Issue link: https://nebusinessmedia.uberflip.com/i/1087523
12 Hartford Business Journal • March 4, 2019 • www.HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com "P ublic-private part- nership" can sound like an overused buzzword with a murky meaning, but Gov. Ned Lamont is looking to get much more specific. In fact, the governor's administra- tion is seeking to do away with several hurdles it says have effectively blocked such partnerships, called PPPs or P3s, from becoming a reality in Connecticut. If the legislature plays ball, the changes — which have already been pitched in a bill introduced last month — could open up possibilities for a wide range of public-private projects, from the construction of university dormitories and train stations to the redevelopment of the XL Center, and yes, highway tolls. The aim of PPPs is to use private capital to finance and build major public infrastructure projects. The investors earn a return, while cash- strapped governments put less long- term debt on their books and complete projects that might otherwise have taken longer, or not happened at all. For Lamont, public-private partner- ships could help finance a bevy of proj- ects that may lose a funding source after he recently pledged to cut annual state borrowing by 39 percent. P3s, however, aren't free money and come with taxpayer risks, experts say. "This is really the start of a larger conversation about public-private partnerships," said Paul Mounds, Lamont's chief operating officer. A majority of states have some kind of enabling public-private partnership legislation, but many, like Connecticut, limit their scope. For example, Connecticut caps the length of any PPP at no more than 50 years; limits the public portion of the funding at no more than 25 percent; and requires various reports and other information to justify the existence of the partnership. Current law also limits PPPs to de- velopment of facilities related to early child care, education, health, housing and transportation. Projects must also generate revenue (and draw other funding) sufficient to cover their cost, maintenance and operation. There was no real legal avenue for PPPs in Connecticut prior to a 2012 law championed by Gov. Dannel P. Malloy, which greenlit the executive branch to enter into agreements with private entities to finance, build and operate a limited set of facilities. However, Mounds, who previously worked for the Malloy administration, said that law is limited in scope. "This legislation has a broader scope, with the understanding that we don't know all the various partner- ships that could come about," he said. One thing Lamont hopes to see is a P3 for the development of several new train stations, including one in Newington, on the Hartford Line — facilities for which the state has not identified funding. The exact mechanism through which a private partner would recoup its investment in such a facility is not known, but a recent Pennsylva- nia train-station project, 10 miles outside of Har- risburg, allowed a private partner to build and operate shops and parking around the facility. Nationally, a few other examples of recent P3s include: • Construction of a major new civic center in Long Beach, Calif., which is nearing completion, with the city trading valuable downtown land for apartments and other development in exchange for more than $500 million in new public buildings financed by a team of private, long-term investors, accord- ing to the Los Angeles Times. • In 2015, Pennsylvania bundled hundreds of bridge construction and repair projects into an approximately $900 million P3, according to account- ing and consulting firm PwC, one of the first deals of its kind in the country. • Universities in New Jersey, Georgia and Kentucky have used P3s to build student housing, while Purdue Univer- sity and its home city of West Lafayette, Ind., forged a $73 million P3 in 2016 to transform a key thoroughfare into a pedestrian-friendly urban hub, PwC said. Learning curve While P3s have been evolving around the country in recent years — and expanding to new types of projects beyond a historic focus on roads and bridges — they still repre- sent a small portion of infrastructure projects, experts say. "It's been a slow, incremental hill that's being climbed," said Darin Siders, a PwC partner who leads the firm's infrastructure advisory practice. There's also the inevitable contro- versy connected to P3s. "The historic controversy with respect to P3s was this perception that you were selling or giving away this thing that belonged to the citizenry," Siders said. But the partnerships are not true privatization, he said, as states typi- cally own the assets in the end, after an agreed upon period of time, usually three or four decades. Capital Partners With infrastructure needs aplenty, Lamont eyes public-private partnerships for new development Private U.S. infrastructure funding on the rise Seventeen large private infrastructure investment funds closed last year helping boost overall infrastructure funding in the U.S., according to PwC, but public-private partnerships remain a small portion of the overall amount. Here's a breakdown of what private investors have bet on infrastructure projects since 2014. 2014 2015 2016 2017 2018 Infrastructure funding $18.8B $32.8B $9.1B $32.1B $42.5B Source: PwC/Inframation Paul Mounds, Gov. Lamont's Chief Operating Officer Capital Region Development Authority Executive Director Mike Freimuth (right) says it's uncertain whether changes to the state's public-private partnership law would be enough to draw in a private partner to renovate XL Center or other public assets. A recently renovated Hartford Line rail station in Berlin. While this facility was financed through the typical method of public bonding, the Lamont administration is hoping to build future rail stations using private investment. PHOTO | HBJ FILE PHOTO | HBJ FILE