Marilyn L Rivers, CPCU ARM AIC Director of Risk and Safety City of Saratoga Springs, NY Tools to Successfully Establish Public Private Risk Partnerships

Develop communication strategies to promote your risk management programming within your community’s activities. Identify and cultivate relationships with community leaders to assist in managing your public and private risk partnerships. Learn to set and achieve expectations minimizing the risk of community programs through the use of mutually beneficial agreements. Learning Objectives:

Public Private Business Continuum

Public-Private Partnership (PPP) is a “contractual agreement between a public agency (federal, state or local) and a private sector agency. Through this agreement, the skills and assets of each sector (public and private) 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 risks and rewards potential in the delivery of the service and/or facility.” National Council for Public-Private Partnerships PPP (P3’s)

“A public sector consortium composed of a contractor, maintenance company, and bank lenders who form a special company to develop, build, maintain and operate a public asset for a contracted period.” Wikipedia Special Purpose Vehicle (SPV)

2013 USDOT FHA: Financial Structuring of Public-Private Partnerships (P3’s) Simple P3 Financing Structure Concessionaire (SVP) Public Sponsor Equity Investors FacilityLenders Funds to build, maintain and operate Toll Revenue Dividends Equity Investments Shared Revenue Availability Payment or Subsidy Repayments Bonds, loans

Healthcare Housing Infrastructure Power Telecommunications Transportation systems Water and Sewer PPP Examples

Services in kind Capital budget subsidies Grants Revenue subsidies Tax breaks Public Entity Contributions to PPP

Capital Expertise Transfer and sharing of risk Operational and maintenance Opportunities for innovation Managerial expertise Private Entity Contributions to PPP

2013 USDOT Federal Highway Administration Innovative Program Delivery: Risk Valuation and Allocation for Public-Private Partnerships (P3’s) Source: Virginia DOT’s PPTA Risk Analysis Guidance, September 2011 RiskTraditional (Design-Bid-Build) Design-BuildDesign-Build Finance- Operate-Maintain Change in ScopePublic NEPA (National Environmental Policy Act) ApprovalsPublic PermitsPublicSharedPrivate Right of WayPublic Shared UtilitiesPublicShared DesignPublicPrivate Ground ConditionsPublic Private HazmatPublic Shared ConstructionPrivate Quality Assurance/Quality ControlPublicSharedPrivate SecurityPublic Shared Final AcceptancePublicPrivate O&MPublic Private FinancingPublic Private Force MajeurePublicShared

What is the public purpose of the PPP? What is the PPP’s contractual time period? Who will be responsible for the creation? How will the PPP be managed? How will procurement and purchasing be managed? What are the terms and conditions of the PPP? How will the ROI be communicated? Who will be responsible for recurring maintenance? Rules of Engagement

Public economic development agencies Private economic development agencies Regional and local chambers of commerce Organized business districts Commercial entities Traditional and non-traditional financing Potential PPP Community Partners

Community public funding gaps Taxes…taxes…taxes Integrity of relationships Global economic pressures Continuing costs of maintenance Cost of money Weighted Average Cost of Capital (WACC) PPP Concerns

Transparency in communication Good governance in public and private Anti-corruption initiatives and ethics Alignment of fiduciary responsibilities Labor relations and legislative mandates Governance Goals and Initiatives

What is a mutually beneficial agreement?

Establishment of legal partnerships Pre-determined revenue and expense sharing Delineation of contractual responsibilities Design-Build-Finance-Operate-Maintain Payment structure Indemnification and insurance Regulatory requirements Contractual Considerations

Insurance for project assets Construction “All Risk” (CAR) Professional Errors and Omissions Third Party Liability Property and Casualty Workers Compensation & Employer’s Liability Lenders as Co-Insureds Reinsurance Insurance Considerations

Project size Identified risks Allocation of risk to public and private entities Innovation potential Cost efficiencies and savings Quality of product and services Life cycle costs Project Scope and Complexity Considerations

Public-private work groups Standardized communication Project milestone presentations Annual reviews and remediation Financial review and analysis Community feedback initiatives Communication Strategies

Allocate risk according to your tolerance of risk Manage public-private relationships Establish clear incentives, contingencies, performance requirements and milestones Participate in the design build process Remain aware of political pressures Know the ramifications of the private sector’s risk Understand reputation risk and public perception Risk Management in the PPP

Sustainable solutions?

1.Appoint a Public Sector Champion 2.Establish a Statutory Environment 3.Dedicate a Public Sector Organized Structure 4.Execute a Detailed Business Plan 5.Clearly Define Revenue Streams 6.Engage Stakeholder Support 7.Pick Your Partner Carefully Keys to Successfully Managing PPP’s Developed by the National Council for Public-Private Partnerships “Testing Tradition: Assessing the Added Value of Public-Private Partnerships”

World Health Organization (WHO) financed by the United Nations US Food and Drug Administration White Oak Campus ( www1.eere.energy.gov/femp/financing/superespcs_fda.html) Chicago O’Hare International Airport Consolidated Joint Use Facility Project Presidio Parkway, San Francisco, CA ( PPP Examples

Questions?

“Testing Tradition: Assessing the Added Value of Public-Private Partnerships,” The National Council for Public-Private Partnerships, 2012, ( “The Hamilton Project: Public-Private Partnerships to Revamp U.S. Infrastructure,” Eduardo Engel, Ronald Fischer, and Alexander Galetovic, February 2011, ( “Public-Private-Partnerships: Risks to the Public and the Private Sector,” Najja Bracey, Sonia Moldovan, and The Louis Berger Group, Inc., 6 th Global Conference on Business and Economics, Boston, MA, ( FEMA, “Public-Private Partnerships: Building Better Resiliency – Together,” ( US Department of Transportation Federal Highway Administration, “Public Private Partnerships” ( Public-Private Partnerships: “In the Public Interest: A Comprehensive Resource Center on Privatization and Responsible Contracting,” ( “PPP In Infrastructure Resource Center,” The World Bank, ( Reference and Resource Documents

Thank you! Marilyn L Rivers, CPCU ARM AIC City Saratoga Springs, NY Tel: