An Example of the Privatization Opportunities Generated for One Facility

An example of how a combination of the nine types of privatization can be applied to one facility will begin to reveal the power of a city-wide privatization program. A city-owned and operated civic arena would be one facility among a multitude of facilities included in the city's responsibility of owning and operating public facilities and infrastructure. Five of the nine types of privatization could be used on this single facility, and they could be implemented in this sequence, or grouped:

  • Enhance the economic performance of the arena by tapping most, if not all, of the 28 sources of revenue, which are possible for this type of facility. (Type 5)

  • Structure the arena's public services to be competitive. (Type 6)

  • Transfer the management of the arena to a private operator. (Type 1)

  • Depending on such factors as how the arena was financed, and the balance of the principal debt, the remaining debt could be restructured. (Type 8)

  • Structure a disposition plan for the arena to offer it to the private sector on the basis of an outright sale, or long-ten-n lease-acquisition. The latter would allow the government to retain ownership. (Type 4)

Privatization of the civic arena alone generates five privatization opportunities. To further illustrate why so many privatization opportunities evolve from a comprehensive privatization process, assume a government owns and operates ten facilities, and on average only two of the nine types of privatization are applicable, the number of privatization opportunities generated is 20.

Comprehensive Privatization Programs should be designed around these privatization methods. Often the combination of methods further enhances the results. For example, on an engagement involving the sale of sports and entertainment facilities, it is recommended that government first enhance the economic performance of its facilities (privatization Type 5) and transfer operations to a private management company (Type 1) prior to structuring the sale of these government-owned assets (Type 9). The increase in the sale price resulting from these sequential privatization actions will likely exceed the estimated proceeds from the disposition of the facility on an as-is basis.