President's Postings: Public-Private Partnerships: Lessons Learned

Note: This is the original, unedited version of a column authored by Laura Moore and Devin Ellis that ran in the Diamondback on June 19, 2008. Due to space considerations, the edited version left out some key points:

June 19, 2008:

In 1994 the University’s two graduate student housing complexes were in a sorry state: aging, dilapidated and barely habitable. Local news stations covered the slum-like conditions of the housing. The facilities needed a massive infusion of cash for renovations, safety improvements and beautification, or they needed to be shut down. The problem was that the University did not have the money to invest. Then, in a fateful decision that would lay the groundwork for much of today’s student housing here, they transformed the properties into a joint venture with the Southern Management Company (SMC). The University would continue to own the land, but SMC gained control over the complexes themselves, taking over management and collecting rent, free of local property taxes. In exchange, they invested the millions needed to upgrade the buildings and agreed to pay the University a set amount (30%) of ground rent. Thus public-private partnership housing was born at Maryland.

At the time, the deal was heralded as a great step forward and the revenue stream was proposed for use on a variety of projects, among them a Graduate Student Center and faculty club. Today the public private partnership is the go-to model for building new student housing projects, in part because the State Government will not pay for them, and maintaining the University System’s bond rating makes financial officials reluctant to float the bonds needed to finance construction. With a partnership, the University can assume some of the risk, or ideally offer the use of its land as in the case of the new East Campus development, in exchange for the developer or management company bearing the bulk of the financial burden (and receiving the return on that investment in the form of rent). In theory it is a great idea, but the reality can be grittier.

The terms of the 99 year lease signed with SMC allow the University little control over the behavior of the company as a landlord, and while good faith efforts are made every year by the Division of Student Affairs, all too often SMC cannot be held accountable. Graduate Gardens and Graduate Hills are once again run down and lacking in basic safety features such as fire escapes and sufficient smoke detectors. Mid-lease rent increases and poor response to tenant concerns aggravate the situation. Furthermore, even though the ground rent revenue stream was promised to enhance the lives of graduate tenants, actually spending it in this way has been a recent phenomenon. Prior to the Division of Student Affairs assuming control of the revenue stream, the money went into the same pot as everything else and was used mainly to fund other construction around the campus.

What was pitched as a win-win ended up being a win only for the landlord, and in public-private partnerships this trend is all too common.

The University has learned and changed a lot about these types of deals since 1994, however, residents of the Commons and Courtyards are all too familiar with the trials of life under a for profit landlord. The fundamental flaw of this campus’s public-private partnerships has been two fold: the profit motive of the partners is often at odds with the University’s goal to take care of its student residents, and all too often the safeguards put in place to protect tenants when the deals are negotiated either prove insufficient or are forgotten over time. No one is asking private corporations to stop caring about profits, but we must drive a hard bargain in negotiating these deals to ensure that student concerns are paramount.

Now the University is in the thick of negotiating the biggest public-private partnership in its history and one of the largest development deals in the County in recent years: East Campus. It is absolutely imperative that the student community remain involved and vigilant in every step of this process. New graduate student housing will be a small part of this development and despite repeated assurances to our community that it would be affordable, the current proposed subsidized rents would be $1900/month for a 2-bedroom unit -- stratospheric even by DC-Metro standards. Naturally, the unsubsidized housing will cost even more. Despite a year and a half’s worth of conversations with administrators and developers, it is clear that their concept of “affordable” is nowhere near that of the average graduate student. But we are not talking only about housing, East Campus will literally reshape the face of downtown College Park, and unless we stay committed to reviewing every aspect and speaking out on every decision, we will quickly lose even the vestige of control over the project’s outcome.

So, student leaders, stay alert. Remember the lessons of 1994. The people involved at the genesis of the project moved on, and commitments that were not written down were quickly forgotten. As soon as the advocates are out of the picture, the hard bargains tend to disappear into the bureaucracy. Every party to these deals has a different agenda, and if you want your issues to really matter, you have to be willing to put in the hard work to keep them on the table.