The efficiency of the South moves North -- charming, isn't it?
One of John F. Kennedy's best quotes was noting that "Washington is a city of Southern efficiency and Northern charm." When it comes to Public Private Partnerships, things have turned around in the last 50 years. The South leads the way in P3's with Virginia, Florida and Texas being notable standouts. The conventional wisdom has been that strong unions in northern states would continue to fight against more private involvement in state infrastructure. But the pressures of constrained state budgets are proving too strong.
So, earlier this year we saw Maryland almost pass a new P3 statute (alright, Maryland is South of the Mason-Dixon Line, but it's still a blue state with heavy union activity). Then Pennsylvania actually passed a law, and now New Jersey has entered the fray with a new law targeting colleges.
We'll take a look at the new Pennsylvania and New Jersey laws, after the jump.
Both New Jersey and Pennsylvania took a "toe in the water" approach to PPP's, enabling a limited type of project to go forward as a PPP instead of throwing the doors open and allowing the state government to privatize any state asset. This is predictable given the union influence in these states. Of course, even if they passed broader PPP enabling legislation, there is no reason to think that the unions would allow significant privately financed and maintained work to go forward without a fight. But still, this legislation is a step in the right direction for both states. Let's look at the specifics of each.
Pennsylvania's statute applies to transportation projects. By giving public notice, public entities may solicit transportation projects through a Request for Transportation Projects. Although the statute does not currently allow a private entity to submit unsolicited proposals, it does allow public entities to submit unsolicited requests for transportation projects to the Public-Private Transportation Partnership Board (the "Board"): "A request may be solicited or unsolicited and may provide for the development or operation of transportation facilities using a variety of project delivery methods and forms of agreement." These delivery methods include, but are not limited to, the following types of agreements: design--build; design-build-operate; design-build-maintain; design-build-finance-operate; design-build-operate-maintain; design-build-finance-operate-maintain; operate-maintain; or a concession providing for the development entity to design, build, operate, maintain, manage or lease a transportation facility. There is still hope for unsolicited proposals from private entities because the statute lists one of the Board's duties as "adopt[ing] guidelines establishing the procedure by which ... a private entity may submit an unsolicited plan for a transportation project to the Board." Hopefully the Board will adopt these guidelines and permit unsolicited proposals.
New Jersey's statute applies to state colleges and universities. For those wondering, the College of New Jersey is the current name of the institution formerly known as Trenton State. Princeton long ago dropped that name. Having said that, there are several other institutions of higher education in New Jersey that could benefit from this new legislation.
The statute permits a state or county college to enter into a contract with a private entity when the entity assumes "full financial and administrative responsibility for the on-campus construction, reconstruction, repair, alteration, improvement, extension, management, or operation of a building, structure or facility." These projects must be submitted to the New Jersey Economic Development Authority (the "Authority") for review and approval by August 1, 2013. Additionally, the statute allows private entities to underwrite the cost of construction for new classrooms, laboratories, and other academic buildings in exchange for the opportunity to lease and operate a dormitory or other revenue-producing facility. While the college will continue to hold title for the facility, the private entity will be able to receive some or all of the revenue generated by the facility during the lease term. These projects must be submitted to the Authority for review and approval by August 1, 2014. In its current form, the statute does not appear to permit the submission of unsolicited proposals to the Authority. However, a private entity can most likely approach a State or county college with a plan for a public-private partnership agreement that will then be submitted to the Authority as an application. With certain tax incentives and the ability to make profits, this legislation should hopefully promote investment in New Jersey's higher education infrastructure.
As reported by NJTODAY.NET (http://njtoday.net/2012/08/08/gov-signs-bills-to-promote-investment-in-higher-education/), State Senator Thomas Kean, Jr. affirmed the importance of P3 projects for improving New Jersey's higher education infrastructure: "The public-private partnership legislation is truly an innovative solution to meeting our infrastructure needs at public institutions during a time of limited resources," Kean continued. "Colleges and universities will be able to leverage existing revenue generators, such as a dining hall or dormitory, as collateral in a partnership with a private entity willing to finance the construction of another facility. Rather than public debt being used for construction, the institutions will leverage the resources already available to them to secure private dollars for infrastructure improvements."