BRADENTON, Fla. – As Florida moves forward with its largest public-private partnership ever, more local governments across the Sunshine State want to capitalize on the benefits P3s can offer.
Lawmakers this year approved House Bill 85, enabling legislation that sets statewide standards for using P3s on all kinds of public facilities. It is waiting for action by Gov. Rick Scott.
The bill, if signed into law, will signal that Florida is open to all kinds of P3 business, according to John Cal, president of the newly organized Florida Council for Public Private Partnerships, or FCP3.
“This legislation makes a clear statement to the financing community that Florida is a place you can come and invest in a public-private partnership, and it is explicitly authorized,” he said. “It gives them the comfort that they are operating in a safe environment.”
While the Florida Department of Transportation has had legislative authority to do P3s for several years, and has successfully implemented a number of projects, Cal said HB 85 could unleash a wave of new projects on a smaller scale than the FDOT’s flagship P3, the $2 billion I-4 Ultimate Project, which is now under way.
“I think the likelihood is that these [local] projects will be smaller, and there will be more of them,” he said. “For many public entities, these will be as small as $5 million to $10 million.”
“Gargantuan” P3 ventures like the I-4 Ultimate Project under way by the state will be relatively unique, and small in number, Cal predicted.
Last week, the FDOT advanced work on its largest-ever P3 – the $2 billion project to rebuild and widen 21 miles of Interstate 4 in central Florida’s Orange and Seminole counties.
Construction on the massive project is expected to take up to six years through counties that suffer from severe traffic congestion due to the location of mega-theme parks and other development in the growing Orlando area.
The complex Ultimate I-4 project includes reconstructing existing Interstate interchanges, adding two managed express toll lanes in each direction, building 56 new bridges and replacing 68 others.
Out of seven teams that submitted qualifications for the P3, FDOT has selected four that will be asked to submit proposals for a 40-year concession contract to finance, construct, operate, and maintain the project.
FDOT, which does not have bonding authority for P3 projects, also selected a conduit issuer for up to $2 billion of private-activity bonds concessionaires can use in their plan of finance.
The state has applied to the U.S. Department of Transportation for the PAB authority, which is separate from the state’s volume cap.
The Florida Municipal Loan Council, operated by the Florida League of Cities, has agreed to issue the bonds if the PAB allocation is used, said Kraig Conn, who is the attorney for both entities.
On May 29, the FMLC adopted an “inducement resolution” that provides preliminary approval for the issuance of the bonds. Final bond documents will be approved if the PAB allocation is included in the plan of finance.
Conn said the council questioned its risks – financial and reputational – before approving the resolution.
“I think there was healthy discussion from various perspectives about the risks to the loan council, the benefits to the loan council, as well as the benefits to the cities and the state,” he said. “We have told FDOT if they want us to be part of their team we are willing and capable.”
In the past 15 years, the council has issued $1 billion of bonds to finance capital infrastructure projects for cities, counties, and some special districts.
Last year, the council created an infrastructure financing program, and issued $59.1 million of bonds to provide gap financing for an FDOT interchange project in Duval County.
As part of the resolution agreeing to the I-4 project, the council has named Bryant Miller Olive PA as bond counsel and Public Resources Advisory Group as financial advisor.
“We recognize the concessionaire will have its own financing team but we thought it was necessary to have our own team members with us, and have a set of eyes looking at the transaction from the loan council’s perspective,” Conn said. “This was a very critical part of the loan council engaging itself as conduit issuer.”
In addition to the allocation of private-activity bonds that concessionaires can use to develop their plan of finance for the I-4 project, the FDOT is also applying for a low-interest federal loan of up to $874 million from the Transportation Infrastructure Finance Innovation Act program.
The state expects to issue a request for concession proposals in September for the I-4 Ultimate Project.
While Florida lawmakers enacted P3 legislation several years ago to advance transportation projects, Cal said the stage is being set for cities, counties, special districts, and nonprofits to use P3s to advance a wide variety of infrastructure projects.
HB 85 is expected to help local governments clear significant hurdles that have prevented some of them from moving forward with public-private partnerships to date, he said, adding that the bill grants specific authority for P3s that local governments and private investors need.
Cal, who is associate vice president of facilities management at Florida International University in Miami, said the legislation could also help universities such as FIU that are exploring the use of P3s after years of decline in state funding for capital needs.
At FIU, funding from the state declined to $3 million a year for the last three years from $53 million annually from 2005 to 2010.
“At $3 million a year it is difficult to have a healthy capital program for a growing public university,” he said, adding that it barely meets maintenance needs. “We have to figure out a way to execute a capital program without that state funding, and P3s offer that possibility.”
Some universities have used public-private partnerships for parking facilities and housing, which have user fees that can be leveraged for those specific projects.
Academic buildings do not generate revenues, and Florida currently prohibits tuition from being used to back bonds or promises of future payments.
The state Board of Governors overseeing higher education is exploring options such as recommending that some restrictions on the use of tuition and other revenues be changed, Cal said.
The governor reportedly has said that he supports HB 85. Action on the bill is expected soon.