Dive Brief:

• The City of Rowlett, Texas, has declared Bayside Land Partners LLC and Bayside District Partners LLC in default of their development agreement for the $1 billion mixed-use Bayside development and has filed a lawsuit in Dallas County District Court, “seeking all available legal remedies.”
• In a press release, City Manager Brian Funderburk accused the developers of committing a “textbook bait and switch” by changing features that city officials felt were critical to the project’s success after the city performed its obligations under the contract, such as agreeing to economic development incentives, creating a tax increment reinvesting zone and winning state tax support for a convention center. The city said the developers, which took over the project in the spring of 2018, went against its original vision by eliminating a planned eight-acre Crystal Lagoon, trolley and one-acre show fountain; reducing the amount of restaurant, retail and entertainment space by 55% (510,000 square feet to 280,500 square feet); and increasing the space for residential development from 29 acres to 50 acres.
• “Bayside is a public-private partnership, and our development partner is obligated to adhere to the vision for Bayside with which both parties are contractually committed; any changes to the vision require city approval,” Mayor Tammy Dana-Bashian said. “We are disappointed that it has reached this point and that we are forced to take this action.”

Dive Insight:

Many times public-private partnerships can be lucrative for all involved — including contractors, developers and the public entity — but all parties must be on the same page and be sure to hammer out an agreement that can protect them against situations such as one the City of Rowlett and the Bayside developers find themselves in. 

In fact, according to William Eliopoulos, a partner at Rutan & Tucker, some public agencies are hesitant to get involved in P3s at all because they just don’t have a deep bench of experience with them. 

For contractors, depending on how the deal is set up, a P3 could be just another construction project. But if a construction company has an equity position in the deal, as some large firms do, this sets them up to take on risk and responsibilities of ownership. In the time it takes a P3 to move through development and construction of a major transportation project, Eliopoulos said, a contractor could have successfully bid on plenty of other projects without the additional burden of ownership. This could be attractive to a construction company that has had to take a financial hit for problems with which an owner or developer typically has to deal.