Public Private Partnerships – The Way to Bring Much-Needed Infrastructure to Arizona?
Just last month, the Arizona Department of Transportation (“ADOT”) finalized its first highway Public Private Partnership (“P3”) Agreement with Connect 202 Partners for the construction of Loop 202 South Mountain Freeway in Maricopa County, Arizona. According to ADOT, the partnership will enable the freeway to be delivered three years earlier than expected and at a savings of over $100 million. ADOT has plans for additional P3 projects in the near future.
What is a P3
According to the National Council for Public-Private Partnerships a P3 “is a contractual arrangement 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” (www.ncppp.org/ppp-basics/7-keys/).
P3s are being created throughout the United States in order to address the continuing reduction in government funds available for financing much-needed infrastructure, and the efforts by federal and state governments to have the private sector help meet the need. On the federal level, President Barack Obama issued a Memorandum on July 17, 2014 entitled “Expanding Public-Private Collaboration on Infrastructure Development and Financing” which launched the Build America Investment Initiative. Further evidence of federal support for P3s includes the Federal Highway Administration’s Model Public-Private Partnership Core Toll Concessions Contract Guide ; the Department of the Treasury, Office of Economic Policy’s September 2014 booklet “Expanding our Nation’s Infrastructure through Innovative Financing;” and the Internal Revenue Service’s improved tax treatment for P3s found in the October 26, 2015 amended General Allocation and Accounting Regulations Under Section 141(REG-140379.02;REG-142599-02) (http://federalregister.gov/a/2015-27328.)
The Loop 202 P3 project described above was created under the authorization of Arizona’s “Public Private Partnerships in Transportation Act,” (Arizona Revised Statutes, Title 28, Chapter 22) (the “Act”). Under the Act, ADOT is granted authority to enter into P3s for a wide variety of projects such as highways, bridges, tunnels, railways, airports, etc. as well as facilities ancillary to such projects, i.e. administration buildings, parking, rest areas, vehicles, energy systems, etc. See A.R.S. §28-7701(2). It is anticipated that additional Arizona legislation will be adopted expanding the use of P3s beyond ADOT.
So, if you are, or work with, a business or entity that has not traditionally been involved in government projects, but provides services that are directly or indirectly related to the construction or maintenance of any public projects (i.e. restaurants, landscapers, builders, contractors, architects, etc.), P3s could prove to be a profitable new source of business. As government funds become increasingly scarce and Arizona’s aging infrastructure continues to deteriorate, P3s may well be the wave of the future that you should catch if, and when, it comes.