Infrastructure and Public-Private Partnerships
2014 Midterm Gubernatorial Elections - Political Wins and Losses for Public Private Partnerships (P3s)
Republicans took control of the US Senate and strengthened their hold on the House of Representatives in the 2014 midterm elections. During these midterms, thirty-six states held gubernatorial elections, with Republicans gaining seats in Arkansas, Illinois, Massachusetts and Maryland and Democrats gaining one seat in Pennsylvania. The Alaska seat went to Bill Walker, an independent. As of this writing, the holder of the gubernatorial seat in Vermont is still undecided.
New gubernatorial leadership may influence the P3 atmosphere in affected states. A major characteristic of the US market is that P3 programs are initiated and directed at the state level. Thus, a governor who believes in P3s and is willing to throw his or her political muscle behind a program can make a major difference in whether a P3 program succeeds.
States in Which Representation Has Changed
The P3 industry will be keeping an eye on Republican Governor-elect Larry Hogan, who defeated Democrat Anthony Brown to replace term-limited Democrat Martin O’Malley as Maryland’s governor. The Maryland Transit Administration is soliciting bids for a 35 year P3 that would help finance construction of a 21 station light-rail Purple Line through the Washington suburbs. A preferred bidder is scheduled to be announced in spring 2015. Brown, a P3 advocate, had been a proponent of this $2.2bn, availability payment project. Hogan, however, has been accused of opposing mass transit and not supporting the Purple Line due to expense. There is concern he may cancel the project altogether. Though Hogan deflected Purple Line questions, he stated the project is “worth considering.” Nevertheless, as he noted during his campaign, Hogan may devote the Purple Line money toward improving Maryland’s state roads (Washington Post).
P3s lost another advocate when Illinois’ Governor Pat Quinn lost to his Republican opponent, Bruce Rauner. Quinn had been a P3 proponent. He supported legislation that enabled a P3 procurement in 2013 (Bugle). Quinn also backed the South Suburban Airport (SSA) project and the Illiana Expressway (IE) project procured in conjunction with Indiana (InfraAmericas). The proposed SSA would be built in Peotone, Illinois, a suburb of Chicago, as a third airport serving Chicago. The IE would be a 47 mile access-controlled highway connecting Illinois south of Metropolitan Chicago to Northwest
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Indiana. Rauner has been non-committal about these projects. He is “skeptical” about the need for the SSA and wants to see an analysis to determine whether the project makes sense (Chicago Tribune). Rauner noted that a new airport should be self-sustaining and not reduce economic activity at other area airports. Similarly, he requires more information about the IE, which could, at the very least, lead to additional delays in the project (NWI Times).
Pennsylvania has enjoyed P3 support in recent years under Republican Tom Corbett. In 2012, Corbett signed into law specific P3-enabling legislation. The legislation established P3 guidelines and a board to review potential projects. It also allowed for an $889M P3 initiative to replace 558 of the 4,500 structurally deficient bridges in the state (the “Rapid Bridge Replacement Project”) (InfraAmericas). Democrat Tom Wolf’s campaign rhetoric offers hope that he will also support P3s: according to his “Fresh Start“ policy plan, Wolf intends to use P3s to tackle transportation projects. He believes P3s should help address the state’s infrastructure deficit. Wolf also wants to “engage the private sector”, leveraging private-sector dollars for projects. Such projects include building a high-speed rail line that will move products from Philadelphia to Chicago in three hours and a continuation of the Rapid Bridge Replacement Project.
Massachusetts Governor-elect Republican Charlie Baker, who narrowly beat Democrat Martha Coakley, purports to support P3s. Baker says he will “investigate opportunities for the state to partner with the private sector” (MASSCreative). He also notes “it is worthwhile to explore the possibility” of expanding passenger rail through P3s (MASSLive).
Republican Governor-elect Gregg Abbott beat Democrat Wendy Davis and will succeed retiring incumbent Rick Perry. Abbott spoke during his campaign of providing additional transportation funding by not diverting highway funds to other uses. But, riding the wave of anti-tolling sentiment in Texas, Abbott said he does not want to add more toll roads. Nevertheless, Texas’ experience with P3 transportation projects may mean more P3s in other sectors, according to John Parkinson, executive director of the Association for the Improvement of American Infrastructure (AIAI). Parkinson noted that the San Antonio City Council recently approved a DBFOM for a water delivery project through a 142-mile pipeline (InfraAmericas).
Other States and Areas to Watch
Governor John Hickenlooper beat Republican Bob Beauprez in a down-to-the-wire decision. A P3 proponent, Hickenlooper is expected to continue advocating P3 projects in Colorado. Historically, he was a strong advocate for the Denver Fast Eagle P3 Light Rail Project as Mayor of Denver from 2003 to 2011. The project will be Colorado’s first highway DBFOM availability payment project. Further, among other projects, Colorado is expected to issue a Request for Qualifications to improve a portion of the I-70 East highway. Hickenlooper also vetoed a P3 transparency bill in June, noting to legislators that the bill, if passed, could have a “chilling effect on future transactions.” In
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addition, Hickenlooper claims he would like to work with legislators on establishing a P3 Center of Excellence in the state (InfraAmericas).
Ohio Republican Governor John Kasich’s easy re-election over his Democratic opponent, Ed FitzGerald, is similarly positive for P3 proponents. Kasich has supported various procurements by the Ohio Department of Transportation (ODOT). He also signed a P3-enabling bill in 2011, prompting the ODOT to consider a P3 procurement for the Portsmouth Bypass project. The state is currently considering a DBFOM approach via an availability payment mechanism (InfraAmericas).
Washington, D.C. will bear watching in 2015, as Mayor-elect Muriel Bowser takes office. While serving as a member of the District Council, Bowser introduced a bill in 2013 that would establish a dedicated P3 office and establish set procurement procedures for P3s. The legislation allows P3s to be used for a wide range of projects, such as transportation, education and cultural or recreational facilities. The bill was approved once by the District Council on October 28, 2014 and is scheduled for final approval vote in late November (InfraAmericas).
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Maxine Ethier 416 865 6987 Maxine.Ethier @bakermckenzie.com
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