Articles Posted in Public-Private Partnerships (PPP)

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In early July, the Bureau of Land Management (BLM) announced the withdrawal of lands identified for solar energy development in the West from new mining claims that could impede development of solar energy sites. Public Land Order No. 7818 (PLO 7818) withdraws 303,900 acres of land within 17 Solar Energy Zones in Arizona, California, Colorado, Nevada, New Mexico, and Utah. You can read the PLO 7818 here.
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Under the Federal Land Policy and Management Act of 1976, BLM is charged with managing the public lands for multiple uses. BLM manages more than 245 million acres of public land, land known as the “National System of Public Lands.” The National System of Public Lands are primarily located in 12 Western states, including Alaska. BLM also administers 700 million acres of sub-surface mineral estate throughout the nation. BLM recently confirmed that in Fiscal Year 2012 activities on public lands generated $4.6 billion in revenue, much of which was shared with the states where the activities occurred. In addition, it reported that public lands contributed more than $112 billion to the U.S. economy and helped support more than 500,000 jobs.

In October 2012, the Department of the Interior established the Solar Energy Zones as part of a western solar plan that provides a road map for utility-scale solar energy development on lands managed by the BLM in Arizona, California, Colorado, Nevada, New Mexico, and Utah. According to BLM, the “Solar Energy Zones encompass the lands most suitable for solar energy development because of their excellent solar resources, access to existing or planned transmission, and relatively low conflict with biological, cultural and historic resources.” Since 2009, BLM has approved right-of-way applications for 25 solar energy development projects with planned total capacity of over 8,000 megawatts, or enough to power over 2.4 million homes. PLO 7818 withdraws the public lands encompassed by Solar Energy Zones for 20 years from potentially conflicting uses, including mining, subject to valid existing use rights, and opens the door to additional solar energy development projects in these states.

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At the 2013 North America Intersolar Conference in San Francisco, California Governor Jerry Brown, and many others spoke confidently about solar opportunities in California. “Just within the last two months we actually recorded over 2,000 MW of solar energy being put into the grid…,” Governor Brown reported. He also confirmed his “goal of 1 million solar rooftops.” He encourages a call to action, marshaling “intelligence and collaboration and political response…” You can hear Governor Brown’s 2013 North America Intersolar Conference Keynote Address here.

Governor Brown launched California’s first round of solar incentives in 1978, during his first two-term tenure as the Governor of the State of California. California now puts more than 2,000 gigawatt-hours (GWh) of solar power into its grid, and Governor Brown wants to see 1 million GWh by 2025, to meet the 33% Renewable Portfolio Standard (RPS), a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal. The state now has 130,000 photovoltaics (PV) installations on homes and businesses, growing toward Governor Brown’s stated goal of a million solar roofs.

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In a previous post, we reported that the American Society of Civil Engineers (“ASCE”) released its 2013 Report Card for America’s Infrastructure. America’s cumulative GPA for infrastructure was a D+. One of the categories in this report focused on ports, which received a C grade. Now a new report goes into more depth on one particular part of our infrastructure: Ports. The question, it seems, is: CapEx or Capsize. More, after the jump.

ASCE reported that, according to U.S. Army Corps of Engineers estimates, more than 95% of the volume of overseas trade imported or exported by the United States moves through our ports. The report stressed the importance of improving our nation’s ports in order for the nation to maintain its competitive edge in the global economy: “To sustain and serve a growing economy and compete internationally, our nation’s ports need to be maintained, modernized, and expanded. While port authorities and their private sector partners have planned over $46 billion in capital improvements from now until 2016, federal funding has declined for navigable waterways and landside freight connections needed to move goods to and from the ports.” The inability of the federal government and state governments to fund the necessary improvements to our ports makes a strong case again for the importance of public-private partnerships (“P3s”) in improving our country’s infrastructure.

According to the recent North American Port Analysis report, published by Colliers International in April, America must secure $3.6 trillion in funding by 2020 for the country’s infrastructure in order to improve U.S. ports and to stay competitive in the global market. This is especially true since, as stated in the report, the Panama Canal Expansion is altering global trade patterns, and major trade is shifting from Asia to Latin America, and from America’s West Coast to East Coast/Gulf ports. In subtitling the report CapEx or Capsize, the economists for Colliers International are driving home the importance of investing in the nation’s infrastructure and ports now rather than delay such an essential undertaking. P3s will definitely contribute to this investment.

As exemplified by past projects, ports can greatly benefit from P3s. One example of a very successful P3 project was the 2004 expansion of the Port of Galveston in Galveston, Texas. The Port of Galveston Cruise Terminal Development (the “Project”) was a partnership between the Port of Galveston and several private partners, including CH2M Hill, Royal Caribbean International and Carnival Cruise Lines. In 2002, the private partners submitted an unsolicited proposal to expand the cruise ship services and facilities. The public and private sectors then worked together to fund the project and to provide the necessary facilities on time and within budget. The Port of Galveston benefited from the project because of the increased revenue from growth in related employment and commercial revenues. And the private partners benefited because a greater number of their cruise ships can now utilize the improved port to increase customers and revenues.

On the whole, like many P3 projects, it was a win for both sides. The National Council for Public-Private Partnerships awarded the Project the 2004 NCPPP Infrastructure Award Winner. A more detailed description of this exemplary project can be found here.

Overall, P3s can play a vital role in improving our nation’s infrastructure and assisting our nation to secure the $3.6 trillion necessary to raise our infrastructure GPA from a D+ to a B. P3 projects have proven time and time again that they can be much more efficient and can lower costs. This certainly is a winning combination to turn around our nation’s infrastructure.

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There is no doubt that Public-Private Partnerships will play an integral role in improving this country’s infrastructure in the coming years. By leveraging private investment, P3s have the ability to bridge the funding gap in many state and local governments. States are slowly recognizing that they can tackle critical infrastructure needs by partnering with the private sector. Some states, however, are still hesitant to commit to P3s.

Pillsbury’s P3 practice has created a chart that lists which states have enacted significant P3 enabling legislation. This P3 Enabling Statutes chart is available on Pillsbury’s P3 practice homepage. The statutes include links to the full text of the enacted legislation so that you can learn more about how you can take advantage of these P3s. In addition to listing the agencies and types of projects authorized, the chart also lists whether the statutes encourage unsolicited proposals. To promote ingenuity and entrepreneurialism, P3 legislation should continue to welcome unsolicited proposals from the industry.

We will of course continue to update this chart as more states pass P3 enabling legislation.

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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.

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Maybe this is the ying to the yang of the American Society of Civil Engineers report that Paul Levin blogged about earlier this week. The Urban Land Institute and Ernst & Young just published Infrastructure 2012: Spotlight on Leadership, in which they detail how state and local governments have decided not to wait for funding from the federal government. It has become like Waiting for Godot (or perhaps Waiting for Guffman). In a Presidential election year the federal government is even more gridlocked than normal — if you can believe that.

But that gridlock doesn’t slow down the rate of decay of our infrastructure, so state and local governments are finding ways to get’r done. These range from old fashioned taxes and bonds to Public Private Partnerships. Of course, no one likes taxes and some object to public private partnerships as selling off our infrastructure. But remember, when a private company finances a road, they can’t roll it up and take it home.

If you don’t have time to read the 70 page report, you can see a condensed writeup about it here.

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The American Society of Civil Engineers (ASCE) just released a report titled “Failure to Act, the Economic Impact of Current Investment Trends in Electricity Infrastructure” and no, the results are not pretty. According to the report, the gap between the amount actually spent on infrastructure across America and the amount that needs to be spent to maintain the system will reach $107 billion by 2020 and $732 billion by 2040. The Southeast and the Western portions of the country are particularly vulnerable to infrastructure underinvestment, making up approximately half of the country’s infrastructure deficit. Furthermore, don’t forget about the 2003 blackout across large sections of the East Coast, including New York City, that showed the grid’s vulnerability. This report comes on the heels of ASCE giving the United States a grade of “D+” in the Energy category in 2009. D+ seems pretty generous.

The ASCE report predicts that disruption and inconsistent service resulting from faulty electricity infrastructure will lead to a reduction in U.S. GDP of almost $500 billion and half a million fewer jobs in America by 2020. The calculations implicit in this report are simple: if we can spend $100 billion to address this problem over the next decade, the country on the whole will be half a trillion dollars better off. It seems so simple.
However, the crunch of budget deficits at both the federal and state levels means that these profitable long-term investments lose out to short-term cost cutting. President Obama, however, has championed doubling overall infrastructure spending that would also help spur job growth and make up for years of underinvestment, but it is not enough.

Public-Private Partnerships will play an important role in bridging this funding gap by leveraging private investment over the long-term. The private sectors sees this $500 billion in potential savings and the United States needs to think creatively to spur further infrastructure development.

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We reported last month that Maryland was on the verge of modernizing its statutory framework for P3s, legislation heavily backed by Governor O’Malley’s administration. The proposed legislation was projected to increase the State’s capital budget by as much as $315 million and create as many as 4,000 jobs.

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Colorado’s Regional Transportation District (RTD), the public transit provider for the Denver Metro area, is hopeful that public-private partnerships, including unsolicited P3 bids, will accelerate the completion of the FasTracks program. FasTracks, a voter-approved transit expansion program aimed at better connecting the Denver Metro area, includes 122 miles of commuter and light rail, 18 miles of bus rapid transit service, 21,000 new parking spaces, redevelopment of Denver’s Union Station and redirected bus services.

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Maryland’s Lt. Governor Anthony Brown led a joint executive and legislative commission to make recommendations for modernizing Maryland’s statutory framework for P3s. The Commission’s work led to legislation, designated as SB358/HB576, that passed the House of Delegates this week and is expected to pass the Senate in the coming days. The primary goal of the legislation is to address Maryland’s critical infrastructure needs through expertly structured public-private partnerships. The various Maryland departments that oversee capital projects found that increased use of P3s could contribute as much as $315 million to the State’s capital budget and create perhaps as much a 4,000 jobs.

Jeffrey Gans, a partner in Pillsbury’s Construction practice and among those leading Pillsbury’s P3 practice, testified in support of the bill before both Houses in the Maryland General Assembly. “The availability of capital is the most often recognized benefit of a public-private partnership. But as important, is the fact that once the legislation takes effect, Maryland will have at its disposal the ingenuity and entrepenurial spirit that is the life blood of the free market.” Mr. Gans’ testimony was in specific reference to the language in the legislation that permits unsolicited P3 proposals to be made to any State agency authorized to enter a P3. “The expertise of the best best and the brightest the market has to offer will be motivated to find innovative and profitable solutions to Maryland’s infrastructure needs,” Gans said.