Is Public-Private Partnership (P3) right for your next project?

Transcription

1 Is Public-Private Partnership (P3) right for your next project?

2 Introductions Charles E. DeVoe, III, President, Balfour Beatty Construction Kenneth Portnoy, Vice President Of Public-Private Partnerships, Balfour Beatty Construction Rodney Moss, Senior Vice President, Legal, Balfour Beatty Construction Eric Horstman, AIA, LEED AP BD+C, Education Group Principal, Corgan Associates, Inc. John Strybos, P.E., Associate Vice Chancellor of Facilities Operation & Construction, Alamo Colleges Daniel Markson, Senior Vice President Development, NRP Group

3 Kenneth Portnoy, Vice President Of Public-Private Partnerships Balfour Beatty Construction HISTORY

4 State of Affairs U.S. infrastructure under-funded and not adequately maintained: Infrastructure deficit grew from $980 billion in 1999 to $2.2 trillion in 2009 ASCE quality scorecard for roads, energy, schools, water were all D US investing less than 50% of peer countries States, Municipalities, and Community College Districts facing a combination of budget shortfalls, employee layoffs, unfunded liabilities, and anti-tax voter sentiment Public entities need to find alternate ways to deliver and fund essential public infrastructure and facilities Large pools of private-sector capital from infrastructure funds, pension funds, and REITs are attracted to the transparency, lower risk, and long term value of investments in public infrastructure and facilities Approximately one half of states have some form of public-private partnership (P3) legislation

5 Definition of a P3 A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility NOT one structure, but many possible structures, ranging from mostly public to mostly private control of (1) development, (2) ownership, (3) financing, (4) revenue, (5) operations, and (6) maintenance

6 Private Sector Strengths Result of Market Competition Management Efficiency Newer Technologies Workplace Efficiencies Incentive Based Performance Metrics Bigger Vision / Master Planning to Leverage All of the Uses Available Investment Capital

7 Public Sector Strengths The Result of Serving the Public Trust: Legal Authority Protection of Public Assets and Desire for Economic Development Broad perspective/balance the competing goals to meet public needs Transparency Capital resources (Tax Free Debt and Economic Development Funds) The Secret is to Create a Partnership That: Balances the Strengths of Both Sectors Recognizes the financial, political, and legal constraints of the public partner

8 Advantages of P3 s Maximizes the use of each sector s strength Reduces development risk Reduces public capital investment (avoids pay as you go O&M) Mobilizes excess or underutilized assets Improves efficiencies/quicker completion Improves service to the community and creates economic development Improves cost effectiveness Shares/allocates risks (output/performance specifications) Allows long term view

9 LEGISLATION History of SB 1048 (soon to be Government Code Section 2267) Rodney Moss, Senior Vice President, Legal Balfour Beatty Construction

10 History of the Bill Widely used in other countries (Europe and Canada) for decades. Federal government first adopted for GSA leasebacks and military housing Used in 33 U.S. states for transportation and water projects, but recently extended broadly in Virginia, California, Arizona P3 has been done recently(tif s, American Airlines, Dallas Cowboys Stadium, Texas A&M, Lubbock Conference Center Hotel) Many more totaling several billion $ planned (Alamo CollegeTobin Hill, Las Colinas Event Center, Cotton Belt Railway, Formula 1, DFW Airport Gateway, TFC Capitol Reprogram, Travis County Courthouse, Parkland) Met with Lt. Governor Dewhurst in September 2010 and explained the need for a statute and predictability and guidelines Sen. Jackson as Chair of the Economic Development Modeled after Virginia s PPEA bill adopted in 2002 which has been tested and improved over seven years

11 Highlights Permissive and broadly applicable to any project other than roads and cable/phone Must adopt guidelines before can proceed (consistent with design/build statutes) Not exclusive to other statutory authority Allows for unsolicited proposals Will look and feel like a public project (HUB, prevailing wage, etc.) Requires competition for 45 days with proprietary information removed Best value selection considering all of the financial and non-financial benefits to the public One or two stage development agreement process (Interim Agreement allows for feasibility studies, environmental assessments, traffic etc. needed to prove model sufficient for financing for proceed with Comprehensive Agreement) Eminent domain

12 Highlights Public use cannot be interrupted Oversight commission for state projects (Section 2268) that must provide recommendations (NOT APPROVAL!) before entering into an Agreement In the event of a default by the developer, government takes subject to the lien rights of the lenders or under an eminent domain proceeding where all of the property interests are represented

13 Watch Outs Texas counties have constitutional limitations limiting debt to solely county purpose Lots of negative press/perception related to Trans-Texas Corridor and county jail projects O&M cost must be considered in comparing NPV cost of project Urgent need for several versions of guidelines P&P bonds required and sureties not yet comfortable on what they are backstopping Sovereign immunity for state projects

14 P3: LEVERAGING SUCCESS Eric Horstman, AIA, LEED AP BD+C, Education Group Principal Corgan Associates, Inc.

15 Good Planning = Good Results The P3 planning process brings the best ideas to the table early on in the project. Good planning works with the site to preserve and enhance desirable features Start with the end in mind; this project will not be the last Work with the contours, don t fight them (save $$$) Avoid detention ponds. Use bioswales, pervious paving, natural drainage Chose sitting and orientation to maximize present and future environmental benefits Phase I Phase II Phase III

16 Good Environmental Stewardship = Good Sense P3 Arrangements allow for the maximum sustainable benefit while lowering M&O costs to previously unattainable levels Acres of rooftop can equal a new revenue stream for your campus Developer can bear all up-front costs of system installation, and then realize 30% Federal Tax Credit, using accelerated depreciation over 5 years or less Developer also realizes power generation benefit while they own the system Ownership of the system can revert to the campus as quickly as possible. Once this takes place, the power generation benefit transfers as well Power can be used on site or sold back to the utility

17 Good Design = Good Outcomes P3 approach is an integrated, collaborative approach to design that leaves less variables to chance Start with the most efficient building possible; great insulation, shading devices, fewer power outlets Use building systems that maximize M&O savings. Geothermal HVAC is a great example Incorporate strategies that will outlast today s technologies: Don t rely on the latest whiz-bang gadgets to save energy; integrate low-tech solutions into the bones of the project. When the automated blinds don t go down, what happens to your heat gain? We can t predict where technologies will be in 20 years, the building has to allow for change

18 CASE STUDY Tobin Hill Mixed-Used Development Alamo Colleges San Antonio College John Strybos P.E., Associate Vice Chancellor of Facilities Operation & Construction Alamo Colleges Daniel Markson, Senior Vice President Development NRP Group

19 Alamo Colleges Existing Campus Locations Northwest Vista College 3535 N. Ellison Drive, San Antonio, TX Year Established: 1995 Total Acres: Total GSF: 593,400 No. Classrooms: 116 No. Labs: 37 Enrollment (Fall 2005): 9,151 Enrollment (Fall 2010): 13,802 San Antonio College 1300 San Pedro Avenue, San Antonio, TX Year Established: 1925 Total Acres: 63.4 Total GSF: 1.6 million No. Classrooms: 237 No. Labs: 63 Enrollment (Fall 2005): 21,155 Enrollment (Fall 2010): 23,763 Palo Alto College 1400 Villaret Boulevard, San Antonio, TX Total Acres: 1985 Total Acres: Total GSF: 560,800 No. Classrooms: 89 No. Labs: 32 Enrollment (Fall 2005): 8,065 Enrollment (Fall 2010): 9,695 Source: Alamo Colleges Information Technology Services Note: 1. Total campus GSF are approximate and based on inventory from Fall 2010 and does not include off-campus lease space SAC enrollment includes approx. 1,145 students registered through SAC but in attendance at the Northeast campus. Northeast Lakeview College 1201 Kitty Hawk Road, Universal City, TX Year Established: 2007 Total Acres: 255 Total GSF: 366,000 No. Classrooms: 76 No. Labs: 23 Enrollment (Fall 2005): 2,044 Enrollment (Fall 2010): 5,743 St. Philip s College 1801 Martin Luther King Dr, San Antonio, TX Year Established: 1898 Total Acres: 47 Total GSF: 783,100 No. Classrooms: 110 No. Labs: 65 Enrollment (Fall 2005): 7,696 Enrollment (Fall 2010): 10,363 St. Philip s College Southwest Campus 800 Quintana Road, San Antonio, TX Year Established: 1987 Total Acres: 20 Total GSF: 416,600 No. Classrooms: 43 No. Labs: 13 Enrollment (Fall 2005): 843 Enrollment (Fall 2010): 1,101

20 Case Study Concept

21 Case Study - Background San Antonio College (SAC) needs: 1,000 space parking garage 100,000 GSF Academic Classroom space Physical Plant to serve Academic space Underutilized asset (4 acre surface parking lot) Lack of funding

22 Case Study - Renovation & Construction Project Funding Options 1) General Obligation Bonds Tax Levy Impacts Operating Budget New Construction Remodel/ Renovation Debt No Yes Yes 2) Revenue Bonds M&O Yes Yes Yes 3) Maintenance Tax Notes 4) Public-Private Partnership (PPP) Debt No No Yes N/A No Yes Yes

23 Case Study Advantages of P3 Underutilized land/assets generate lease revenue stream to fund Debt service on Revenue Bonds for construction of College Buildings if needed; without competing with operating budget Excess revenue could fund debt service for other campus construction needs 30 to 50 year ground lease; buildings revert to College for future use

24 Case Study Benefits to the Community Stimulate economic growth along Main Avenue Strengthen links between SAC and the neighborhood As part of Tobin Hill SAC, along with the development of Pearl, can become an integral part of San Antonio's vision of the revitalization of the downtown area Project has the support of Tobin Hills Community Association, the City of San Antonio and the SAC community Summary: This gives SAC an opportunity to become an integral part of urban revitalization Removing ourselves from this process will make SAC an island

25 Case Study Sources

26 Case Study Cash Flow

27 Case Study Benefits to the Community at Large Gateway to the Residential Side of Campus Opportunity to positively impact New Historic District that lacked Commercial Uses Stimulate economic growth along Main Avenue Strengthen links between SAC and the neighborhood As part of Tobin Hill SAC, along with the development of Pearl, can become an integral part of San Antonio's vision of the revitalization of the downtown area Project has the support of Tobin Hills Community Association, the City of San Antonio and the SAC community Summary: This gives SAC an opportunity to become an integral part of urban revitalization. Removing ourselves from this process will make SAC an island

28 Questions & Answers

29 Is Public-Private Partnership (P3) right for your next project? For an electronic copy of this presentation contact: Anna Sullivan