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Public-Private Partnership

Within the California State University (CSU) system, the definition for public-private partnerships has been expanded and sometimes retitled to real property partnerships to encompass a partnership with a public or non-profit entity or to involve campus auxiliary organizations. A Public-Private Partnership (P3) may serve as an alternative delivery method to procure and finance real property development projects sponsored by the CSU or an auxiliary.

Public-private and public-public partnerships can be structured in a number of ways, but the typical structure calls for a campus or auxiliary to lease a portion of its land to a third-party development partner who then develops a project on the land, assuming development, financing, construction, and operating risk on t​he project.

The campus or auxiliary is expected to confer with the assistant vice chancellor of Financing, Treasury & Risk Management and/or the assistant vice chancellor of Capital Planning, Design and Construction about a potential public-private partnership project early in the concept process, and no later than the early stage of any feasibility study. Because of the commitment of the CSU or auxiliary organization land to third parties for long periods of time and because of the risks involved, public-private or public-public partnerships are usually approved by the CSU Board of Trustees in a two-step process consistent with board policy.

Reasons to Choose a Public-Private Partnership

  • Need for additional housing or academic buildings
  • Deferred maintenance in campus facilities
  • Allows access to alternative private financing (off the CSU's balance sheet)
  • No monetary investment required by the CSU or auxiliary organizations, with project costs paid by the partner for revenue-generating projects such as housing
  • Transfer of risk for initial costs, budget, financing and schedule
  • Leverages developer expertise and efficiencies in development, management and operations
  • Unlocks land value and monetizes underutilized land via ground lease
  • Financial return in the form of ground lease revenue, net cash flow participation
  • Achieves facility needs while limiting financial and operational risk

Reasons Not to Choose a Public-Private Partnership

  • Cheaper cost of capital available with CSU-arranged financing
  • Additional project costs to CSU or auxiliary organizations on P3 projects for real estate financial advisory and outside legal support
  • Possible adverse impact on existing housing operations
  • Off balance sheet, but still on credit
  • Reversion of risk to the CSU in the event of the project's failure
  • Non-revenue-generating projects such as classrooms or infrastructure will require annual payment to the private partner
  • Concerns about control of land by a third party over a long period of time