How the war for talent is hitting local governments
Funding from the U.S. Infrastructure Bill is plentiful, but government employees to support the work are not. Many are turning to the private sector for help
As municipalities look to make the best use of federal funding from President Biden's $1 trillion bipartisan infrastructure law, a significant challenge is stymying their efforts.
In June, the U.S. Conference of Mayors launched a task force to discuss opportunities, challenges, and best practices around partnerships with private companies and non-profits highlighted talent and expertise shortages – and the ability to feasibly retain staff dedicated to infrastructure projects – as major pain points.
"The issue is these are complicated projects that require specialized expertise that normally the public entity would not have in-house," says Bob Hunt, who leads JLL's National Public Institutions practice group for state and local government and higher education.
The war for talent and the inability of local municipalities to compete with the private sector regarding pay and other benefits add to that pressure point.
While public-private partnerships, otherwise known as P3s, have been seen as a viable way to finance large infrastructure projects, working with the private sector is also proving necessary for municipalities to staff these large "episodic" projects, Hunt says.
It takes a village
Most public-private partnerships sit on a three-legged stool of advisors, including financial, technical and legal. The financial advisor analyzes a project's feasibility and affordability and consults on how to structure financing optimally and affordably.
For example, when Prince George County Public Schools had the lofty goal of building six new schools with limited financial means, they looked to a public-private partnership to bring their vision to life.
JLL was hired to augment the district’s capital projects and P3 teams – the latter of which had one person on staff at the time. As a financial advisor, JLL performed complex economic modeling that cut the time to deliver the schools from 16 years to three, saving nearly $175 million in deferred maintenance and construction costs.
The same type of modeling can be used on a variety of infrastructure projects, Hunt says.
Another advisor typically seen in a public-private partnership is one focused on the technical aspect of a project. For example, a city is looking to create a solar wind farm. The technical advisor would look at elements such as how to write specs around how the farm needs to perform.
The third is legal, which ensures the risk is appropriately allocated between the public and private sectors and that the public sector's interests are protected in the deal throughout its lifecycle.
"Most public institutions, unless it's a large city such as Los Angeles or New York, don't have the resources on staff that will be required if they're going to do a complicated public-private partnership,” Hunt says. "P3’s often require a small village of advisors to address their complex financial, technical and legal issues, and it’s important that these advisors, who often are from different firms, be philosophically aligned and commit to working well together.
“Public-private partnerships can provide financing where municipalities have limited options to raise the revenue and can be structured so the private partner takes on development and operational risks,” Hunt continues. “By leveraging the private sector in these strategic partnerships, the public entity can acquire the expertise needed to make the best use of federal grant dollars, especially when it is not feasible for these public institutions to attract or afford to fill a full-time position.”