Can Public-Private Deals Help County?

Milwaukee County faces a serious challenge of declining state revenue and mounting capital costs. So does the City of Milwaukee. 

The city is racked with aging infrastructure, roads and lead service lines. And at the county, there’s an increasing gap between its annual revenue and what it needs to spend in order to keep up with capital improvements and maintenance of its transit system and cultural assets like the parks. Because of this both county and city officials are pushing data showing that the state’s shared revenue system is flawed, with both the city and county sending away more tax revenue each year to the state, thanks to a growing tax base facilitated in part by local policies, while the shared revenue from the state has been declining in real dollars.

In light of this, the Wisconsin Policy Forum recently held a panel discussing the possibility of attacking some of these challenges through public and private partnerships. The event, held Monday, drew both Milwaukee County Executive Chris Abele and County Board chair Theodore Lipscomb, Sr., along with private sector leaders with an interest in the issue. 

These partnerships, often referred to as P3’s, can vary from philanthropic donations to a government entity (like the county zoo or public museum) to contracts with private firms to save public dollars on services. Recent examples include a new fund accepting donations to county parks being stewarded by the Greater Milwaukee Foundation, and the beer gardens in county parks that let private companies — local breweries — sell beer under a mutually beneficial contract. 

Elected officials often face public backlash over proposals to privatize government services or capital projects. In 2009, the then comptroller for the city of Milwaukee, Wally Morics, suggested privatizing the city’s Water Works in order to save money. The proposal was met with fierce resistance from the public.

One expert on the Monday panel, Grady Crosby, VP Public Affairs & Chief Diversity Officer for Johnson Controls, said the public often fills in what they don’t know or understand about a deal, like a P3, with fears. Added Abele: “The public dialogue tends to be formed primarily by the media, and the media is less interested in successes than they are in failures. And failures sell.”

But some failures have had deadly consequences. At the Milwaukee County Jail it was a private contractor, Armor Correctional Health Services, that was charged with falsifying records of inmates. And these crimes are related to the death of Terrill Thomas, an inmate that died of dehydration.

Abele said some of the opposition to privatization follows from “the implication, implicit or not, that government can somehow do it perfectly.” Instead, Abele added, it’s important to look at what the government is doing relative to what a private partnership can accomplish. When services are privatized, he noted, “It’s never been in place where we’re doing something incredibly well and consistently providing value. It’s usually because we’re not.”

But Abele added a caveat: “Guaranteeing that it [a private solution] is always going to be a sort of rosy outcome, it is impossible for an elected to do that.”

One example of successfully managing an ongoing public private partnership is the Zoological Society of Milwaukee, said Jodi Gibson, its president and CEO. Her group is a non-profit that raises money privately to fund the mission of the Milwaukee County Zoo. Important to their success has been clearly defining the rules and responsibilities of the organization, she noted. The society also raises funds for specific, highly visible projects, that make for an easier sell to donors.

Charles Renner, a partner with Husch Blackwell, who has worked extensively on public-private partnerships, said there is “more opportunity for public private partnerships in buildings… I think water based infrastructure, there is a significant opportunity there.”

And Milwaukee certainly faces a fiscal challenge for its water infrastructure. Finding funding to replace lead service lines has become a politically charged topic for city politicians, and is shaping up to be a key issue in the upcoming mayoral race. In order to meet the challenge, Milwaukee Water Works would have to take on significantly more debt in the coming years, more than doubling its debt service between 2018 and 2022, according to the Wisconsin Policy Forum.

But it is projects like these where Renner believes public private partnerships could yield positive results. The competition of the private market has the potential to bring new efficiencies to government projects, especially in procurement, he said: “Private sector technology and development talent can be so far ahead of where the process is.”

In terms of the philanthropies, though, there are limits to what can be raised even to support worthy causes like the parks. Crosby, who also serves as the president of the Johnson Controls Foundation, noted: “The asks are outpacing the funders exponentially.”

Lipscomb said he sees the potential of public private partnerships, but the problem the county faces is ultimately a revenue issue that won’t go away. Most projects are paid for by issuing general obligation bonds, he said. “We’re doing that at a major scale every year.” A problem is the levy limits, which allow governments like the county to borrow more than the levy limit. “Which is the wrong encouragement. The reality is that we need higher revenue to pay for these services directly, whether it’s buses or a courthouse,” he said.

This is an area where the county board and the county executive have common ground, with both pushing for the state to either increase shared revenue or let the county tax more. 

The county as an institution is here to stay, Lipscomb said, which calls for more permanent solutions. Partnerships with private entities can put the county in a position where, over time, massive amounts of money are being made off it. Lipscomb used a hypothetical building project as an example: “The project developer is going to build this thing and own it and operate it and you’re just going to be a tenant and you’re going to pay a premium for that… Are you gonna open up your books and show me how much you’re really making?”

“And I’m gonna be forever paying for it. This isn’t like renting an apartment,” Lipscomb said. “You’re always gonna be in the business of courts and jail and airport and transit.”

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