Photo by Kerry O’Connor is licensed under CC BY 2.0
The city of New Orleans has certainly suffered through its share of heartache – and heartbreak – since being decimated after Hurricane Katrina in 2005. Parts of the city became a virtual wasteland as homes, businesses, public health and safety facilities, parks and infrastructure suffered billions of dollars in damages, some irreparable. The economy tanked. But, 10 years later, the city is continuing to fight its way back.
One casualty of the storm that was the costliest and one of the deadliest in American history was the city’s historic Charity Hospital. Charity was one of two teaching hospitals that were part of the Medical Center of Louisiana at New Orleans. The facility was so heavily damaged that the governor ordered it shuttered, saying it would not reopen as a hospital.
Now, like the city, Charity is trying to make a comeback, although not as a medical facility. And, officials are turning to the private sector for help. Collaboration – one of the best options for solving large problems. In April, the Louisiana Division of Administration issued a request for information (RFI) from developers who might either purchase the more-than-80-year-old facility or work with the state through a public-private partnership (P3). The RFI also included a number of other ancillary properties owned by the state. If there is enough interest, a request for proposals (RFP) could be issued soon.
What the private sector can bring to such projects is industry experience, expertise and project funding. P3 projects are gaining in popularity in the United States after a slow start. The Great Recession, followed by slow recovery and diminished public funding, has public officials scrambling for new sources of revenue. That makes public-private partnerships extremely attractive.
P3s have been very successful on college campuses, and state departments of transportation have launched hundreds of collaborative transportation infrastructure projects. And, with water supplies at a premium, many local governments are hoping to partner with private-sector firms to finance, build and maintain water and wastewater treatment facilities.
So, it was only natural that the state of Louisiana would turn to the private sector for ideas about how an aging former hospital can be transformed for a useful purpose. A market study in 2011 suggested that the reincarnation of the building might best be suited for government, biomedical or housing use.
The city received five responses to the RFI. One suggested converting Charity into a mental health facility and low-income housing. However, no developer and no financial support have been garnered for that project. A Texas firm offered a plan that includes a more than $230 million renovation of the facility. The result would be both market-rate and affordable apartments that would cater to individuals and families employed in a new $2 billion hospital complex close to Charity. The plans call for 585 apartments, extended stay rooms, retail spaces and office space. It would include a number of incentives for the developer including tax credits, property tax breaks and city and federal grant funds.
A New Orleans developer proposed a $194 million plan that would create both affordable and luxury apartments on the properties. One section of the hospital facility would be dedicated to medical research and office space. This particular plan includes retail space, a day care and art-related facilities. The project is proposed as a P3, and would include a 99-year lease of the property by the developer. Loans, tax-exempt bonds, tax credits and affordable housing funds would be used to help pay for the renovations.
A developer from New York offered to purchase Charity Hospital and begin redevelopment. The proposed $245 million plan would create 600 apartments, an extended stay hotel, a biomedical training facility, retail space and parking. In addition to funds from the developer, other sources of funding for the project would include tax credits, federally subsidized loans and tax-exempt bonds. Another proposal from a consulting group offered its services to help create a vision for possible uses for the building before an RFP is issued.
The Charity project is indicative of how collaboration between the public and private sectors can benefit citizens and taxpayers. Incentives make P3s attractive to the private sector, and government benefits from lower project costs, little risk and quicker completion dates. What’s not to like about that?
Interested in getting involved in one of these potential public private partnerships in New Orleans? Contact Strategic Partnerships, Inc and let us help you sell your services to the government!