The Public Private Education Facilities and Infrastructure Act of 2002

1. The Public Private Education Facilities and Infrastructure Act of 2002 2003 VIRGINIA ENGINEERS CONFERENCE Chris Lloyd McGuireWoods Consulting October 10, 2003

2. 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

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

4. 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

5. 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

6. Typical 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

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

8. 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

9. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation Who are the major players? • Northrop Grumman Mission Systems • Haskell Company • Centex Construction • Clark Construction • English Construction • Moseley Architects • Morgan Keegan • Lehman Brothers • J.P. Morgan Chase • GE Capital • Lincoln Properties • Fluor

10. 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 very quickly • Public input is lacking • Creative financing has not been embraced • Board vs. staff debates

11. 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

12. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation How can engineers get more involved? • Assess your capabilities – where have you done projects that have made you a trusted resource • Talk to contractors – they have the lead • Survey government contacts for potential projects • Be willing to put in some sweat equity

13. Public-Private Education Facilities and Infrastructure Act of 2002 - implementation www.mwcllc.com/people/individuals/lloyd_cd.asp