The Public Private Education Facilities and Infrastructure Act of 2002

1. The Public Private Education Facilities and Infrastructure Act of 2002 Construction Owners Association of America, Inc. – Virginia Chapter Spring Seminar Chris Lloyd McGuireWoods Consulting March 24, 2004

2. Presentation Overview • History of the PPEA • PPEA Overview and Process • Financing and Deal Structures • Virginia Experience – Examples • Pitfalls and Opportunities • What’s new

3. PPTA Success Stories • VMS - Contract for maintenance of 25% of Virginia’s interstate lane miles • Interstate 895 - $325 million, connecting suburbs to Richmond International Airport • Route 288 - $236 million, 17.5 mile beltway around Richmond, support Capital One expansion • Route 28 - new interchanges on access road serving Dulles International Airport • Coalfields Expressway - new road for SW Virginia, leverages dedicated federal funds • Interstate 81 – tolls and federal funds

4. Public-Private Education Facilities and Infrastructure Act of 2002 What are the components of a successful proposal? • Delivers something citizens want • Private sector shares in the risk • Minimizes impact on state/local debt model • Faster, better, and cheaper • Broad political support • Open and inclusive process that keeps the public informed • Strong partnership between staff and elected body

5. Public-Private Education Facilities and Infrastructure Act of 2002 What is it? - An alternative procurement tool that allows public entities to more efficiently develop infrastructure and achieve better value for the taxpayer What it is NOT? - A panacea that resolves all procurement issues - A way to get something for nothing - A way to steal ideas from the private sector

6. Public-Private Education Facilities and Infrastructure Act of 2002 - provisions • Allows for solicited and unsolicited proposals to acquire, design, construct, improve, renovate, expand, equip, maintain, or operate a qualifying project • A qualifying project is: • education facility (public school and higher ed) • “any building or facility for principal use by a public entity” • equipment to enhance public safety and security at public buildings • utility and telecommunications infrastructure • recreational facilities • Technology infrastructure

7. Public-Private Education Facilities and Infrastructure Act of 2002 - process • Public body must also determine that the project “serves the public purpose” by demonstrating: • Public need • Cost is reasonable in relation to similar facilities • Will result in timely delivery of the project • Public body may charge a reasonable fee to cover processing costs including fees for attorneys and financial and other advisors

8. Public-Private Education Facilities and Infrastructure Act of 2002 - process • Public body adopts PPEA guidelines • Private entity submits proposal to public body • Public body makes a written determination whether the project is developed using competitive bid or competitive negotiation • Competitive negotiation can proceed if the public body determines that this method is “likely to be advantageous” because of the “probable scope, complexity or urgency of the project” or “risk sharing, added value, an increase in funding or economic benefit from the project that would not otherwise be available”

9. Structures Design-build Design-build-O&M Build-own-operate Build-own-revert Sale-leaseback Lease-purchase Long-term O&M contracts Various development agreements Funding/Value Traditional government sources (GF/NGF) User fees Service contracts Lease payments Commercial revenues Private activity bonds Depreciation and other tax credits for private entities Leverage funding streams Public-Private Education Facilities and Infrastructure Act of 2002 - funding

10. Potential deal structure Team offers “turn-key” project delivery Contractor willing to assume project delivery risk Life-cycle maintenance is included Other revenue-generating activities are suggested Team members provide free services that benefit government entity even if project does not proceed Achieves cost savings through design-build and financing Financing vehicles use solely local funds or 63(20) structure Public-Private Education Facilities and Infrastructure Act of 2002 - funding

11. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation What is happening across Virginia? • Education facilities in Falls Church, Fredericksburg, Chesterfield and Stafford County (2) - agreements signed • Pending school proposals in Manassas Park, Warren County, and City of Winchester • Longwood University dorm facilities • Public safety facilities in Roanoke, Stafford, and Frederick Counties (others in the works) • Capitol Square redevelopment • Prison construction program • Downtown Fredericksburg parking deck

12. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Roanoke County Public Safety Project • Northrop Grumman first in door, leads 3 day ‘visioning’ session with county staff • NGMS presents white paper to county administrator, includes 30% design – all at no cost to the locality • Plan includes building and equipment, routine technology refresh, lease structure • Roanoke County accepts white paper as an unsolicited proposal (June 29, 2003), advertises for 75 days • Two competing proposals were filed by September 15 • Staff recommends that only 2 of the 3 proposals move forward, board wants additional information on all three (October 28, 2003) • County issues RFP for design review (December 2003) • PR effort to county citizens begins (February 2004)

13. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Stafford School Construction Project • County issues a solicitation for 3 new schools on county owned land, some design has been completed, includes a wish list (February 11, 2003) • 7 firms respond in 30 days, narrowed to 2 in one week • Detailed proposals were requested with one month turnaround • Each team had revenue generating opportunities • Haskell team is selected, derives revenue from sale of land for senior living center, joint uses of facilities, exchange of developer proffers • Comprehensive agreement signed July 1, 2003 • County will finance using VPSA bonds

14. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Who are the major players? • Haskell Company • Donley’s • Northrop Grumman Mission Systems • Centex Construction • Clark Construction • English Construction • Moseley Architects • Morgan Keegan • Eastridge Development • HSMM • Ricketts Construction • Kahn Construction • Trammell Crow

15. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Trends - How Are Local Governments Reacting? • Implementation of PPEA guidelines becoming more widespread • “Smart” firms are actively looking for good projects • “Smart” local governments are seeking maximum leverage • Deals are closing quickly • Public input is sometimes lacking • Creative financing has not been embraced • Board vs. staff debates

16. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Potential pitfalls • Too much work goes to out-of-state companies or large conglomerates • Cost savings are hard to define • Process seems rushed, appearance of inside deals • Debt capacity is compromised • Voters feel left out of the process • Non-performance by a contractor (picked the wrong team) • Board vs. staff debates cause long term problems

17. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Anticipated growth areas • Water and wastewater • Public safety • Colleges and universities with small/unsophisticated endowments • Courthouses and other local government buildings • Local/regional jails • Technology procurement • Performance contracting/energy conservation • Parking structures

18. What’s New? • Technology infrastructure added in 2003 session • AGC opposition continues (2003/2004 amendments) • Requires payment, performance and maintenance bonds for construction aspects of a project • Requires a local government to hire outside help or affirmatively rule that such services will be provided in-house