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Overview and Principles for Implementing State PPP (P3) Legislation

Overview and Principles for Implementing State PPP (P3) Legislation. Presented at the NCPPP P3 Connect Denver, Colorado Conference By Jim Reed , Group Director – Environment, Energy and Transportation National Conference of State Legislatures (NCSL) July 29, 2014.

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Overview and Principles for Implementing State PPP (P3) Legislation

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  1. Overview and Principles for Implementing State PPP (P3) Legislation Presented at the NCPPP P3 Connect Denver, Colorado Conference By Jim Reed, Group Director – Environment, Energy and Transportation National Conference of State Legislatures (NCSL) July 29, 2014

  2. Backdrop:Government Funding Shortfalls • Great Recession aftermath, slow growth • Climbing out of State budget shortfalls since 2008 • Political reluctance to raise new taxes • Previous underinvestment in infrastructure • Aging infrastructure in all sectors • Continuing uncertainty of federal funding and program, less federal funding going forward, i.e. HTF • Transportation: Declining gas tax revenues (less driving, electric and hybrid vehicles, millennial’s drive less)

  3. The P3 Option • Public-Private Partnerships are attractive because they: • Can complete projects that cannot be fully funded through traditional means. • Expand the pool of available money for transportation projects- private equity. • Can create cost savings in terms of lower initial project cost to the public, quicker project completion and long-term operation & maintenance • Private sector takes on a portion of the financing risk and other risks. • Bring private sector practices and innovations into public projects, which can increase efficiency.

  4. Two Key Legislative Factors That Assist States in Developing P3s • Robust and Comprehensive PPP Enabling Legislation: Sets up the institutional framework within which PPPs can occur • “PPP enabling laws are important in facilitating private investment in infrastructure. Better designed PPP enabling laws can serve to attract more private investment into a state.” (Geddes and Wagner ,Cornell Univ. study using linear probability models to examine P3 laws - August 2012) • Creating enhanced public sector expertise by establishing a specialized P3 office

  5. 33 States with Transportation PPP Enabling Legislation + Puerto Rico

  6. Key Elements: PPP Enabling Legislation • Gives broad authority for a variety of P3 projects • Creates a robust framework for contracting • Flexibility in application of state procurement laws • Defines allocation of risks between public sector and private partners • Allows combination of private and public money in financing, also allows revenue sharing • Allows availability payments • Political approval at an appropriate (early) stage • Creates specialty P3 office to handle projects

  7. Closing the Expertise Gap:State PPP Offices • Arizona Office of P3 Initiatives (DOT) • California Public Infrastructure Advisory Commission (BTH) • Colorado High Performance Transportation Enterprise (DOT) (Government-owned business) • Georgia P3 Program (DOT) • Michigan Office for PPPs (Treasury Dept) • Ohio Division of Innovative Delivery (DOT) • Oregon Office of Innovative Partnerships and Alt. Funding (DOT) • Puerto Rico Public-Private Partnerships Authority • Texas Best Practices Center (under development) • Washington Transportation Partnerships Office (DOT) • Virginia Office of Transportation PPPs (DOT) • Proposed Federal Center of Innovative Transportation Finance

  8. NCSL PPP Principles • Principle 1: Be informed. Decision makers need access to fact-based information that supports sound decisions. • Principle 2: Separate the debates. Debates about the PPP approach should be conceptually distinct from issues such as tolling, taxes or specific deals. • Principle 3: Consider the public interest for all stakeholders. Legislators should consider how to protect the public interest throughout the PPP process.

  9. NCSL PPP Principles • Principle 4: Involve and educate stakeholders. Stakeholder involvement –early and often--helps protect the public interest, improve buy-in and mitigate political risk. • Principle 5: Take a long-term perspective because P3s are long-term. Legislators should approach PPP decisions with the long-term impacts in mind, looking beyond short-term considerations • Principle 6: Let the transportation program drive PPP projects—not the other way around. PPPs should be pursued to support a state’s transportation strategy, not just to raise short-term revenue.

  10. NCSL PPP Principles • Principle 7: Support comprehensive project analyses. Before pursuing a PPP, it should be shown to be a better option than traditional project delivery. • Principle 8: Be clear and transparent about the financial issues. States must carefully assess financial goals, an asset’s value and how to spend any proceeds. • Principle 9: Set good ground rules for bidding and negotiations. Legislation should promote fairness, clarity and transparency in the procurement process.

  11. NCSL Contact Information Jim Reed Group Director – Environment, Energy and Transportation Denver, Colorado (303) 856-1510 jim.reed@ncsl.org

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