public sector decision-making in public-private partnerships
TRANSCRIPT
Transportation leadership you can trust.
presented topresented to
National Conference of State LegislaturesNational Conference of State Legislatures
presented bypresented by
Jeffrey N. Buxbaum, AICPJeffrey N. Buxbaum, AICPCambridge Systematics, Inc.Cambridge Systematics, [email protected]
April 23, 2009April 23, 2009
Public Sector Decision-Making in Public-Private PartnershipsNCHRP Synthesis 391
onlinepubs.trb.org/onlinepubs/nchrp/nchrp_syn_391.pdf
1
Motivations for Public-Private Partnerships (PPP)
About the Study
4
Study Objectives and Approach
Objectives• What information is needed to evaluate
benefits and risks?• How can this information be used during decision-making?• What is the reliability of information? • How are public interests are protected?
Approach • Literature review• Interviews with state DOT and others
5
Topics
Project selection and delivery• Criteria• Unsolicited proposals• Roles, risk allocation,
rates of return• Valuation tools
Transparency• Public participation• Adequacy of legislative
review• Perceptions of foreign
control and role of local contractors
Terms of agreement• Asset control/ownership• Toll policy• Noncompete and
unanticipated event provisions
• Use of proceeds and revenue sharing
• Maintenance standards and hand back provisions
• Environmental safeguards• Labor relations• Length of agreement• And more…
6
PPP Come in More Shapes, Sizes, and Colors Than You Might Think
Source: FHWA, User Guidebook on Implementing Public-Private Partnerships for Transportation infrastructure Projects in the United States, 2007.
7
Calling It All PPP Confuses People
DesignDesign
BuildBuild
OperateOperate
MaintainMaintain
Initial Delivery Upkeep
Traditional Project Delivery
Government Responsible for Each Piece
Design
Build
Operate
Maintain
Finance
Revenue Stream
Government Government OversightOversight
Funding
Concession Approach –a.k.a. “PPP”
8
Some PPP Are Simply Life-Cycle Project Delivery
Private RolePrivate Role
DesignDesign
BuildBuild
OperateOperate
MaintainMaintain
Government RoleGovernment Role
Project SelectionProject Selection
Performance MeasuresPerformance Measures
Revenue StreamRevenue Stream
Suggested by Dr. John B. Miller in: Life Cycle Delivery of Public Infrastructure – Precedents and Opportunities for the Commonwealth, A Pioneer Institute White Paper, December 2008.
Finance?Finance?
9
To PPP or not to PPP?
Objective valuation compared to alternatives• Consistent framework needed• “Value for Money” analysis• People with the skills working for the government
Appropriate risk transfer• Who can best manage which risks?• Contract terms
More…
10
To PPP or not to PPP? (continued)
Transparency and public participation• Frequent concern by both “supporters” and “opponents”• Education of public and elected officials needed
Recognize unavoidable complexity• Each situation unique• Relatively few examples• Desire for speed, but need for care
11
Participants
Public sector decision-makers
State or public toll authorities
Equity participants• Integrated transportation
companies
• International construction companies
• Funds
• Developers and concessionaires
Lenders
Design and construction firms
Operating companies
12
Protecting the Public Interest
Keep the motivations in the right place• Investors have a profit motive• Government (“the people”) wants value for money
− Toll setting (if tolled) – needs to reflect this tradeoff− Preservation needs to be monitored and enforced
Most concerns can be addressed through contract terms
Government must be prepared to monitor…• Safety, maintenance other standards
More…
13
Protecting the Public Interest (continued)
Maintain environmental standards
Maintain fair labor practices
Use revenue for appropriate purposes
14
Misperceptions Can be a Distraction From the Real Issues…e.g.,
For example…• Noncompete clauses are always part of PPP with a
long-term lease component− “limited compete” now more likely
• PPP = tolls− And, runaway, uncontrolled toll increases− Windfall profits for concessionaire
• Public sector loses control
An open process can build trust and support
15
The report covers much much more….
Project selection and delivery• Criteria• Unsolicited proposals• Roles, risk allocation,
rates of return• Valuation tools
Transparency• Public participation• Adequacy of legislative
review• Perceptions of foreign
control and role of local contractors
Terms of agreement• Asset control/ownership• Toll policy• Noncompete and
unanticipated event provisions
• Use of proceeds and revenue sharing
• Maintenance standards and hand back provisions
• Environmental safeguards• Labor relations• Length of agreement• And more…
My Observations
17
Trends in PPP in the U.S.
The expected avalanche of deals after Chicago Skyway and Indiana Toll Road has not materialized• A couple of small “brownfields”• New “greenfields” practically nonexistent, and a struggle
High profile backlash over whether the public’s interests were protected
Economic conditions highlight risks• Projects falling through, e.g.
− Port of Miami Tunnel− Missouri Bridges
More…
18
Trends in PPP in the U.S. (continued)
Dialogue tends to be ideologically driven and emotional
Caution has prevailed over bold action
Education coming slowly
Private capital still looking for somewhere to invest…
19
Evolution of PPP in the U.S.
“Life-Cycle Delivery” approaches will become an attractive middle ground• Availability payments• Put incentives in the right place• Don’t look like “handing over the keys” to the private sector• Have clear performance measures• Public sector clearly in charge of rate setting (if applicable)
20
New Breed?I-595 Express Project Broward County, FL
$1.8 billion for reversible toll lanes+ other improvements• Concessionaire + banks funding 55%• Annual availability payments of $65.9M• Deal closed March 2009
21
Reading ListRecent Arrivals
Public Sector Decision-Making in Public-Private Partnerships, NCHRP Synthesis 391, Jeffrey N. Buxbaum and Iris N. Ortiz, Cambridge Systematics, Inc.
Protecting the Public Interest: The Role of Long-Term Concession Agreements for Providing Transportation Infrastructure, Keston Institute for Public Finance and Infrastructure Policy, Jeffrey N. Buxbaum and Iris N. Ortiz, June 2007
Driven by Dollars, What States Should Know When Considering Public-Private Partnerships to Fund Transportation, The Pew Center on the States, March 2009
Private Roads, Public Costs, The Facts about Toll Road Privatization and How to Protect the Public, U.S. PIRG Education Fund
Transportation leadership you can trust.
presented topresented to
National Conference of State LegislaturesNational Conference of State Legislatures
presented bypresented by
Jeffrey N. Buxbaum, AICPJeffrey N. Buxbaum, AICPCambridge Systematics, Inc.Cambridge Systematics, [email protected]
April 23, 2009April 23, 2009
Public Sector Decision-Making in Public-Private PartnershipsNCHRP Synthesis 391
onlinepubs.trb.org/onlinepubs/nchrp/nchrp_syn_391.pdf