Ernest C. Brown Esq. PE - Citizens Guide to P3 Projects: A Legal Primer for Public-Private Partnerships

Citizens Guide to
P3 Projects

A Legal Primer for Public-Private Partnerships

Ernest C. Brown, Esq., PE

CITIZENS GUIDE TO P3 PROJECTS

A LEGAL PRIMER FOR PUBLIC-PRIVATE PARTNERSHIPS

Copyright 2020 Ernest C. Brown, Esq., PE.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

Interior Graphics/Art Credit: Marla Aufmuth- Photographer

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ISBN: 978-1-5320-8999-2 (sc)

ISBN: 978-1-5320-9000-4 (hc)

ISBN: 978-1-5320-9001-1 (e)

Library of Congress Control Number: 2020900645

iUniverse rev. date: 01/27/2020

CONTENTS

Americas infrastructure is in trouble.

The roads, bridges, dams, and pipelines that we rely upon as the backbone of our economy are up to one hundred years old and are grossly inadequate for our growing population and societal objectives. Our Federal Government, states and localities lack the financial resources to make the necessary investments to restore, enhance and properly maintain our public infrastructure.

In the past decade, Public Private Projects, or P3s have emerged as a new design, build and financing alternative. A P3 or Concessionaire Agreement is a cooperative agreement between a public agency and private entity for the design, construction, finance and management of a project or service used by the public. P3s can provide private investment funds and offer ordinary citizens the opportunity to advocate for creative local projects.

The P3 approach has resulted in the construction of hundreds of exceptional projects in the United States, Canada, and abroad. They offer great opportunities for new investment and can be catalysts for successful project development. In 2018, the Trump Administration announced its Building a Stronger America program, a plan to promote $1.5 trillion in new infrastructure programs, largely funded by P3 investment. In fact, there is bi-partisan support at all levels of government for implementing P3s to save our rapidly aging infrastructure.

As recently observed in the Harvard Business Review:

[I]ts no surprise that there is renewed interest in public-private partnership (P3) projects, where businesses supplement public investment in return for reaping rewards such as tolls and fees. (What Successful Public Private Partnerships Do, Elyse Maltin, January 8, 2019).

In sum, the voting public is distrustful of raising property taxes or otherwise financing urgently needed projects with increased gas taxes, user fees or bonded indebtedness. Thus, we desperately need private investment vehicles such as P3s to make our roads, bridges, airports and hospitals safe. We simply cant fund the repair and expansion of our core infrastructure without these types of innovative finance solutions.

That is why P3s are so promising in fixing our infrastructure

The material covered in this P3 Legal Guide should be considered general information and guidance regarding these innovative projects. The reader is advised not to take any specific actions based upon the general observations and suggestions in this general survey of the law without consulting an experienced P3 attorney or law firm.

CHAPTER 1

PROJECT CONCEPTION

1.01

The P3 approach can be an exceptional method for pursuing urgently needed infrastructure projects, especially when government budgets are grossly inadequate.

While the United States economy has largely recovered from the 2008 financial crisis, the aging of the boomer generation, growing public retirement expenses and hostility to new taxes has impacted state and local budgets, restricted government services, curtailed investment, affected bond ratings and deferred maintenance. As a direct result, American infrastructure is crumbling faster than it is being repaired or replaced. And it requires a fresh approach to avert major safety risk to the public.

A 2016 study by Syracuse University concluded through dozens of owner and Concessionaire interviews for US-based projects that there is a significantly higher likelihood of meeting cost and schedule objectives under P3 models compared with traditional public sector project delivery where a project is owned, managed, and financed by government.

The Government Accountability Office (GAO) defines a public-private partnership as a contractual agreement formed between public and private sector partners, which allows more private sector participation than is traditional. These agreements usually involve a government agency contracting with a private company to design, renovate, construct, operate, maintain, and/or manage a facility or system. That is why many consider P3 the future of infrastructure.

On April 15, 2019, the Build America Bureau of the US Department of Transportation further endorsed P3s:

Early involvement of the private sector can bring innovation, efficiency, and capital to address complex transportation problems facing State and local governments. The Bureau provides information and expertise in the use of different P3 approaches, and provides TIFIA and RRIF loans, Private Activity Bonds (PABs), and INFRA Grants to facilitate P3 projects.

Overall, 65% of U.S. roads are in poor condition and 25% of U.S. bridges are in need of significant repair or are unable to handle the current volume of traffic. The Federal Highway Administration (FHWA) estimates that to eliminate the nations bridge backlog by 2028, we would need to invest $20.5 billion annually, while only $12.8 billion is being spent currently.

Throughout the United States, there have been increasing numbers of well-publicized bridge collapses, such as the I-35 Bridge Collapse in Minneapolis, weather catastrophes in the Gulf States, widespread power outages and wildfires in the Western United States, the failure of the Orville Dam Spillways in California, and other public facility failures that have taken many lives and disrupted local economies.

In New York State alone, the American Society of Civil Engineers estimates that $9.3 billion is required just to replace or repair deficient highway bridges.

A November 11, 2019, review of federal data and reports obtained by the Associated Press under state open records laws identified 1,688 high-hazard dams rated in poor or unsatisfactory condition as of last year in 44 states and Puerto Rico. About 1,000 dams have failed over the past four decades, killing 34 people, according to Stanford Universitys National Performance of Dams Program.

There are thousands of people in this country that are living downstream from dams that are probably considered deficient given current safety standards, said Mark Ogden, a former Ohio dam safety official who is now a technical specialist with the Association of State Dam Safety Officials. The association estimates it would take more than $70 billion to repair and modernize the nations more than 90,000 dams.