Public Private Partnerships in Florida

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Welcome

Special Thanks to Sponsors

Law Firm of

Becker & Poliakoff

CPA Firm of

Shavell & Co.

Insurance Firm of

InSource

Welcome

Keynote Speaker – Jane Garvey

Panel of Experts – George Burgess, Becker & Poliakoff, Moderator– Lowell R. Clary, Clary Consulting– Mark Blanchard, AECOM

– Francois Wasselin, ACS Infrastructure

Putting PPP into Perspective

Bill ParkerVice Chairman, InSource, Inc.

Rich Shavell, CPA, CVA, CCIFPShavell & Company, P.A.

The Great Recession

Economy Employment Infrastructure Public Funding

History of PPP

Europe

Canada

United States

Public-Private Partnership

“A Public-Private Partnership (PPP) is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resource, each party shares in the risks and rewards potential in the delivery of the service and/or facility.”

The National Council for Public-Private Partnerships

PPP Benefits

1. Reduce project costs2. Accelerate project delivery3. Transfer project risks to the private sector4. Provide valuable, high-quality projects

PPP Program Elements

Design Build Finance Operate & Maintain

The Better Fit for PPP

Operate & Maintain

Toll roads

Toll bridges

Water facilities

Hospitals

Schools

Detention Facilities

PPP Funding Sources

Self-Funded Foreign Banks US Banks Private Equity Private Activity Bonds

FDOT Completed

I-75 in Lee/Collier Counties (DBF)

I-95 Express Lanes Phase I (DBF)

US-1 18-Mile Stretch (DBF)

FDOT Under Contract

I-95 Widening / Pineda Causeway (DBF) Palmetto Expressway Section 2 (DBF) I-595 Improvements (DBFOM) Port of Miami Tunnel (DBFOM) US 19 (BF) Palmetto Section 5 (DBF) I-4 Connector (BF)

Surety Concerns

Only Construction Exposure Change Order Protocols Rights to Accounts Receivable Project Funding to Completion Non-Recourse to Contractor

“Ye Olde PPP”

“…from the General Court of Massachusetts, May 3, 1654:

‘Richard Thurley, having built a bridge at his own costs over the Newbury River, hath liberty to take toll so long as he maintains the same’”

“First such structure legally implemented”

Source: 2010 article by Arthur Smith at www.ncppp.org

Sectors for PPP

Transportation Water/Waste water Urban Development Energy Education/Schools

Focus on Education in Florida

Public Education Capital Outlay (PECO) Fund Primary source of funding for the capital needs of public

schools, community colleges, and universities. Declining source of revenues Impact to State’s ability to fund capital projects Capital Projects Plans: www.fldoe.org

Seven Keys to Successful PPPs*

Public Sector Champion Statutory Environment Public Sector’s Organized structure Detailed Contract (Business Plan) Clearly Defined Revenue Stream Stakeholder Support Pick Your Partner Carefully

SB 576PUBLIC PRIVATE PARTNERSHIPS

Lee A. Weintraub, Esq.Becker & Poliakoff

The PPP Process Begins

Responsible public entity may not request nor consider 3P proposal until they have adopted and made publicly available sufficient guidelines

Adoption of Guidelines

Guidelines must include:– Opportunities for competition through public notice– Reasonable criteria for choosing among non-

competing proposals– Timelines for selecting proposals and negotiating

agreements

Guidelines Must Include

– Authorization for accelerated selection for priority projects

– Financial review and analysis procedures including cost benefit analysis, assessment of opportunity cost, and consideration of project impacts

• Analysis must be disclosed to appropriating body before signing agreements


– Consideration of non-financial benefits of project– Mechanism for appropriating body to review proposed

agreements before execution


– Ensuring adequate information is released, and if necessary updated, when seeking competing proposals

– Establishment of criteria to ensure the extent of competition has been considered


– Posting and publishing of notice of private entities’ request for 3P project

• Provide reasonable time of at least 45 days to encourage submission of competing proposals

• Advertising requirements must include internet


– Engagement of professionals, including architects, engineers or accountants, to provide independent analysis on advantages, disadvantages and costs of project

Procurement Procedures

Public entity may only contract on 3P jobs with legislative approval or pursuant to other appropriate local government appropriation process as evidenced by approval of project in public entity’s work program


Public entity must establish application fee for unsolicited proposals– Must be sufficient to pay costs of evaluating proposal– Public entity may hire private consultants to assist in

evaluation


Public entity must publish notice of unsolicited proposals in Fla Admin Weekly & newspaper at least weekly for two weeks– Must solicit competing proposals for same job for 60

days after initial publication– Notice must be mailed to each local government in

affected area

Before Awarding Job, Public Entity Must Ensure Job:

1) Is in public’s best interest2) Doesn’t require state funds unless facility is owned

by public entity or ownership will be conveyed to public entity

3) Has adequate safeguards to ensure additional costs or service disruptions won’t occur in event of default or cancellation of agreement

Before Awarding Job, Public Entity Must Ensure Job:

4) Has adequate safeguards to ensure opportunity to add capacity

5) Would be owned by public entity upon completion or termination of agreement & payment of all financed amounts

Consideration and Approval of Projects

Public entity may approve job if:– There is public need or benefit– Estimated cost of job is reasonable in relation to

similar facilities– Private entities’ plans will result in timely performance

of job


School boards, counties, cities and towns may enter into interim or comprehensive agreements only with local governing bodies approval

Technical Studies & Independent Analyses

Private entity must provide investment-grade technical study prepared by nationally recognized expert accepted by national bond rating agencies


Private entity must also provide finance plan identifying job cost, revenues by source, financing, major assumptions, internal rate of return on private investments, whether government funds are needed & cash-flow analysis from job implementation through term of agreement


In evaluating request, public entity may rely upon staff personnel familiar with similar facilities or external consultants having relevant experience– Public entity may charge a reasonable fee for costs of

processing, reviewing and evaluating private entities’ solicitation, including fees for attorneys and financial, technical and other necessary consultants


All reasonable costs to the state, substantially affected local governments & utilities related to facilities which aren’t to be transferred to public entity must be borne by private entity– State funding is available for jobs owned by public

entity in accordance with public entity’s enabling legislation

Solicitations From Private Entities Must Include the Following Unless Waived By Public Entity:

– Topographic map indicating project location– Conceptual design and construction schedule– Method by which private entity proposes to secure

necessary property interests• Public entity may exercise power of eminent domain to

facilitate project


– Current plans by other public entities for facilities or technology infrastructure similar to job being proposed

– List of all required permits and approvals from all government agencies and schedule for obtaining same

– List of public water or wastewater management facilities that will be crossed by job and plans to accommodate same


– Private entities’ plans for financing job, including funding sources, dedicated revenue sources or proposed debt or equity investment

– User fees, lease payments and other service payments and methodology and circumstances for changes to same over time

Process of Project Qualification

Private entity’s performance & payment of subs must be ensured– Letters of credit & guarantees from parent companies,

lenders & equity partners may be required– Payment & performance bonds per 255.05– Contract provisions for exit transition obligations of

private entity


After public notification period expires, public entity must rank proposals in order of preference– May consider professional qualifications, general business

terms, innovative engineering & cost-reduction, financing, & need for state funds

– If negotiations are unsatisfactory, public entity may terminate & proceed to lower-ranked firms

– Public entity may reject all proposals at any time up to execution of contract


Public entity must perform analysis of cost-effectiveness & overall public benefit:– Before procurement process; and– Before awarding contract

Affected Local Jurisdictions

Private entity must provide copy of proposal to each affected local jurisdiction

Affected local jurisdiction shall, within sixty days after receipt of notice, submit any written comments it may have to public entity, indicating whether facility is compatible with local comprehensive plan, local infrastructure development plans, capital improvements, budget or other government spending plan

Interim Agreement

Before negotiating a comprehensive agreement, public entity may enter into interim agreement with private entity– Doesn’t obligate public entity to enter into comprehensive

agreement– Authorizes private entity to commence activities for which it may

be compensated• Including design and engineering, environmental analysis and

mitigation, surveys, and ascertaining availability of financing

Comprehensive AgreementRequirements

– Payment and performance bonds and letters of credit– Review & approval of plans and specifications– Inspection procedures– Insurance requirements– Requirements for maintaining project– Reimbursement to public entity for services provided

Comprehensive Agreement Requirements

– Periodic filing of appropriate financial statements– Provisions for termination of agreement and rights

and responsibilities in event of default– Fees, lease payments or service payments as may be

established by agreement of the parties– Duties of the private entity as the public entity

determines necessary to serve public purpose

Comprehensive Agreement Requirements

Regulations governing future increase of fees Assurance that negotiated portion of revenue from fee-

generating jobs are returned to public entity over life of agreement– For leases of existing facilities, public entity must receive portion

of funds upon closing on agreements plus portion of excess revenues over life of partnership

Comprehensive Agreement

In addition, comprehensive agreement may include:– Public entity grants or loans to private entity– Notice and opportunity to cure in event of default or

unavoidable delays– Cessation of private entity’s authority & dedication of

job to appropriate public entity

Financing

All financing agreements & liens on property must be paid in full upon transfer of ownership to public entity

Financing

To be eligible for loan of public entity’s funds, private entity must:– Be eligible for state financial assistance under Fla.

Single Audit Act (sect. 215.97)– Provide indication from nationally recognized rating

agency that senior bonds for job will be investment grade

– Alternatively, provide letter of credit or other credit support

Financing

STATE’S funding is limited to amount approved for that specific facility in public entity’s five-year work program or 15% of public entity’s total funding for similar jobs in given fiscal year

Financing

Public entity may use innovative finance techniques– Federal loans– Commercial bank loans– Hedges against inflation from commercial banks– Other private sources

Financing

Public entity may not indemnify financing source Facility may not be subject to liens Public entity may not pledge security interest Any of the above provisions are void as matter of

law

Expiration or Termination of Agreements

Public entity may use revenues to pay current operation & maintenance costs, plus compensation to public entity for its services

Public entity is not liable to financier due to election to take over job– Public entity is not obligated to pay private entity’s job

obligations from sources other than revenue

Sovereign Immunity

Public entity’s sovereign immunity is not waived with respect to participation in, or approval of, project

Timeline

Statute would take effect July 1, 2012

4 Weeks to go in Session… Status of PPP Legislation

Carol Bowen , Associated Builders and Contractors, Florida East Coast Chapter

Demystifying The PPP Process- The Role of the Equity Partner

Jane Garvey, North American Chair, Meridiam Infrastructure; Former FAA Administrator; Former Head of U.S. Public Private Partnerships at JP Morgan

How to Make PPP a Reality – War Stories From the Experts

George Burgess, Becker & Poliakoff Lowell R. Clary, Clary Consulting Mark Blanchard, AECOM Francois Wasselin, ACS Infrastructure Development

Top Ten List of Practical Steps to FindPPP Opportunities

1) Invest the Time2) Establish Relationships3) Know Public Sector Needs & Funding Gaps4) Focus on Revenue Generating Operations and Activities with Dedicated

Funding Sources5) Look at Projects with O&M Component6) Build Strong, Talented Teams7) Secure Community & Political Buy-In8) Ensure Contracts are Well Drafted & Well Vetted9) Ensure Clear Measurable Local Benefits – Jobs, Subcontractors, Small

Businesses, etc…10) Prepare Unsolicited Proposals

THEN…Provide an Excellent, High Quality Productat or Under Budget, and at or Ahead of Schedule!