It is no secret that our country faces aging (and, in some cases, crumbling) infrastructure along with fiscal restraints at all levels of government, to say nothing of the gridlock in Washington, which have collectively made procuring new projects and repairing existing facilities a much more difficult proposition.

In the face of such challenges, Georgia's General Assembly and the State University System of Georgia have each recently taken important steps toward solving these issues by adopting measures to further the use of public-private partnerships (P3s) in the state, and more P3 projects are likely on the horizon.

In the infrastructure space, a P3 is formed by a contractual agreement between a public agency (federal, state or local) and a private sector entity or consortium, whereby the private sector entity brings its skills and assets to deliver a public project (and, commonly, to maintain that project for a term of years) in exchange for some stream of payments over the term of the partnership. The idea is for the public sector to maintain ownership of the project (for example, a courthouse), with many of the costs and risks of maintaining the structure being provided and financed by the private sector entity, in exchange for a stream of rents or tolls generated by the facility.

Partnership for Public Facilities and Infrastructure Act of 2015

On May 5, Gov. Nathan Deal signed Senate Bill 59, the "Partnership for Public Facilities and Infrastructure Act," into law. The governor's signature brings successful closure to a multiyear effort by the bill's sponsors to bring this enabling legislation for so-called "vertical construction" P3s into law and allow public entities at all levels of state government and the private sector to partner to design, build, finance, lease, operate and/or maintain qualifying projects.

While the new law expressly does not apply to facilities that generate electric power, provide communications, cable or video services, or contain water reservoirs, the law could be used for a broad range of infrastructure and facilities, including water and wastewater facilities, stormwater projects, solid-waste facilities, and all manner of so-called "social infrastructure" projects (schools, police and fire stations, courthouses, detention centers, public housing, mixed-use developments and civic centers), as well as transportation projects (seaports, airports, railways, bridges, roads and highways), among many others.

The primary benefit of the new law, which resembles legislation passed in Virginia, Florida, Texas and other states, is to provide an avenue for the acceptance of unsolicited proposals (a proposal submitted by a private party that is not in response to any request for proposal (RFP) issued by the governmental entity), in addition to the existing and traditional method of solicited proposals and competitive sealed bidding in the procurement of government projects.

The law requires various safeguards to ensure that the consideration and acceptance of an unsolicited proposal is carried out in an equitable process. For example, a governmental entity wishing to accept unsolicited proposals must either adopt model guidelines (yet to be drafted) or prepare its own, subject to requirements as to the contents of submitted proposals and the process for their consideration.

Once the proposed project is deemed to qualify for consideration, the governmental entity must issue a public request for competing proposals for the qualifying project within a deadline of not less than 90 days. Amongst other things, the law prevents the governmental entity from pledging the credit of the state of Georgia or loaning funds to the private sector entity in connection with any qualifying project.

Although the eventual uses for this legislation in Georgia are unclear so soon after passage, P3 projects in states with similar legislation can illuminate the possibilities. One such example from Texas, procured pursuant to the city of San Antonio's P3 guidelines, shows the potential that P3s have, not only for fiscal cost-saving, but also to aid urban renewal. On April 27, San Antonio announced a deal with Frost Bank and developer Weston Urban for a complex land-swap, which will:

  • Consolidate the city's operations into Frost Bank's existing tower and other buildings, eliminating approximately $3.5 million a year in commercial lease obligations for the city;
  • Facilitate the development of 265 new housing units by Weston Urban in the central business district on formerly city-owned land; and
  • Provide formerly city-owned land to the private sector partners—where Weston Urban will build San Antonio's first skyscraper since 1989, which Frost Bank will use as its new headquarters.

With the city council voting on June 4 to approve the project, this deal shows the exciting potential an unsolicited proposal from the private sector can have, not only in redefining a major city's skyline, but also on its bottom line.

P3 Residence Halls Throughout the University System of Georgia

In November 2014, the University System of Georgia's Board of Regents and Corvias Campus Living announced they were entering into a public-private partnership to develop, construct, manage and maintain new and existing residence halls with approximately 10,000 student beds on nine of the university system's 30 college campuses for the next 65 years.

Although the university system is expressly authorized to utilize the new legislation (discussed above), this P3 was procured pursuant to the already-existing and broadly enabling procurement statute governing the university system's activities. The project will include the construction of buildings for 3,753 new beds and the renovation of buildings with 6,195 beds.

This project, where a state university system has entered a P3 for student housing over a portfolio of its campuses, is the first of its kind in the country. The agreement calls for renovations on all existing residence halls to take place within the first year and includes an injection of $6.3 million in upfront funding for these repairs in the initial phase. Additionally, Corvias has already broken ground on new residence halls at six of the campuses to date.

The university system will add 3,753 new beds without incurring any new debt and also will be able to service $300 million in existing debt. The university system will retain "campus life" services, while Corvias will maintain the residence halls. The university system also expects, over the life of the partnership, to receive $8 billion via ground rent, contingent rent, retained services and a reinvestment fund and improvements to the residence halls are expected as early as fall 2015.

Conclusion

In the face of some daunting infrastructure needs, entities throughout the state of Georgia continue to show a willingness to explore the P3 model as a potential solution for project delivery, with additional P3 projects likely to follow.

This article originally appeared in the Daily Report

Antony L. Sanacory is an Atlanta partner in Duane Morris's construction and trial practice groups. He has significant experience representing parties at all tiers of construction and public works projects on project planning, risk strategies, bidding, award and negotiation of construction contracts, as well as resolving claims arising from large, complex projects. William W. Fagan III is an associate in Duane Morris' Atlanta office. He has experience in such practice areas as complex commercial litigation, financial services, white-collar criminal defense and investigations, and environmental and toxic tort litigation.

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