New Jersey Advancements in Public-Private Partnership s Presented by:

1. New Jersey Advancements in Public-Private Partnerships Presented by: Mara Johnston, VP Business Development Star America Capital Advisors March 28, 2019 Spanish Tavern Mountainside, NJ

2. Public Private Partnership History and Overview

3. Public Private Partnership Defined A Public-Private Partnership (P3) is a contractual agreement between a public agency and a private entity that allows for greater private sector participation in the delivery and financing of aproject.

4. US Historical Legislation Overview • The first legislation approved to allow P3’s in the US was not until 1991. • 2016 was the first year that the US surpassed the rest of the world in terms of total value of P3 projects. According to InfraAmerica’s, the US totaled USD 10.14 Billion in 2016 in part “due to two trailblazing transactions: the $4 Billion LaGuardia Airport terminal redevelopment; and Maryland’s $2 Billion Purple Line project.” • Today, 37 States, Washington DC, and Puerto Rico have approved P3 legislation, with New Jersey, Arkansas and Oklahoma as the most recent additions to the P3 roster.

5. P3 Highlights • Collaborative and long term process • Design and Construction teams work together to plan & build the project with O&M after construction Public Sector enters into long-term contract with private sector to deliver assets/services for public benefit • Risk Sharing Approach • Private sector assumes financial, technical and operational risk.Public sector sets policy and retainsownership. Project must still be creditworthy for debt andequity investors. • Long term and performance based goals • By integrating design, construction, and financing, with O&M, assets areoptimized for the long-term. • A Value-for-Money analysis is performed by experienced advisors to determine if a P3 is the right fit. • Transparent and continuous communication • Public stakeholders have control and are regularly updated and informed throughout theproject • Performance Based Standards • Private entity enters into a performance-based contract with financial penalties imposed by the public agency if availability and quality standards are notmet

6. Criteria for Successful P3 Projects • P3 projects often represent some of the largest and most complex infrastructure projects • P3 teams are structured to reflect the unique characteristic of each project • Type of asset (tunnel, bridge, rail projects, energy, water, etc.) • Type of investment (availability payment, toll risk, real estate) • Location (local partners are a key component of any team) • A successful P3 project relies on the integration of the design, construction, and operations and maintenance of the asset • “Best Value” approach to the project is driven by considering the entire lifecycle – from construction means and methods to handing back the project in 20 to 50+ years

7. P3 FinancingOverview Funding Options • Transportation Infrastructure Finance and Innovation Act (TIFIA - Up to 33% of the project costs) • Tax Exempt Private Activity Bonds (PAB’s) • State Revolving Funds (Sanitation and Water Specific) • US Department of Agriculture Funds • Community Development Block Grant Program (HUD) • Others Typical Equity to Debt Breakdown • Equity -> 10-30% • Debt -> 70-90%

8. Typical P3 Project Procurement Timeline • 30-60days IssueRFQ Shortlist or Prequalify Proposers • 30-45days • 60-90 days after RFPissued IssueRFP • 3 to 6months Proposalperiod • 30-60days Select PreferredProposer • 30-60days Negotiations • 60-90days Commercial/FinancialClose *From RFQ to Financial Close – The lifecycle is typical one to two years. **These timelines will varyby project and State legal requirements

9. P3 Legislation by State and StateP3Offices

10. WHY A STATE P3TEAM? • P3s are complex, long-term financial agreements. These complex and long term projects benefit from a full-time professional publicteam. • A dedicated P3 Office will allow New Jersey to undertake the desiredproject screening, review,and analysis that is needed to identify and procureP3 projects in the most efficient and streamlined way as possible. • A State-Level P3 Office can serve as advisor to all local governments and authorities thinking about P3s.It can also serve as the in-house project structuring advisor to all Stateagencies.

11. Five-Year NJ PilotP3 Program in 2009 • A limited P3 bill was enacted in 2009 as part of the NJ Economic Stimulus Act as the Great Recession tookhold • Contained a sunset provision, automatically terminating theprogram after 5years (2014) • Applied to only higher education projects (state and countycolleges) • Only a few schools took advantage including a dormitory at Montclair State University

12. MSU DormitoryProject – Case Study • First P3 project in thestate • Ledby developers who had done similar projects in the South and West • Developers had a well versed team of designersand lawyers and non-profit educational foundations who actedas the sponsor to help float tax free bonds • Non-profit educational foundation (501c) acted as sponsor and contracted withdeveloper • Developer retained the contractorteam • MSU prescribes standards / fees / tuitions for dormitory use • Developers have teams to perform O&M within guidelines set by MSU as to the amounts charged for room and board, dining facilities,etc.

13. NJ Public Private Partnership Highlights

14. P3 Summary and Public Contractor Requirements • Bill Passed is S-865, signed into law by Governor Murphy in August of 2018 • Contractors must obtain contractor registration andclassification or prequalification from the NJDOT orNJ Dept of Treasury (DPMC) • Contractors must post performance and payment bonds and in some instances a maintenancebond • PLA’s are required and private entities must pay prevailingwages

15. Additional Important Requirements • Theprivate partnermustestablishaconstructionaccountmanagedbyathird-party financial institution to hold the project funding in trust for benefit of thecontractor, CM,and design-buildteam • Projects are encouraged to adhere to the LEEDS ratingsystem. • A P3 project must have a minimum of $10millioninpublicfunds, $100millionforDOT projects,orany size whensolely privatefunds are used. • No bundling of projects allowed (goal was to protect smaller and local contractors by keeping project sizes smaller).

16. UnsolicitedProposals • To qualify as an unsolicited proposal, the unsolicited proposal shall include, at aminimum: • A description of the public-privateproject; • The estimated construction and life-cycle costs and a timeline fordevelopment; • Proposed plan of financing, including projected revenues, public or private,debt, • and equityinvestment; • A description of how the project meets needs identified in existingplans; • The permits and approvals needed to develop the project from local, state and federal agencies and a projected schedule for obtaining such permits and approvals; • A statement of risks, liabilities and responsibilities to be assumed by theprivate • entity. • Treasury has a 120 day period to respond to unsolicited proposals

17. P3Justification • To justify P3 use, the public entity shalldetermine: • The benefits and costsof project if it is developed by the public sector supportedby • comparisons to comparableprojects • The maximum public contribution that local government unit will allow underthe • public-privatepartnership • A comparison of the financial and non-financial benefits of theP3 comparedto otheroptionsincludingthepublicsectoroption • A list of risks, liabilities and responsibilities to be transferred to the privateentity • and those to be retained by the local government unit,and • If the project has a high, medium or low level of project delivery risk and howthe • public is protected from theserisks. • That there aresignificant benefits to using the P3 model instead of other options • The P3 procurement will result in timely and efficient developmentandoperation

18. Treasurer ApprovalConsultation • Treasurer review and approval shall be conducted in consultationwith the followingagencies (depending on the type of project at hand): • Economic DevelopmentAuthority • Department of CommunityAffairs • Department ofEducation • Schools DevelopmentAuthority • Secretary of HigherEducation • Educational Facilities Authority,and • Department ofTransportation • The State Treasurer must provide a status of each P3 project on their website – • Posting will be shown as “proposed, under review or active P3 project.”

19. TeamQualifications and RFP Requirements • Qualificationrequirements: • The GC, CM, D-B team, or Subcontractor shall be registered with and classifiedbythe DPMC to perform P3work • Alternatively, the GC, CM, D-B team, or Subcontractor shall be prequalified bytheDOT, NJT or NJTA, as appropriate, to perform P3work • Other minimum qualifications standards administered by the Treasurer • Other applicable qualification standards of the public entity forprofessional • services and constructioncontracting. • RFP requirements: • Shall include relevant technicalsubmissions • Shall include relevant documents related to the project,and • Shall include the evaluation criteria to be used in the selection of the designated respondent • At minimum, the evaluation criteria shall be the criteria promulgated bythe Treasurer

20. General P3 Order of ProcurementProcess Evaluating and Ranking Proposals Public Hearing – Project Purpose and Proposal Public Entity Resolution of Intent to enter into a P3 Agreement Application to Treasurer for Final project Proposal Approval Treasurer’s Review and Approval Executive P3 Project Agreement

21. RankingProposals • Public entity ranks proposals in order of preference according to, at least, thefollowing: • The evaluation criteria of theTreasurer • The professional qualifications of the proposingteam • General businessterms • Innovative engineering and architecturalservices • Cost-reduction terms and finance plans,and • The need for local government funds to deliver the project and dischargethe • agreement.

22. Approval Application ToTreasurer • Required contents for application to theTreasurer: • A full description of the proposed P3agreement • Theplanningstagejustificationanalysisandfindingsfromthepublichearing • A full description of theproject • The estimated costs and financial modeling documentation for theproject • Along-rangemaintenanceplanandalong-rangemaintenancebond • The timetable for completing the construction of theproject • An analysis of all available funding options for the project, along with evidence ofthe • publicbenefitinadvancingtheprojectasa public-privatepartnership • The record from the post-proposal publichearing • The resolution by the public entity of its intent to enter into the P3 agreement,and • Any other requirements that the Treasurer deems appropriateornecessary.

23. Project ApprovalCriteria • To approve an application the Treasurer shallfind: • The public entity's assumptions regarding the project's scope, its benefits, its risks and the cost of the public sector option were fully and reasonablydeveloped • The design of the project isfeasible • The experience and qualifications of the privateentity are acceptable • The financial plan issound • The long-range maintenance plan is adequate to protect theinvestment • The project is in the best interest of the public, based on the criteria utilized by the public entity in the planningstage • There is a resolution by the public entity of its intent to enter into a P3agreement • for the project,and • The term sheet for any proposed procurement contains all necessaryelements.

24. Contents Of P3Agreement • The minimum requirements of any P3 Agreementinclude: • The term of theagreement • The total projectcost • A completion dateguarantee • A provision for damages if the private entity fails to meet the completiondate • A maximum rate of return to the private entity and a provision for the distribution of excess earnings to the local government unit or to the private party for debt reduction

25. Regulations are being developed and are expected to be public and finalized in the next few weeks/months.Looking to put together a “how-to-guide” to help contractors who would like to bid on a P3 going forwardNext project will be at the NJCU in Jersey City, including a performing arts center and student housing. https://www.njcu.edu/news/groundbreaking-university-place-redevelopment-projectLooking to do a higher education workshop through the NJ Educational Facilities AuthorityVisit www.nj.gov/treasury/dpmc for more information What's Next?