California continues to bet on public-private partnerships. Will it pay off?

Source: Adam Ashton, Merced Sun-Star, November 20, 2016

In the rolling greens of a defunct county golf course next to California’s youngest public college, tractors turned earth earlier this month for a long-awaited project that would double UC Merced’s footprint at an unprecedented pace. The heavy equipment on campus these days is breaking new ground in another way, too. It’s a sign of the University of California’s biggest-yet experiment with a construction project drawing substantially on private funding, committing the campus to a 39-year deal with a single developer that ultimately costs more than $3.6 billion. Known as UC Merced 2020, the project is distinct in its scale and its long-term contract with an international developer called Plenary Group. Plenary stands to earn about $1.77 billion over time for its role designing, constructing and maintaining the new buildings. … That contract adds UC Merced to a small but growing list of public agencies in California that are turning to the private sector for help with projects that otherwise might wait indefinitely for state funding. The roster includes a new city hall complex in Long Beach and a tunnel off the Golden Gate Bridge in San Francisco. Each likely will tie up public finances for decades. At UC Merced, the university expects to pay about $103 million a year from 2020 to 2055 for an upcoming growth spurt. It’s so expensive that the 12-year-old university might not be able to afford another development until it pays off the current expansion. … At UC Merced, Plenary is putting up almost $600 million of its own funding for initial construction, which helped clear the way for the expansive project favored by the campus’s chancellor, Dorothy Leland. Campus leaders also were won over by the prospect of quickly building expensive structures, and by a commitment to keep them well-maintained through the life of the contract, Feitelberg said. …

Related:

UC Merced Closing In On Execution Of Massive P3
Source: Kyle Glazier, Bond Buyer, June 23, 2016

The University of California, Merced, is closing in on formal execution of a $1.1 billion public-private partnership to nearly double the physical capacity of the campus by 2020. The university announced earlier this month that Plenary Properties Merced (PPM) was the winning bidder for the school’s next major phase of campus development, which the UC Board of Regents gave conceptual approval to last November. … Fitch Ratings earlier this month cited the UC Merced project as a primary example of how colleges and universities are increasingly finding P3s an attractive option for financing their campus infrastructure. College campuses provide public services that can generate revenues attractive to private investors, the rating agency pointed out, also noting that large flagship universities with strong credit ratings are less likely to go the P3 route because they have ready access to low-cost borrowing through traditional muni market access. …

UC Merced Picks Company For $1.14 Billion Expansion
Source: Inside Higher Ed, June 16, 2016

The University of California, Merced, is moving forward on a $1.14 billion campus expansion plan designed to use a public-private partnership to allow the newest campus in the University of California System to grow by 3,300 students. UC Merced on Wednesday named international investor and infrastructure developer the Plenary Group as the lead developer on a project to increase the size of its campus by 2020. The plan calls for new facilities to be built within a 219-acre site currently supporting the existing campus. Under the public-private partnership, private companies will design and build new facilities, then operate them over a 39-year contract. Funding will include private financing from the developer, money from UC Merced and up to $600 million in revenue bonds issued by the University of California Board of Regents….