On July 31, 2017, the Federal Transit Administration (FTA) published a notice of proposed rulemaking in the Federal Register, for a proposed regulation that would establish new, experimental procedures to encourage use of public-private partnerships (P3s), joint developments and other private investment mechanisms in surface transportation capital projects. The rulemaking is linked to a statutory provision in the Moving Ahead for Progress in the 21st Century Act, which requires FTA to identify provisions at 49 U.S.C. chapter 53 and any regulations or practices thereunder that impede greater use of P3s and private investment. Potential private investors in public transportation infrastructure projects, as well as local and state transportation agencies that may be considering mechanisms of private funding, should be aware of the proposed new procedures. Public comments on the proposal are due September 29, 2017.
Rebuilding America’s aging infrastructure is one task that most economists and civil engineers, and most Americans, agree should be at or near the top of President Donald Trump’s agenda. President Trump touted his background as a real estate developer to convince voters that he was best positioned to identify priorities and bring various interest groups together to structure concrete solutions. If he can harness bipartisan support for fixing or upgrading roads, bridges, tunnels, railways, airports, dams and other critical infrastructure, while satisfying Congressional budget hawks, he will fulfill one of his most consequential campaign promises. However, the just announced Trump Tax-Cut Plan, while light on technical detail, would almost certainly enlarge the budget deficit and will complicate any legislative push for infrastructure funding.
Public development and infrastructure projects are on the rise in California. This is a good thing for the economy. But it also means that private property will often be needed to complete these projects. Public agencies may acquire private property upon payment of just compensation, without the owner’s consent, through an eminent domain action. Property near highways, railroads, public utilities, government buildings and other public facilities are frequent acquisition targets for expansion of these facilities, as are those properties in the path of development of growing cities. But virtually any property may be subject to public acquisition, either through condemnation of the entire property or of easements in the property.
Today, my colleague Norman Carlin published an interesting piece discussing a pair of recent decision issued by the Fourth District Court of Appeal upholding a public-private partnership (P3) water project against two California Environmental Quality Act (CEQA) challenges. The two decisions are Delaware Tetra Technologies, Inc. v. County of San Bernardino, 247 Cal. App. 4th 352.(2016) and Center for Biological Diversity v. County of San Bernardino, 247 Cal. App. 4th 326 (2016). Norman’s alert is Saving Private Partnerships: Court Upholds P3 Project against CEQA Challenge under Save Tara.
Historically, investors have pretty clearly found the Peruvian legal framework for procuring, awarding and monitoring concessions to be a favorable one — just since 1996, the country has awarded more than US$20bn in Public-Private Partnership concessions. But a new legislative structure for PPP financings in Peru entered into force at the end of 2015, replacing the prior legal regime and introducing some significant changes. While some commentators have reacted negatively to the new framework, it is my view that the new law is modern, progressive, and provides a mature and comprehensive framework that should continue to attract private investment in Peru’s infrastructure. In an article for Project Finance International, New Peruvian Framework for PPPS, I examine the recently implemented legislation in depth, and arrive at the conclusion that it may prove to be a very useful model for other countries in the region and around the globe. I’m looking at you, Argentina…
Photo: Jorge Gobbi, Estación Villa El Salvador, Taken Feb. 2, 2012 – Creative Commons
We have previously written regarding critical repairs and updates needed for the Nation’s aging infrastructure. We have also noted the need for private investment to get these capital-intensive infrastructure projects off the ground. An Act recently passed with strong bipartisan support by Congress and expected to be signed into law as early as this week by President Obama seeks to promote private investment in water infrastructure projects through innovative financing programs and the use of public-private partnerships (“P3s”).
The Water Resources Reform and Development Act of 2014 (“WRRDA”) (H.R. 3080) establishes a five-year pilot program – the Water Infrastructure Finance and Innovation Act (“WIFIA”) – which provides low-interest federal loans and loan guarantees for major water infrastructure projects. WIFIA authorizes the Army Corps of Engineers and the Environmental Protection Agency to provide up to $175 million in direct loans and loan guarantees for the construction of critical water infrastructure projects, including those delivered through P3s. WIFIA is modeled after the Department of Transportation’s Transportation Infrastructure Finance and Innovation Act, a successful federal program which has supported major P3 transportation projects.
In addition, WRRDA creates a separate 15-project pilot program – the Water Infrastructure Public-Private Partnership Program – to assess the use of P3s to accelerate projects in such areas as hurricane, storm, and flood damage reduction; coastal harbor improvement; and aquatic ecosystem restoration. These pilot projects authorize the Army Corps of Engineers to enter into agreements with private entities and state and local governments to help address a significant project backlog.
It is estimated that the U.S. water and sewer infrastructure will need an investment of between $600 billion and $1 trillion in the coming decades. Given the magnitude of capital needed and the critical nature of these projects, P3s seem to be an ideal structure for accomplishing the work, particularly given the current financial pressures faced by the government and its agencies. If WRRDA and its programs prove successful, it makes sense to expand such financing programs and encourage the use of P3s to fund projects addressing other sectors of the Nation’s infrastructure.
Co-head of Pillsbury’s Energy Industry team Rob James and project finance partner Philip Tendler recently published 2014 Project Finance – United States. In it, they discuss collateral, how security interests are perfected and prioritized, liens, and enforcement of collateral. In addition, they touch on bankruptcy, foreign exchange, remittances, repatriation, offshore and foreign currency accounts, foreign investment and ownership restrictions, insurance, and natural resources. They conclude with a section on financing of recent public-private partnership (PPP) transactions in the United States.
Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through – Project Finance 2014 (published in August 2013; contributing editor Phillip Fletcher, Milbank, Tweed, Hadley & McCloy LLP).
For further information, please visit Getting The Deal Through
We previously reported that, in August, Maryland announced plans to utilize a public-private partnership (“P3”) to build and operate its $2.2 billion light rail project known as the Purple Line, which will run between Montgomery and Prince George’s Counties. This past Tuesday marked the deadline for companies competing to be the project’s private partner to respond to a Request for Qualifications to design, build, finance, operate, and maintain the Purple Line project.
According to the Maryland Department of Transportation (“MDOT”), six groups comprised of local, national, and worldwide private companies made submissions. Those groups are: (1) M-PG Connect LLC (Plenary Group USA Ltd. and Bechtel Development Company Inc.); (2) Maryland Purple Line Partners (VINCI Concessions, Walsh Investors, InfraRed Capital Partners, ALSTOM Transport, and Keolis S.A.); (3) Maryland Transit Connectors (John Laing Investments Limited, Kiewit Development Company, and Edgemoor Infrastructure & Real Estate LLC); (4) Purple Line Development Partners (CSCEC and United Labor Life Insurance Company, Inc.); (5) Purple Line Transit Partners (Meridiam Infrastructure Purple Line, LLC, Fluor Enterprises, Inc., and Star America Fund GP LLC); and (6) Purple Plus Alliance LLC Proposer (Macquarie Capital Group and Skanska Infrastructure Development Inc.).
In January, MDOT plans to select no more than four of these groups to submit a detailed proposal for the Purple Line project by next fall. MDOT will then choose the winning proposal by early 2015. The private partner is expected to contribute between $400-900 million, and additional funding for the project will come from the federal government. If that federal funding is obtained, MDOT predicts that construction of the Purple Line will begin in the spring of 2015 with services planned to begin in 2020.
We have previously reported on Maryland’s efforts to modernize its public-private partnership (“P3”) law. Our own Jeff Gans has had considerable involvement with the new legislation, and, at the request of the Lt. Governor’s office, has testified before Maryland Senate and House committees considering the P3 legislation. The new law is about to be put to good use.
Last month, Maryland Governor Martin O’ Malley announced plans to utilize a P3 to build and operate a $2.2 billion public transportation project. The project is a light rail line – the “Purple Line” – which will run from Bethesda in Montgomery County to New Carrollton in Prince George’s County and tie into the existing Metrorail, MARC, and Amtrak train lines as well as bus routes.
Maryland will provide $400 million for construction of the 16-mile, 21-stop route, plus $280 million for right-of-way acquisition and finalizing design. The private partner is expected to contribute between $400-900 million, and additional funding for the project will come from the federal government.
The Maryland Department of Transportation (“MDOT”) predicts that use of a P3 will promote efficiency and reduce costs by transferring risk to the private partner. In addition, P3 proponents point to the incentives and quality-control that are created when the designer and builder of a project is also the entity responsible for the project’s ultimate operation and long-term maintenance.
The presolicitation report submitted in accordance with Maryland’s new law, which outlines MDOT’s vision for the Purple Line project, can be found at MDOT’s website. Maryland will begin the process of selecting a private partner later this year. Each prospective partner will submit a detailed bid which includes estimates for building the project, plus a 30-year estimate for operating and maintaining the Purple Line. The partner’s profits will increase if it can provide the services for under the budgeted amount, but Maryland does not bear the risk related to budget overruns.
Maryland will maintain ownership of the Purple Line, and, after 30 years, the private partner operating the line will return it to the State. At that time, Maryland has options – it can decide to operate the line on its own, or it can rebid the operating function, which could result in the same company continuing to operate the line or a transition to a new operator.
According to MDOT, construction of the Purple Line is to begin in 2015, with rail services starting in 2020. In addition to vastly improving travel between Montgomery and Prince George’s counties, the project is expected to create thousands of jobs. As a Maryland resident living along the Purple Line’s planned route, I’m looking forward to the future.
The Milwaukee Public Museum’s 8-story tower’s marble façade facing West Wells Street is being replaced with 234 solar panels. It was reported that, over the past 50 years, the Museum’s heavy marble façade on the south wall facing West Wells Street has weathered and become less stable. Milwaukee County, which owns the building, reportedly elected to use solar panels as the replacement option because of the energy-generating potential of solar. The Museum’s solar wall is expected to generate 77,533 KW hours of electricity per year, the equivalent of having 442, 60-W light bulbs on for 8 hours every day for an entire year. For now, the Museum will be the only building in Milwaukee with a full solar wall that is generating electricity.
It was reported that Milwaukee-based manufacturer Helios USA has been contracted to produce the Museum’s solar panels. Construction is expected to last approximately 5 months, commencing Monday, July 29. The initial phase, which will involve removal of the existing marble façade, is expected to take 4 weeks.
Photo © March 10, 2006, fitzgene – creative commons.