Greater Baltimore Committee Transportation Summit May 19, 2015

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An Overview of P3s in Maryland

Discussion Outline

• Public Private Partnerships (P3s) overview

• Maryland P3 Law

• Transportation P3 Process (Regulatory)

• Maryland P3 Projects: – Seagirt Marine Terminal – I-95 Travel Plazas – Purple Line

• Select US P3 Projects

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P3 Misconceptions

• P3s do not transfer ownership of project assets

• P3s are not the same as outsourcing or privatization • P3s are not a replacement mechanism for traditional financing approaches for all

projects • P3s are not primarily about cheaper financing

• Various public sector entities have used P3s, even though they could finance projects at lower cost of capital

• Value created through improved delivery performance, increased risk transfers, and overall lower lifecycle costs achievable by integrating design, construction, and long-term maintenance responsibilities

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• Method for delivering public infrastructure assets using a long-term, performance-

based agreement between a Reporting Agency and a Private Entity.

• Appropriate risks and benefits can be allocated in a cost-effective manner between the contractual partners.

• Private Entity performs functions normally undertaken by the government, but Reporting Agency remains ultimately accountable for the public infrastructure asset and its public function.

• State may retain ownership in the public infrastructure asset and the private entity may be given additional decision-making rights in determining how the asset is financed, developed, constructed, operated and maintained over its lifecycle.

• Does not include an asset sale or a short–term operating space lease.

Maryland’s P3 Definition

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P3 Project Delivery Models

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D/B Contractor

Concessionaire

Operator (with Maintenance)

Concession (DBFOM) Structure Revenue Risk

Public Owner

Creditors Equity Investors

Debt Equity

Users / Other revenue

sources

Revenue

P3 Agreement

Design-Build Payments

Operate-Maintain Fees

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D/B Contractor

Concessionaire

Operator (with Maintenance)

Concession (DBFOM) Structure Availability Payment

Public Owner

Creditors Equity Investors

Debt Equity

Users / Other revenue

sources

Revenue

- Milestone/Construction Progress Payments - Availability Payments

P3 Agreement

Design-Build Payments

Operate-Maintain Fees

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Key Details of Maryland’s P3 Law (2013) • Creates predictable, transparent, and streamlined approach, incorporating best

practices and lessons learned from other states, while addressing the needs of Marylanders

• Allows agencies to consider unsolicited proposals for potential competitive solicitations • Outlines key requirements for competitive solicitation processes

• Exempts P3s from state procurement (Division II of State Procurement Article)

• Requires that reporting agencies promulgate regulations for the development,

solicitation, evaluation, award, and delivery of future P3 projects • Requires that BPW designate any potential P3, ensuring that future P3 projects

receive the highest level of scrutiny BEFORE the State seeks proposals from potential partners

• Outlines key terms and provisions that should be part of a P3 Agreement

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Maryland’s Statewide P3 Oversight Process

Board of Public Works Approval of Agreement

Agreement Terms Sent to Budget Committees, Comptroller, and State Treasurer for Concurrent Review and Comment; Posted Online for Public Review

Solicitation Process (Public notice of solicitation, proposal review, negotiations, reach acceptable

agreement terms)

Review and Designation by Board of Public Works

Presolicitation Report Review by Budget Committees, Comptroller, and State Treasurer; Posted Online for Public Review

Agency Decision to Solicit for a P3: Presolicitation Report Sent to Budget Committees, Comptroller, and State Treasurer

45 days max, with 15-day extension

possible for larger projects

30 days max

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Transportation-Specific P3 Regulations • Processes for identification, screening, and advancement of P3 concepts,

including: – Process for unsolicited proposals – High level and detailed level evaluations of potential P3 concepts – Presolicitation report development

• Components of a multi-phase solicitation process, including:

– Requests for Qualifications – Requests for Proposals (draft and final) – Information availability during solicitation process – Industry review meetings

• Details regarding potential reimbursements

• Framework for evaluation, negotiation, and award of P3s

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Secretary’s recommendation to submit a presolicitation report

Presolicitation development Complete relevant tasks required for the development of a presolicitation report

Detailed level screening More comprehensive screening, including relevant analyses and due diligence

High level screening Initial screening of appropriateness, viability, and effectiveness as a P3

Receive unsolicited proposal P3 concept (from private sector)

Regulatory Process to Advance Transportation P3 Concepts

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Receive internally generated P3 concept (from within MDOT)

P3 concepts identified within MDOT

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Potential P3 concepts and opportunities may be identified through periodic transportation planning, communication, and evaluation processes that are carried out within the Department and its Modal Administrations and through other state, regional, local, and municipal processes, including but not limited to: • Consolidated transportation program • Statewide transportation improvement program • Long-range transportation plans developed by metropolitan planning organizations • County priority letter

Unsolicited Proposals

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Unsolicited Proposals should contain key information required to conduct high-level screening of proposed P3 concept including, but not limited to: • Preliminary ideas of scope, schedule, and project lifecycle considerations

• Preliminary qualitative evaluation of relevant benefits and cost • Preliminary description of financial concepts

• High-level description of financial feasibility • Relevance to other transportation facilities/public infrastructure assets • Rationale for a P3 delivery method relative to a conventional project delivery approach • Clear indication of any proprietary information that should be protected

Some Questions for Determining P3 Potential

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• Are there stand-alone operations and/or assets?

• Can an optimal allocation of risks between private and public sectors be achieved?

• Can there be incentives for private sector to make asset-specific investment decisions that are optimized over the asset life?

• Can a greater focus on asset availability provide strong incentives to maintain schedule discipline during asset delivery?

• Can enhancements or innovations to asset design and delivery approach benefit long-term operations and maintenance performance?

• Is there potential for significant, long-term financial savings relative to a traditional project delivery approach?

High-Level Screening Considerations

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• Ability to meet State transportation, socioeconomic development, workforce, and environmental goals;

• Technical implementation considerations; • Potential need for coordination with other State agencies, including but not

limited to the Maryland Transportation Authority; • Opportunities to accelerate asset delivery implementation; • Ability to allocate and share risks in a cost effective manner that shall be

consistent with State law and in the best interests of the State; • Opportunities to reduce reliance on public funds or finance, or both; • Public affordability considerations; • Potential for increased revenue generation and revenue sharing with the

Department; and • Potential impact on the workforce, including existing State employees, if any.

Typical Detailed Screening Steps

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Review of case studies of similar projects, both nationally and internationally Value for Money analysis or similar quantitative valuation analyses Industry outreach, including:

• Industry forum • Request for Information • Participation in industry events (conferences, etc)

Preliminary risk allocation analyses, with careful consideration of which responsibilities for the public sector to retain, potentially including: • Fare or toll policy and collection • Security • Right of Way acquisition • Public communications

Project delivery workshops to determine potential alignment between project

delivery goals and key P3 features

Evaluate in-house resources to determine if supplementary resources (consultants, other public agencies, etc) are necessary

Existing P3: Seagirt Terminal Key Terms • In 2010, MPA entered into a 50-year DBFOM with Ports America

Chesapeake for redevelopment of Seagirt. • $105 million project to construct deep berth and cranes completed

in 2012, two years ahead of schedule. • $140 million upfront payment, reinvested in shovel-ready

transportation projects along I-95 and the Chesapeake Bay Bridge. • Annual payment of $3.2 million, grown at inflation starting in Yr 5.

Ongoing Achievements • Four new all-electric, high-efficiency, Super-Post-Panamax gantry

cranes which can reach 22 containers across. • Seagirt set 5th consecutive cargo record in 2014, with

tonnage growth 5.36% better than 2013. • MPA recently received a USDOT TIGER Grant to bring rail to

Fairfield, redevelop Fairfield Ship Basin, and to straighten and widen Seagirt access channel.

• The world’s three largest container lines have formed an alliance called the P3; this alliance will bring additional carrier options (Maersk and CMA vessels) to the Port.

• Amazon has built a large distribution center adjacent to Seagirt.

2010

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2013

Existing P3: I-95 Travel Plazas

• In 2012, MDTA entered into a 35-year DBFOM with Areas USA for redevelopment of the two travel plazas on I-95.

• Areas USA invested $56 million for reconstruction of the

Maryland House and Chesapeake House.

• Areas USA will operate and maintain the travel plazas through 2047, while the MDTA retains ownership and oversight of the plazas.

• State will receive approximately $400 million in estimated

revenue payments from Areas USA over a 35‐year period. • Operations of both travel plazas transferred to Areas USA in

September 2012. • Project supported 400 construction and 575 operational jobs. • Maryland House re-opened to the public in January 2014,

Chesapeake House re-opened in August 2014.

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Maryland House

Chesapeake House