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Kentucky's Use of Public-Private Partnerships

"P3s." It sounds like the name of a new video game console, but the abbreviation stands for "public-private partnerships" and this term is becoming increasingly popular. In July, the Kentucky Chamber of Commerce announced that they would soon be releasing a report outlining the benefits of P3s. So, what exactly is a P3?

Governments at every level have been affected by the economic downturn and increase in funding requests. In these tough fiscal times, governments are trying to find ways to finance, construct, and operate social infrastructure projects that are vital to an area's welfare and growth. These essential projects can include a variety of things, such as schools, roads, military housing, and water systems. Because of the shortage of funds, federal, state, and local governments are turning to P3s as a way to facilitate these infrastructure projects without breaking the already-cracked bank.

Traditionally, a government will hire a private company for a specific project. This method creates problems ranging from adequate financing to daily oversight necessary for construction. In a P3 arrangement, the public sector partner retains the advantage of public ownership of the facility or asset. The private partner is relied upon for his expertise in operations, construction, and management and retains risks associated with the project, such as cost overrun or design problems.

P3s can result in projects moving faster, as private partners are able to streamline and approve phases much quicker than governments can act. Private partners also make many projects more affordable, as they have broader financing options.

P3 projects are visible across the Commonwealth: a new Eastern State Hospital, UK Student Housing, and transformation to Owensboro's downtown area are all made possible through these partnerships.

Currently in Kentucky, there is contention regarding the Brent Spence Bridge remodeling project. The bridge has long been functionally defunct, though still structurally intact. Remodeling it will not be cheap; it is a $2.4 billion dollar project. The Kentucky Transportation Cabinet, Ohio Department of Transportation, and many companies are all weighing in on the potential options available to keep the bridge up and running for the future. A PS3 could work, but critics are worried about the installment of tolls along the bridge. There has been extensive investigation and even legislation on the issue, but no decision. The time has come to cross the bridge, so to speak, and a P3 just may be the best way to get there.

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Thomas D. Flanigan is a member of McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Lexington, KY office. Mr. Flanigan specializes in the areas of entrepreneurial business, lending and commercial services and mergers and acquisitions. He can be reached at tflanigan@mmlk.com or 859-231-8780.

This article does not constitute legal advice.

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