Types of a Public Private Partnership (P3)
There is a public need for timely acquisition, design, construction, improvement, renovation, expansion, and installation of education facilities, government facilities, and other public infrastructure in Texas that serve the public need and purpose.
In many cases, the current credit environment and recession have made it increasingly difficult for governmental entities to finance large initiatives. These same worldwide credit issues have caused bond packages to face tough opposition, while sales tax receipts have fallen to new lows. Most cities and counties have budget shortfalls yet continued pressing needs for growth.
Texas Senate Bill No. 1048,
Titled “Public and Private Facilities and Infrastructure” was signed into law September 1, 2011, and provides new opportunity for a partnership engagement between public and private sector organizations. With this option, the private group has the opportunity to provide any combination of financing, design, development, construction, operation and/or maintenance of a public infrastructure project, and in return receives payment through different types of structured compensation. The costs of an investment are spread over the life of the project, as compared to traditional “pay as you go” financing options. There are various ways to structure P3’s, but usually the projects repay private-sector partners through designated revenues, lease agreements, user fees, tolls, generated cost savings and transfers. Unlike privatization, in a P3 agreement the public agency typically retains ownership of the project, oversees its operation, and controls the private group’s involvement. Consequently, many of the risks of project financing, design, construction and maintenance are transferred to the private sector. A Public Private Partnership is used to finance a wide variety of projects – and they are traditionally a quicker start as well as a quicker finish.
“There are inadequate resources to develop new education facilities, technology and other public infrastructure, and government facilities for the benefit of the citizens of this state, and there is demonstrated evidence that partnerships between public entities and private entities or other persons can meet these needs by improving the schedule for delivery, lowering the cost, and providing other benefits to the public:”
Texas Senate Bill 1048 Sec. 2267.002 (a),(3)
A private partner may initiate the required approval process of a governmental entity by submitting a conforming proposal requesting approval. Prior to considering a proposal for a qualifying project, a responsible governmental entity must adopt and make publicly available guidelines that enable the governmental entity to comply with the P3 bill.
(HASEN Design Build and Development can help provide guidance to the responsible governmental entity to better understand and develop these requirements.)