This article is part of MACo’s Policy Deep Dive series, where expert policy analysts explore and explain the top county policy issues of the day. A new article is added each week – read all of MACo’s Policy Deep Dives.
Local governments are regularly tasked with braiding complex funding streams to ensure the vitality of public infrastructure and services. With federal dollars in limbo, weak revenue, and higher costs here to stay, maintaining government infrastructure has begun putting more pressure on public dollars and tax payer wallets. Public-private partnerships (or P3, commonly) become especially important during tough financial climates because they can allow local governments to pursue critical infrastructure projects without bearing the full financial burden upfront.
The P3 structure provides access to private capital, helping governments maintain or even expand essential services and infrastructure investments that support community well-being and economic resilience. Additionally, by transferring certain risks and responsibilities to private partners, governments can protect limited public funds, improve project efficiency, and accelerate project timelines. This policy deep dive will highlight a few ways Maryland counties have used P3 to advance projects for residents and serve critical needs despite the challenges.
What Does the P3 Opportunity Look Like?
The structure of the financial arrangement can take a number of shapes but improvements are typically funded by the private company fronting capital with their costs recouped at a later date. These repayments can be covered by revenue sharing from user fees, negotiated payment plans, interest charged on costs of services, and the like. Essentially government funds are allocated over an extended term and or user fees cover the costs depending on the project type.
This is particularly useful when traditional funding methods—like issuing bonds or raising taxes—may not be feasible or politically viable. By tapping into private investment and technical capabilities, local governments can access resources that might otherwise be unavailable. Additionally, P3 often promote accountability and performance-based outcomes, ensuring better value for public funds.
Where Can P3 Go Wrong?
While public-private partnerships offer many benefits, they are not always without risk and could come with notable downsides that local governments must carefully consider. Typically the majority of the pitfalls associated with these agreements can be addressed during the development and negotiation phase. To mitigate these risks, local governments rely on strong legal, financial, and technical expertise to structure fair, transparent, and effective partnerships that cover the lifespan of the project.
Project control and vision in particular needs to be very clear, especially when it is for a public service. There could be financial benefits that come with relinquishing certain amounts of control or responsibility. If issues arise during development, the flexibility to makes changes in order to address public concerns is paramount.
Another concern that could arise is that the long-term costs are greater due to profit margins structures with the partnering company, complex financing structures, and long-term contractual obligations. By contrast, one deal with a lender and a handful of grants would be more simple but does not have the same potential to leverage the expertise of the industry in question, which has the potential to lead to a highly superior product or service for residents. Weighing the potential opportunities and challenges is key to avoiding these problems while benefiting greatly from the access to market expertise. Successful projects typically hinge on a shared long-term vision between the government, the company, and residents.
Fast Tracking School Construction In Prince George’s
One of the most well-known and widely covered P3 county project in Maryland is in Prince George’s, where local leaders have established a public-private partnership that has enabled them to fast track improvements to the school systems aging infrastructure. The first phase of the project saw the construction of six new middle schools in three years. Experts estimate a project like this would take at least sixteen years if only public funding were leveraged for the development. A key component of this arrangement is the maintenance costs are built in for 30 years.
The Assistant Superintendent at the time shared:
“It usually takes us six to seven years per school from design to construction completion,” said Jason Washington, an associate superintendent who oversaw the project for the school system. But existing buildings were up to 80 years old and falling apart, and the district was running out of space for middle school students. “We had to find a way to do it faster.”
Prince George’s County Public Schools has been giving quarterly updates on progress for The Blueprint Schools project, with development timelines for additional phases continuing through 2028.
Not only has this accelerated the timeline for producing new schools but it comes at a time when both state and federal dollars for school projects are in question. The Maryland Interagency Commission on School Construction (IAC) has recently reported that Built to Learn and Blueprint mandates and weaker than anticipated revenue growth have lead to an imbalance in need verses resources. IAC Executive Director Alex Donahue briefed General Assembly membership during the 2025 legislative session on the financial gaps local education agencies are facing even beyond construction needs, noting that the fiscal pressure may be as great as the committee has ever seen.
The federal government has also recently been freezing and discontinuing grant funding, in what is intended to be an eventual dissolution of the US Department of Education. This eventual outcome will strain both operating and capital expenditures in the local school systems, making now potentially an ideal time to explore public-private opportunities.
Frederick Is Growing…And P3 Helps Them Keep Up
Another major P3 project is taking place in what is unarguably the fastest growing county in Maryland – Frederick. The Frederick Hotel and Conference Center project – also known as the Downtown Frederick Hotel at Carroll Creek – is a public-private partnership between the City of Frederick, Frederick County, the State of Maryland, and developer Plamondon Hospitality Partners. The $101M project will create more than 200 new hotel rooms, more than 25,000 square feet of ballroom and meeting space, and a parking garage to accommodate more than 250 vehicles.
The construction cost of the full-service hotel and meeting space will be privately financed by the developer using private equity and bank financing—with no public funds and includes the renovation of the historic trolley building (Frederick Railroad Building). Public funds for the project will be solely used to pay for the construction of public infrastructure, including land, on-site public parking, and related off-site road, utility, streetscape, and creekscape improvements. These public improvements will be funded from revenue sources generated by the project itself, including property tax increment, parking revenue and hotel tax revenue solely generated from the Downtown Hotel at Carroll Creek, the City of Frederick Parking Fund, and State grants.
From Frederick County Executive Jessica Fitzwater:
Frederick County’s growing economy is one of the strongest, most diversified in the state,” said Frederick County Executive Jessica Fitzwater. “Our partnership with state and city leaders and the private sector to develop the downtown Frederick hotel and conference center will create jobs and attract new investments in our community.
Completion of the new facility is anticipated to be 2027 and $35M is expected to be generated in annual economic impact.
Montgomery P3 Fills Gaps In Statewide Behavioral Healthcare Shortage
The capacity for in-patient treatment of individuals with behavioral health and substance use issues in Maryland is low. Montgomery County used a public-private partnership model to open a new treatment facility for residents. Construction and the opening of the facility continued despite the challenges of the COVID-19 pandemic. It officially opened in June of 2021 and began providing services.
Montgomery County developed and owns the site and partnered with the Maryland Treatment Centers for the operation of the facility. While the facility has been open since 2021, the project is just now in the final phase of development and scheduled to be closed in FY26 with the cleanup of the forest easement. This facility – the Avery Road Treatment Center – provides residential, non-hospital detoxification and intermediate care services for adults. Clients can self-refer, or can be referred by Access to Behavioral Health, jail, hospitals, or other treatment providers. The project was not without its challenges but brought together six different county agencies to get it done.
How’s Revenue Looking?
Revenue has remained sluggish since the COVID-19 pandemic and costs remain high, making P3 a more inviting option to continue moving projects forward, without overburdening tax bases statewide, particularly with a number of new taxes going into effect just this month. As previously covered on Conduit Street, the revenue outlook in Maryland continues to under perform. The March revenue revision slashed projections by $280 million over fiscal 2025 and fiscal 2026, primarily driven by weakening personal income tax collections and the growing impact of federal job reductions. Because counties in Maryland collect local income tax as a “piggyback tax“ on the state’s personal income tax, reductions in taxable wages directly shrink county revenue streams, limiting funding for essential local services.
Maryland Matters reported on the revenue revision, quoting Director of the Bureau of Revenue Estimates Robert Rehrmann from the March announcement:
“Now, however, I think it’s safe to say, compared to what our expectations were in December, a worst-case scenario has developed,” he said. “These cuts are materializing quicker than anticipated, and they’re as bad or worse than what we feared in December.”
A recent US Supreme Court ruling will likely exacerbate those federal job losses in Maryland with the recent pause on mass federal layoffs having been lifted in early July. Under the circumstance private funding could continue to look more viable until the tides turn.
