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P3 Infrastructure

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Jaylindgren

In a time when state and local governments must balance shrinking revenue with deteriorating infrastructure, P3s have become a timely model for completing projects on time and on budget.

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Infrastructure: Developing the Public-Private Partnership Model Where it Doesnt Exist and Making it Work for You Jay R. Lindgren Jocelyn Knoll
In a time when state and local governments must balance shrinking revenue with deteriorating infrastructure, P3s have become a timely model for completing projects on time and on budget. A long-term performance-based contract between public sector and private sector to deliver public infrastructure
The Issue Not enough resources for current infrastructure needs Increasing Spending Levels: How Much is Enough? Changing demographics and market needs demand new infrastructure Development Trends Diversity in America
Increasing Spending Levels: How Much Is Enough? Many groups claim that we are not spending enough. Comparisons of need differ based on what is being counted, but overall numbers are relatively consistent Note: Total government spending 169 Total 13 Rail 21 Transit 9 Bridges 126 Roads $ billions annual spending Type American Society of Civil Engineers Note: Federal government spending only 91 Total 6 Intercity Passenger Rail 7 Freight 16 Transit 63 Highways $ billions annual spending Type American Association of State Highway and Transportation Officials Note: Federal aid eligible roads only 156-200 Total 7-9 Intercity Passenger Rail 5-7 Freight 14-18 Transit 130-166 Highways & Bridges $ billions annual spending Type National Surface Transportation Revenue and Policy Study Commission
Development Trends US Population 1900-2100 Source: All data from U.S. Bureau of the Census. Census Release NP-T1, "Annual Projections of the Total Resident Population as of July Lowest, Middle, High Series: 1999 to 2100,Population Estimates Program, Population Division, U.S. Census Bureau, Washington, D.C. 20233, February 14, 2000.
Diversity in America Distribution of Households by Type: 1950 to 2000
New Demands: A More Urban Country Since 1956, we built 46,837 miles of Dwight Eisenhower National System of Interstate and Defense Highways at cost of $114 billion over 35 years How to build the urban half of the system? Increasing demand Insufficient federal funding State transportation shortfalls
One Tool: P3s Public-Private Partnerships Accelerates infrastructure projects deemed impractical under traditional funding Well-developed international tool $200 billion capital available
Typical Models Build Own Transfer (BOT) Design, Build, Finance, Operate, Maintain Risk Shifting Performance-based Contracting Concessions Privatization Upfront fee in exchange for revenues
BOT: Advantages/Disadvantages Pros Risk-sharing Innovation and efficiency Public liquidity Public focus on other core functions Decreased reliance on traditional funding International investment Cons Long-term/complex contracts Loss of public control Potential higher user costs Risk of quality sacrifice in exchange for profits Impact on public jobs Loss of accountability
U.S. Examples Chicago Skyway - $1.8 billion (concession) Cincinnati Streetcar (BOT) British Columbia 75% of current infrastructure through P3s $3 out (??) $4 billion
Minnesota Roadblocks Well consider . . . What is currently authorized What is currently prohibited What is necessary to achieve P3 goals Good models
Minnesota Roadblocks What is currently authorized Local governments do not have inherent authority; authority must be expressly granted or implied from express grants. Mangold Midwest Co. v. Vill. of Richfield , 274 Minn. 347 (1966) Look to Minnesota Statutes for authority
Minnesota Roadblocks What is currently authorized Local Road Authorities have power to retain private contractors to design, build, and maintain roads within their jurisdiction. E.g. Minn. Stat. 則163.02 (counties) Must follow public bidding process prior to awarding contract E.g. Minn. Stat. 則471.345.
Minnesota Roadblocks What is currently authorized Implied authority to combine design, build & maintain into one contract? The awarding of a contract is an administrative act of discretion vested by the law in the governing authorities of the city. The courts cannot direct the authorities as to how they shall exercise that discretionary power nor direct to whom they must let a contract. They may only enjoin them from doing so illegally, which must include an arbitrary, capricious, or unreasonable exercise of power. 33 Dunnell Minnesota Digest, 則12.01(b) (4th ed)
Minnesota Roadblocks What is currently authorized Implied authority to combine design, build & maintain into one contract? Must conform to bidding requirements, then discretion re: methods and terms of contracting process. Must exercise discretion in a reasonable manner, not contrary to the public welfare, not unreasonable, arbitrary, or capricious.
Minnesota Roadblocks What is currently authorized Implied authority to combine design, build & maintain into one contract? Argument: By combining the contractual obligations to design, build and maintain into a single procurement process which comports in all respects with the applicable contracting procedures, a local road authority may use and combine these private initiative variants.
Minnesota Roadblocks What is currently authorized Certain Toll Facilities Since 1993, Minnesota Statutes have permitted local road authorities to enter into agreements with private operators to develop, finance, design, construct, improve, own, and operate a toll facility for roads and bridges within the road authoritys jurisdiction. Minn. Stat. 則則160.84160.93
Minnesota Roadblocks What is currently authorized Certain Toll Facilities Toll Facilities = a bridge, causeway, or tunnel, and its approaches; a road street, or highway; an appurtenant building, structure, or other improvement; land lying within applicable rights-of-way; and other appurtenant rights or hereditaments that together comprise a project for which a road authority or private operator is authorized to develop, finance, design, operate and impose tolls . Minn. Stat. 則160.84
Minnesota Roadblocks What is currently authorized Certain Toll Facilities NOTE: An important element of the definition of toll facility is the ability of the road authority or the private operator to impose tolls .
Minnesota Roadblocks What is currently prohibited 2008 Transportation Finance Bill (passed over Governor veto) New provision restricting local road authorities from imposing new tolls on existing highways or using existing highways as toll facilities. Now road authorities may not limit operation of commercial motor vehicles to a toll facility or a tolled portion of a highway. Minn. Stat. 則160.845(b)
Minnesota Roadblocks What is currently prohibited Three exceptions to ban on new toll facilities: Toll facilities or HOV lanes constructed, converted, or established before 9/1/07 Any additional lane added to a highway after 9/1/07 (including price dynamic shoulder lane, HOV lane, or high-occupancy toll lane) Any other general purpose lane that adds capacity
Minnesota Roadblocks What is currently prohibited Also in 2008 Transportation Finance Bill: A road authority may not sell, lease, execute a development agreement for a BOT facility or a BTO facility that transfers an existing highway lane, or otherwise relinquish management of a highway, if the highway is retained or utilized by the buyer, lessor, or operator for highway purposes. Minn. Stat. 則160.98 Aimed to prevent privatization of States roads and bridges
Minnesota Roadblocks What is currently prohibited 2008 Minnesota Law, Key Terms BOT facility = a build-operate-transfer toll facility developed, designed, constructed, improved, rehabilitated, and operated by a private operator who holds title to the facility subject to a development agreement providing that title will be transferred to the road authority on expiration of an agreed term.
Minnesota Roadblocks What is currently prohibited 2008 Minnesota Law, Key Terms BTO facility = a build-transfer-operate toll facility developed, financed designed, constructed improved, or rehabilitated by a private operator who: (1) transfer any interest it may have in the toll facility to the road authority before operation begins; and (2) operates the toll facilities for an agreed term under a lease, management, or toll concession agreement.
Minnesota Roadblocks What is currently prohibited 2008 Minnesota Law, Key Terms Highway includes all kinds of highways and roads and the bridges or other structures thereon which form part of the same Road Authority applies to state, county, and city-level authorities. New law applies to all roads and bridges owned or managed by any road authority in the State.
Minnesota Roadblocks What is necessary to achieve P3 goals Dialogue ULI/RCM Connecting Infrastructure, Transportation and Land Use Initiative Legislation
Minnesota Roadblocks Good models Minnesotas procurement laws specifically permit private ownership and operation of water and wastewater treatment plants. Citing the public benefits of faster construction, lower cost, and efficiency, the law permits privatization of facilities for the prevention, control and abatement of water pollution and the furnishing of potable water. Minn. Stat. 則則471.371 and 471A.01.
Minnesota Roadblocks Good models ABAs 2007 Model Code for Public Infrastructure Procurement design bid build design build design build operate maintain design build finance operate maintain
Resources Dorsey's Infrastructure Practice Group: http:// www.dorsey.com /infrastructure/ The National Council for Public-Private Partnerships: http:// www.ncppp.org / The Institute for Public-Private Partnerships, Inc.: http://www.ip3.org U.S. DOT publication, An Update on the Burgeoning Private Sector Role in U.S. Highway and Transit Infrastructure (July 18, 2008): http:// www.fhwa.dot.gov/reports/pppwave/ppp_innovation_wave.pdf British Columbias P3 agency: http:// www.partnershipsbc.ca/index.html

More Related Content

P3 Infrastructure

  • 1. Infrastructure: Developing the Public-Private Partnership Model Where it Doesnt Exist and Making it Work for You Jay R. Lindgren Jocelyn Knoll
  • 2. In a time when state and local governments must balance shrinking revenue with deteriorating infrastructure, P3s have become a timely model for completing projects on time and on budget. A long-term performance-based contract between public sector and private sector to deliver public infrastructure
  • 3. The Issue Not enough resources for current infrastructure needs Increasing Spending Levels: How Much is Enough? Changing demographics and market needs demand new infrastructure Development Trends Diversity in America
  • 4. Increasing Spending Levels: How Much Is Enough? Many groups claim that we are not spending enough. Comparisons of need differ based on what is being counted, but overall numbers are relatively consistent Note: Total government spending 169 Total 13 Rail 21 Transit 9 Bridges 126 Roads $ billions annual spending Type American Society of Civil Engineers Note: Federal government spending only 91 Total 6 Intercity Passenger Rail 7 Freight 16 Transit 63 Highways $ billions annual spending Type American Association of State Highway and Transportation Officials Note: Federal aid eligible roads only 156-200 Total 7-9 Intercity Passenger Rail 5-7 Freight 14-18 Transit 130-166 Highways & Bridges $ billions annual spending Type National Surface Transportation Revenue and Policy Study Commission
  • 5. Development Trends US Population 1900-2100 Source: All data from U.S. Bureau of the Census. Census Release NP-T1, "Annual Projections of the Total Resident Population as of July Lowest, Middle, High Series: 1999 to 2100,Population Estimates Program, Population Division, U.S. Census Bureau, Washington, D.C. 20233, February 14, 2000.
  • 6. Diversity in America Distribution of Households by Type: 1950 to 2000
  • 7. New Demands: A More Urban Country Since 1956, we built 46,837 miles of Dwight Eisenhower National System of Interstate and Defense Highways at cost of $114 billion over 35 years How to build the urban half of the system? Increasing demand Insufficient federal funding State transportation shortfalls
  • 8. One Tool: P3s Public-Private Partnerships Accelerates infrastructure projects deemed impractical under traditional funding Well-developed international tool $200 billion capital available
  • 9. Typical Models Build Own Transfer (BOT) Design, Build, Finance, Operate, Maintain Risk Shifting Performance-based Contracting Concessions Privatization Upfront fee in exchange for revenues
  • 10. BOT: Advantages/Disadvantages Pros Risk-sharing Innovation and efficiency Public liquidity Public focus on other core functions Decreased reliance on traditional funding International investment Cons Long-term/complex contracts Loss of public control Potential higher user costs Risk of quality sacrifice in exchange for profits Impact on public jobs Loss of accountability
  • 11. U.S. Examples Chicago Skyway - $1.8 billion (concession) Cincinnati Streetcar (BOT) British Columbia 75% of current infrastructure through P3s $3 out (??) $4 billion
  • 12. Minnesota Roadblocks Well consider . . . What is currently authorized What is currently prohibited What is necessary to achieve P3 goals Good models
  • 13. Minnesota Roadblocks What is currently authorized Local governments do not have inherent authority; authority must be expressly granted or implied from express grants. Mangold Midwest Co. v. Vill. of Richfield , 274 Minn. 347 (1966) Look to Minnesota Statutes for authority
  • 14. Minnesota Roadblocks What is currently authorized Local Road Authorities have power to retain private contractors to design, build, and maintain roads within their jurisdiction. E.g. Minn. Stat. 則163.02 (counties) Must follow public bidding process prior to awarding contract E.g. Minn. Stat. 則471.345.
  • 15. Minnesota Roadblocks What is currently authorized Implied authority to combine design, build & maintain into one contract? The awarding of a contract is an administrative act of discretion vested by the law in the governing authorities of the city. The courts cannot direct the authorities as to how they shall exercise that discretionary power nor direct to whom they must let a contract. They may only enjoin them from doing so illegally, which must include an arbitrary, capricious, or unreasonable exercise of power. 33 Dunnell Minnesota Digest, 則12.01(b) (4th ed)
  • 16. Minnesota Roadblocks What is currently authorized Implied authority to combine design, build & maintain into one contract? Must conform to bidding requirements, then discretion re: methods and terms of contracting process. Must exercise discretion in a reasonable manner, not contrary to the public welfare, not unreasonable, arbitrary, or capricious.
  • 17. Minnesota Roadblocks What is currently authorized Implied authority to combine design, build & maintain into one contract? Argument: By combining the contractual obligations to design, build and maintain into a single procurement process which comports in all respects with the applicable contracting procedures, a local road authority may use and combine these private initiative variants.
  • 18. Minnesota Roadblocks What is currently authorized Certain Toll Facilities Since 1993, Minnesota Statutes have permitted local road authorities to enter into agreements with private operators to develop, finance, design, construct, improve, own, and operate a toll facility for roads and bridges within the road authoritys jurisdiction. Minn. Stat. 則則160.84160.93
  • 19. Minnesota Roadblocks What is currently authorized Certain Toll Facilities Toll Facilities = a bridge, causeway, or tunnel, and its approaches; a road street, or highway; an appurtenant building, structure, or other improvement; land lying within applicable rights-of-way; and other appurtenant rights or hereditaments that together comprise a project for which a road authority or private operator is authorized to develop, finance, design, operate and impose tolls . Minn. Stat. 則160.84
  • 20. Minnesota Roadblocks What is currently authorized Certain Toll Facilities NOTE: An important element of the definition of toll facility is the ability of the road authority or the private operator to impose tolls .
  • 21. Minnesota Roadblocks What is currently prohibited 2008 Transportation Finance Bill (passed over Governor veto) New provision restricting local road authorities from imposing new tolls on existing highways or using existing highways as toll facilities. Now road authorities may not limit operation of commercial motor vehicles to a toll facility or a tolled portion of a highway. Minn. Stat. 則160.845(b)
  • 22. Minnesota Roadblocks What is currently prohibited Three exceptions to ban on new toll facilities: Toll facilities or HOV lanes constructed, converted, or established before 9/1/07 Any additional lane added to a highway after 9/1/07 (including price dynamic shoulder lane, HOV lane, or high-occupancy toll lane) Any other general purpose lane that adds capacity
  • 23. Minnesota Roadblocks What is currently prohibited Also in 2008 Transportation Finance Bill: A road authority may not sell, lease, execute a development agreement for a BOT facility or a BTO facility that transfers an existing highway lane, or otherwise relinquish management of a highway, if the highway is retained or utilized by the buyer, lessor, or operator for highway purposes. Minn. Stat. 則160.98 Aimed to prevent privatization of States roads and bridges
  • 24. Minnesota Roadblocks What is currently prohibited 2008 Minnesota Law, Key Terms BOT facility = a build-operate-transfer toll facility developed, designed, constructed, improved, rehabilitated, and operated by a private operator who holds title to the facility subject to a development agreement providing that title will be transferred to the road authority on expiration of an agreed term.
  • 25. Minnesota Roadblocks What is currently prohibited 2008 Minnesota Law, Key Terms BTO facility = a build-transfer-operate toll facility developed, financed designed, constructed improved, or rehabilitated by a private operator who: (1) transfer any interest it may have in the toll facility to the road authority before operation begins; and (2) operates the toll facilities for an agreed term under a lease, management, or toll concession agreement.
  • 26. Minnesota Roadblocks What is currently prohibited 2008 Minnesota Law, Key Terms Highway includes all kinds of highways and roads and the bridges or other structures thereon which form part of the same Road Authority applies to state, county, and city-level authorities. New law applies to all roads and bridges owned or managed by any road authority in the State.
  • 27. Minnesota Roadblocks What is necessary to achieve P3 goals Dialogue ULI/RCM Connecting Infrastructure, Transportation and Land Use Initiative Legislation
  • 28. Minnesota Roadblocks Good models Minnesotas procurement laws specifically permit private ownership and operation of water and wastewater treatment plants. Citing the public benefits of faster construction, lower cost, and efficiency, the law permits privatization of facilities for the prevention, control and abatement of water pollution and the furnishing of potable water. Minn. Stat. 則則471.371 and 471A.01.
  • 29. Minnesota Roadblocks Good models ABAs 2007 Model Code for Public Infrastructure Procurement design bid build design build design build operate maintain design build finance operate maintain
  • 30. Resources Dorsey's Infrastructure Practice Group: http:// www.dorsey.com /infrastructure/ The National Council for Public-Private Partnerships: http:// www.ncppp.org / The Institute for Public-Private Partnerships, Inc.: http://www.ip3.org U.S. DOT publication, An Update on the Burgeoning Private Sector Role in U.S. Highway and Transit Infrastructure (July 18, 2008): http:// www.fhwa.dot.gov/reports/pppwave/ppp_innovation_wave.pdf British Columbias P3 agency: http:// www.partnershipsbc.ca/index.html