Vector Arena
Introduction |
Transport and access | Noise
| Facts at a glance
|
Parties
| QPAM Limited | What's a BOOT? | The Quay Park site | Services
and facilities
| Key milestones | Student information
What's a BOOT?
The Vector Arena project was a forerunner in public/private
partnerships in New Zealand. It was developed under the country's first BOOT
(Build, Own, Operate, Transfer) scheme for a public facility. This means the
council invested in the development of the arena but was not directly involved
in its construction, nor will it be directly involved in its operation.
The council will receive royalties once the arena's rental
revenue reaches a specified level. In addition, a 20-cent royalty from every
ticket sold to an event at the Vector Arena will go into a fund for community
events.
A BOOT explained
A BOOT arrangement is a form of public private partnership
(PPP). It stands for Build Own Operate Transfer.
BOOTs allow private sector resources and expertise to
assist in providing and developing public sector assets and services.
BOOTs are not new. Historically they were known as
franchises or concessions. Famous examples are the Perrier Brothers water supply
in Paris in 1782 and the Suez Canal in 1869.
More modern BOOTs include the Hong Kong cross-harbour
tunnel, which opened in 1972 and which remains a successful venture for its
public and private partners.
How a BOOT works
Typically, the private sector has the opportunity to invest
in and generate revenue from a new public asset. This allows the public sector
to transfer the operating risks to the private sector.
In a BOOT scheme the private sector partner generally
builds, owns and operates the infrastructure or facility being provided. At the
end of a specified period, ownership of the facility is transferred back to the
public sector partner at no further cost.
More and more, BOOTs are being used to finance, build and
operate projects that would otherwise not be feasible, or would only be
achievable on a smaller scale.
A hallmark of the BOOT is that risk is allocated to the
party best able to manage it and price it.
The advantages of a BOOT
BOOTs recognise that neither central nor local government
alone will be able to finance all the investment needed in public sector
infrastructure. A BOOT combines the resources of the public and private sectors
to deliver public services and infrastructure efficiently and economically.
By passing the project to the private sector the council
avoids financing risk, construction risk and operating risk.
For example, a BOOT typically provides a new public
facility at a pre-arranged cost and to the specifications demanded by the public
sector customer. Any risk of cost or time overruns is borne by the private
sector rather than the ratepayer.
Also, it is up to the private sector company to operate and
promote the facility efficiently, so that it attracts users and therefore
revenue and profits to compensate for the extra risks they are taking on.
Changing the way we do things
There are important differences between a BOOT and other
council projects because of the duration of the projects, the method of
financing and the requirements of risk transfer.
Complex legal and commercial negotiations and drafting of
agreements are inevitable. Successful closure of these negotiations requires the
council to take a commercial approach to negotiations, particularly to the
transfer of risk. Of necessity, a great deal of the work is behind closed doors.
This is because commercial and legal negotiations require the exchange of
sensitive information.
