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Public – Private Partnerships (“P3s”)

Public – Private Partnerships (“P3s”). FOR PUBLIC TRANSPORTATION FINANCE. John Peracchio. Education: Brown University and Columbia University Law School Practiced Law in New York City CEO of 2 Family-owned Automotive Suppliers Harman International Industries Senior Operating Executive

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Public – Private Partnerships (“P3s”)

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  1. Public – Private Partnerships(“P3s”) FOR PUBLIC TRANSPORTATION FINANCE

  2. John Peracchio • Education: Brown University and Columbia University Law School • Practiced Law in New York City • CEO of 2 Family-owned Automotive Suppliers • Harman International Industries Senior Operating Executive • Peracchio & Co.: Consulting Services to Investors/Financial Institutions (Guggenheim Securities) and Intelligent Transportation System Integrators…and The State of Minnesota’s TFAC! • Intelligent Transportation Society of America and the World Congress on Intelligent Transport Systems

  3. Examples of P3s in Transportation(Risk Management) • “Adopt-a-Highway” • Design and Build Projects • Transportation and Community Development • Concession Arrangements to Operate Publicly-Owned Transportation Infrastructure • Privately-Owned or Leased Bridges and Tunnels • Privately-Leased Toll Roads

  4. Privately-Owned or Leased Bridges and Tunnels • Success: Detroit to Windsor Tunnel • Owned and Operated by Multiple Investors • Consistently Upgraded and Maintained in Excellent Condition • Failure: Detroit to Windsor Ambassador Bridge • Owned by One Investor • Arguably Poorly Maintained and Operated • Mired in Political Turmoil

  5. Privately-Leased Toll Roads • Chicago Skyway (99 Year Lease) • Indiana Toll Road (75 Year Lease)

  6. One Key for Success in Any PPP: Deploy Intelligent Transportation Systems (“ITS”) • Reality: Public Opposition to Tolling • Selling Point: Privatization Will Provide More Mobility, Safety, and Sustainability Through the Use of Technology • Investment in ITS is “Layered-Into” the Transaction Upfront • Investors Understand the Benefits, and so, Hopefully will the Public

  7. Another Key for Success: Public Participation or Joint Venture Ownership • No Matter What Legal Entity Structure is Chosen: the Public Should Participate in any “Upside” Potential • Alignment of Public Interests with Investor Interests • Transparency for the Public and Investors about Financial and Operating Expectations • No “Suicide Pacts”!

  8. Debt v. Equity • Debt • Historically Low Interest Rates Permit Lower Cost Financing in Public Debt Markets • If Special Purpose Entity is Chosen, Does Not Burden the Balance Sheet of the Higher Level Public Authority • Inherently Allows the Public to Participate in “Upside” after Debt Service is Covered on Bonds • Equity • Typically Higher Rates of Return Demanded by Investors (Net Present Value & Internal Rates of Return on a Discounted Cash Flow Basis) • No Burden on the Balance Sheet of the Public Authority • Can be Structured to Provide Public with “Sweat Equity”

  9. CONCLUSION • Financing Public Transportation Infrastructure • Taxation (Income, Sales, Property, Gas, etc.) • Private Capital (Debt or Equity) • For Private Investment: Any Identifiable and Separable Revenue Stream • If Private Investment is Chosen, Public Interest Must be Served • Clear Agreement between Investors and the Public • Social Equity Issues Must be Examined and Resolved

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