PUBLIC/PRIVATE PARTNERSHIPS (P3S) IN 30

MINUTES OR LESS

WHAT ARE WE GOING TO DISCUSS?

• Some history of P3s in Arizona• Current shifting landscape• Potential future of P3s in Arizona

P3s

A BRIEF HISTORICAL LOOK• Although the 202 Connect

project has garnered a lot of attention, it is not the first Public/Private Partnership in Arizona

• A project may be a P3 even if it is not formally titled a “P3” or even doesn’t require private financing

WHAT IS A P3? • A Public-Private Partnership is a

contractual agreement between a public agency (federal, state or local) and a private sector entity.

• Through this agreement, the skills and assets of each sector 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 potential risks and rewards in the delivery of the service and/or facility. o Source: www.ncppp.org

Public Sector

Private Sector

Partnership

RANGE OF DELIVERY MODELSThe Scale of Public-Private Partnerships:

Risk Transfer & Private Sector Involvement

Privatization

Deg

ree

of P

riva

te S

ecto

r R

isk

Design-Build-Finance-Maintain-Operate (Full Concession)

Design-Build-Finance-Maintain-Operate (Availability Payment)

Design-Build-Finance-Maintain

Design-Build-Operate-Maintain

Design-Build-Finance

PDA

PPP

Mod

els

Design Build

Design-Build

Degree of Private Sector Involvement

CENTRAL ARIZONA PROJECT• In 1946, the Central Arizona Project Association was

formed to educate Arizonans about the need for CAP and to lobby Congress.

• It took approximately 22 years to accomplish this, when in 1968 President Johnson approved construction of the CAP.

• The Central Arizona Water Conservation District was created to manage the CAP and as a means to repay the reimbursable costs of construction.

GM DESERT PROVING GROUNDo Structured as an enhanced use

leaseo Joint venture with the US Army

and GMo GM provided the facilitieso Army provided the lando Win/win as now both have a

2,400 acre hot weather test complex that neither could have built on their own

CRESCENT MOON• Crescent Moon/Red Rock

Crossing Recreation Area in Sedona, AZ o RRM has operated this area since

1994 under a private maintenance and operations agreement with the US Forest Service

o Study conducted in 2011 compared RRM’s operations of the Recreation Area with nearby Arizona State Park

o Crescent Moon returns $45,000 a year to the US Forest Service while state park costs Arizona $234,000 a year

LAKE PLEASANT WATER TREATMENT PLANT

• Water Treatment Facility – Built with a capacity of 80 million gallons per day (mgd), but expandable up to 320 mgd

• Built as a Design-Build-Operate• At the time was the largest Design-Build-Operate in North

America• Project began two months ahead of schedule, saving the City

of Phoenix approximately $30 million • Project was completed with zero lost-time accidents

CURRENT SHIFTING LANDSCAPE IN ARIZONA

• Although P3s have been used in Arizona over the years, they have not been capitalized on here as much as they have in other states or globally.

• Why is that?:o A lack of clear enabling legislation?o A lack of understanding on the public/private sector side?o Access to affordable financing options?o A lack of need for this delivery method?

• It is unclear why, but it is clear that there is a growing interest in Arizona.

LEGISLATION• Significant changes in public procurement laws in

the 2000 session have allowed for government agencies to utilize alternative project delivery methods.

• The passage of clear enabling legislation in 2009 for ADOT to use P3s has resulted in ADOT exploring them for a number of opportunities.

• Depending on the size of potential P3, additional P3 legislation is required to encourage P3 use in Arizona.

UNDERSTANDING• Until the past couple of years, there have been pockets of

discussion on P3s, but no clear groundswell.• Recently a P3 Stakeholder group was formed with members

of the public and private sector to discuss potential projects to use P3s, enabling legislation and other P3 issues

• In the past four months, there have been two meetings hosted by the Arizona Commerce Authority, in conjunction with leaders from Canada to discuss growth and use of P3s in Arizona. o These meetings have drawn out between 70 and 100 attendees each meetingo Leaders from contracting companies and governmental leaders at all levels

• Personal experience – an increased level of consults

NEED• To utilize a P3, there needs to be an

infrastructure need.• Estimated costs of Arizona infrastructure

needs in the areas of transportation, telecommunications water and wastewater, and energy are at least $417 billion over the next 25 years.

• Arizona’s political landscape makes it very unlikely for the government to raise that money on its own.

POTENTIAL P3S IN ARIZONA• ADOT related:

o Freeway lighting upgrade• Replace all high pressure sodium lights in Phoenix Maintenance

District including lights in the Deck Park Tunnel• Plan, design, supply, operate and maintain

POTENTIAL P3S IN ARIZONA• ADOT related:

o I-11 corridor• The concept of an access controlled, high-capacity

transportation facility connecting Phoenix and Las Vegas

CONCLUSIONS • P3s are not simply about financing,

but rather providing a performance guaranty to public sector partners

• Staying aware of the growing interest in P3s may result in you being competitive in some fantastic business opportunities.