P3: OPPORTUNITIES FOR AMERICA’S INFRASTRUCTURE Greg Hummel
Public Private Partnerships (“P3”) Broadly refers to a variety of transactions in which a public or quasi-public entity shifts some degree of control and responsibility for development and operation of a facility or a piece of infrastructure to be used by the public, or for governmental or other institutional purposes, to a private entity
Types of P3 Projects 1. Private Contract-Fee Services 2. Design Build 3. Build Operate Transfer and Build Transfer Operate 4. Long-Term Lease Agreement 5. Design Build Finance Operate 6. Build Own Operate
P3 Funding and Financing • User Fees - payments associated with the actual use of the infrastructure by the public • E.g. tolls • Availability Payments - payments made for the supply or provision of the infrastructure and not the degree of its use • Most flexible • Lease payments, registration fees, bonds and other forms of debt, public sector grants, and equity investments
Benefits of P3 1. Projects are more likely to be completed on time and within budget 2. Risk and cost of maintenance and repairs shifted to the private partner • Ensures high level of maintenance 3. Construction cost savings and reduced life-cycle costs due to ongoing operation and maintenance 4. Cost-spreading over course of life 5. Provides positive and consistent customer experience 6. Allows public entity to focus on outcomes than the means by which those outcomes are achieved
P3 Challenges in the US • Slow to be adopted • Challenges • Federal and 50 different state statutory schemes • Conventional procurement laws based on “design, bid, build” scheme • No pipeline • Competing demands for capital • Lack of coordination • Lack of enabling frameworks • Inadequate infrastructure strategy/planning • History/Reputation
Global Success • Despite challenges to adoption in the US, P3s have been widely used around the world • Utilized in Europe, Canada, Asia, Australia, and Africa
Global Success: Australia Asset Recycling
Global Success: Infrastructure Ontario • “Full service” delivery vehicle • Advisory services, project management, financing • Alternative Financing and Procurement model • Private sector financing and expertise • Public sector control
Global Success: Infrastructure Ontario
Key Elements of Successful P3s • Stron ong Enabli ling Legis isla lation on • Public-Private Transportation Act (VA) • Public-Private Education Facilities and Infrastructure Act (VA) • Organize ized Stru ructu cture • Development of internal expertise • Developed policies and procedures • Streamlined project selection • Det etai ailed led Plannin ing • Fosters pipeline of future projects • Guara ranteed ed Revenue enue Stre reams ms • User fees, tolls, availability payments, special taxing districts
Keys to Success: Virginia P3 • Public-Private Transportation Act of 1995 (“PPTA”) • Main means for the construction of new, large transportation projects in the Commonwealth • Implementation Manual and Guidelines provides detail as to the process of approving transportation P3s, including Key Action Items and associated time requirements • Flexible, including in the means of financing P3 projects • Value-for-money analysis used to determine whether a project provides more benefits to its users and to the Commonwealth when delivered through the P3 delivery process than when delivered through an alternative method • Transparent and predictable – 30 day public comment period
Keys to Success: Virginia P3 • Public-Private Education Facilities and Infrastructure Act of 2002 (“PPEA”) • Establishes the means to use P3s for infrastructure, education projects, and public facilities of all types • Guidelines and Procedures for the PPEA instruct the state and local institutions in adopting projects -- P3 projects are appropriate under the PPEA “where private involvement may provide the project in a more timely or cost-effective fashion [and] lead to productivity or efficiency improvements in the public entities’ processes or delivery of services.” • Project is checked for “compatibility with the appropriate local or regional comprehensive or development plans”
Successful P3 Projects in the US • Virginia I-495 Expressway Expansion • Port Miami Tunnel • Long Beach Court House • Eagle Project (Denver) • KentuckyWired
Virginia I-495 Expressway Expansion • Cost less than Virginia’s estimate and displaced fewer residents due to its innovative design • Four new lanes, two in each direction, along 14-mile stretch of the Capital Beltway • Electronic/dynamic tolls • Consolidated availability payment
Port Miami Tunnel • Prior to construction of the tunnel, approximately 16,000 vehicles travelled to and from the seaport daily through downtown Miami, causing severe traffic congestion and indirectly threatening the seaport’s economic position • One concessionaire • Payments contingent on construction, availability, and quality • Public stakeholder: obligated to pay $670 million
Port Miami Tunnel
George Deukmejian Courthouse - Long Beach, CA • Replaced old courthouse labeled “one of the worst buildings in the state” • First major civic building in the U.S. to be delivered through P3 • Represented the California judiciary’s first “Performance- Based Infrastructure”project • State paid nothing until building occupied, and will pay an annual fee of $50 million thereafter for 35 years • Fee adjusted based on performance and upkeep • Additional courtrooms leased to LA County – revenue stream
George Deukmejian Courthouse Success • Completed on time and below budget • Engagement and oversight from the state’s Administrative Office of the Courts • Projected that the state saved $26 million through Performance Based Infrastructure
Denver’s Eagle Project • Commuter line between downtown and the airport opened April 22, 2016 • Project was procured by the Denver Regional Transportation District (“RTD”) as a 34-year design-build-finance-operate-maintain concession contract • RTD to make monthly availability payments to Denver Transit Partners, LLC (private concessionaire) • RTD retains ownerships, sets fares and fare policies • Supported by local sales taxes and federal funding grant
KentuckyWired • Private financing to provide broadband fiber cable connectively to every county • Private entity will build, finance, operate and maintain the network, and the Commonwealth will oversee the broadband lines • Internet providers will lease lines to complete connections to homes • Will connect 1,100 government facilities and allow for higher internet speeds to homes and businesses
Mixed Results • Chicago parking meters • Chicago Skyway • Indiana Toll Road
Chicago Parking • Parking Meters • 75-year concession agreement for control of city’s 36,000 parking meters for $1 billion • Revenue to fund Chicago’s immediate needs • Later determined that the city undervalued by approximately $974 million • Failed to account for rising rates and costs • Millennium Garage • 99 year concession agreement for $563 million
Chicago Skyway • 7.8 mile toll road connecting the Indiana Toll Road with the Dan Ryan Expressway, leading into the Loop • Existing toll road leased to private concessionaire – first time in the US an existing toll road was privatized • 99-year lease • City retains ownership and received $1.8 billion upfront • Concessionaire has right to operate and receive revenues • Concession sold lease in 2015 for $2.8 billion
Indiana Toll Road • 175 mile toll road across northern Indiana • Owned by the State, but leased to concessionaire for 75 years – $3.8 billion upfront payment • Concessionaire filed for bankruptcy 8 years into lease
Jury’s Out • Maryland Purple Line • Florida’s I-4 Ultimate Improvement Project • Trump’s Infrastructure Plan
Maryland Purple Line • Maryland Purple Line • Light rail through Maryland’s DC suburbs • Single private partner will design, construct, operate and maintain project and provide $900 million in financing • MTA will make annual availability payments
Florida’s I-4 Ultimate Improvement Project • Involves the reconstruction of 21 miles of roadway infrastructure in and around Orlando • Will add 4 variable toll lanes • Has received Envision Platinum recognition from the Institute for Sustainable Infrastructure (ISI) • Sustainability efforts of environmental, social and economic impact on the community
Keys to Success • National Council for Public-Private Partnerships six keys to success: Statutory and Political Environment 1. Organized Structure 2. Detailed Business Plan 3. Guaranteed Revenue Stream 4. Stakeholder Support 5. Project and Partner Selection 6.
Keys to Success • Authorization system that allows for transparency • Perception that P3s fail to protect the public interest or inappropriately profit • Appropriate cost-benefit analysis (value for money) • E.g. failed analysis re: Chicago parking • Defined processes to ensure timely adoption and implementation integrated in a way that provides some degree of certainty for private parties
Recommend
More recommend
