Importance of Public Private Partnerships (Gregory Henk, Flatiron Corp.)

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Importance of Public Private Partnerships (Gregory Henk, Flatiron Corp.)

  1. 1. AGC of CALIFORNIA <ul><li>ENGINEERING DIVISION </li></ul><ul><li>FALL CONFERENCE </li></ul><ul><li>OCTOBER 27, 2011 </li></ul><ul><li>GREGORY HENK, P.E. </li></ul><ul><li>[email_address] </li></ul>
  2. 2. NEED FOR PPP’s <ul><li>Diminishing Traditional Revenues </li></ul><ul><li>Financing Efficiencies </li></ul><ul><li>Lower Price </li></ul><ul><li>Faster Delivery </li></ul><ul><li>High Level O&M </li></ul><ul><li>O&M Efficiencies </li></ul>
  3. 3. REVENUE/FINANCING CONSIDERATIONS <ul><li>Toll Facilities Provide New Funding Source (PPP’s Are an Effective Way to Deliver New Toll Roads) </li></ul><ul><li>PPP’s Are More Efficient if Interest Rates are Projected to Be Lower than Inflation Over the Term of the PPP </li></ul><ul><li>PPP Financing Can Provide More Up-Front Funding for the Same Revenue Stream </li></ul>
  4. 4. CONCESSION LEASES <ul><li>Provide an opportunity to capture the “growth wedge” in volume and revenue increases. Municipal bond investors rely on historical revenues to determine the leverage levels which constrains total value for the owner </li></ul>Concession Sale Today 40 yrs Past 99 yrs Equity Investor Debt Net Revenues Net Revenues Municipal Bond Today 40 yrs Past Debt 1.25-2.00x Coverage 99 yrs Conservative Projections Conservative Projections Chicago Skyway Example $800 Million $1.83 Billion Vs.
  5. 5. LOWER PRICE <ul><li>PPP’s Design-Build Pricing is Lower </li></ul><ul><li>PPP’s ATC’s Provide Savings </li></ul><ul><li>PPP’s Life-Cycle Costs Are Lower </li></ul>
  6. 6. FASTER DELIVERY <ul><li>PPP’s Design-Build Delivery is Reported to Be Generally 40% Faster (FHWA): </li></ul><ul><ul><li>Design Overlaps Construction </li></ul></ul><ul><ul><li>Early Critical Path Construction </li></ul></ul><ul><ul><li>Early Order of Long Lead Items </li></ul></ul>
  7. 7. HIGH LEVEL O&M <ul><li>PPP O&M Required to Meet Objective Standards </li></ul><ul><li>Traditionally, Agencies Distribute Available O&M Funding Amongst Projects Each Year (Do What You Can With the Funding) </li></ul>
  8. 8. O&M EFFICIENCIES <ul><li>PPP’s Draw from National and International Experience </li></ul><ul><li>PPP’s Can Self-Perform or Contract Out </li></ul><ul><li>Generally, No Prior Labor Restrictions </li></ul>
  9. 9. SUBCONTRACTING <ul><li>Subcontracting Is Generally 25-75% of the PPP’s Design and Construction Work </li></ul><ul><li>Often, Without a PPP Approach, There Would Be No Project </li></ul>
  10. 10. AGC of CALIFORNIA <ul><li>ENGINEERING DIVISION </li></ul><ul><li>FALL CONFERENCE </li></ul><ul><li>OCTOBER 27, 2011 </li></ul><ul><li>GREGORY HENK, P.E. </li></ul><ul><li>[email_address] </li></ul>

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