome the county's favorable cost of capital.

Rogers said the county will evaluate public private partnerships on construction comparisons and the cost of capital. Construction comparisons would answer who can build at a lower cost, the quality of construction, or the ability to build the project more quickly to help avoid inflation costs or provide needed seats more quickly. The cost of capital would look at the interest rate being charged by the private sector. She noted there is no one-size fits all analysis.

You can see Roger's presentation here.

Board members agreed to continue their discussion of the issue. The Citizens Facility Advisory Committee will hear a presentation on public private partnerships at its meeting Dec. 18.

Posted by Bill Poston at 8:53 AM on December 13, 2006 | Leave Feedback

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