Innovative revenues and the new puppy syndrome

The revenue model for PPPs is evolving—gone are the days when the only options were tolls/tariffs or availability payments.  PPP grantors are looking to diversify revenues to make projects more robust and resilient to change. Land value capture, associated commercial revenues, tax revenue appropriation, among other idea, provide new sources of revenue while also linking the success of the project with other activities and parts of the local community.

These new revenues need to come from sustainable sources to ensure they are sufficient over the life of the project.  For example, revenues may come from corporate social responsibility funding from large companies looking to give back, from trust funds or other donor-funded initiatives, from international financial institutions like the World Bank, or from nongovernmental organizations. While these can be attractive sources—flexible and sometimes generous—they are often not sustainable. These entities may not be able to commit funding over the long term, or at least cannot be relied upon, as political and corporate priorities change.

It’s a bit like getting a puppy. The kids will promise to walk it, feed it, and care for it. They may actually fulfill their promise for a few weeks, maybe a few months. But slowly the enthusiasm fails, the promise fades. Mom and Dad end up doing everything. From personal experience the same is true for frogs, geckos, hamsters, turtles, and fish. Fundamentally, the arrangement is only sustainable because the obligation is backed by gullible parents.

So, plan accordingly. Mobilize revenues creatively, there are some great examples the world over.  See a few examples at https://ppp.worldbank.org/public-private-partnership/subnational-and-municipal/municipal-public-private-partnership-framework. But when being creative, ensure the source provides long-term sustainability; this means aligning incentives and ensuring the key stakeholders can fulfill their obligations over the period of the project.

Puppies aren’t just for Christmas.

 

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