Public-Sector Decision Making for Public-Private Partnerships (2009)

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102 APPENDIX D Other Individuals/Interest Groups Survey Summaries List of Respondents* Name Organization Anonymous Legislature Achterman, Gail Oregon Transportation Commission Baxandall, Phineas U.S. Public Interest Research Group Clary, Lowell Lowell Consulting, LLC DiPietro, Susanne Citizen Diedrich, Roger Sierra Club, Virginia Chapter Enright, Dennis NW Financial Group Epstein, Lois Alaska Transportation Priorities Project Ford, Richard Washington Transportation Commission Holman, Bill Nicholas Institute, Duke University Jacobs, Carl Aeia NB #20 Levenson, Dana RBS Greenwich Securities Mandel, Nick New Mexico Department of Transportation Muchnick, Allen Arlington Coalition for Sensible Transportation Neumann, Dennis BNY Capital Funding Pagano, Anthony University of Illinois at Chicago Parker, Jeffrey Jeffrey A. Parker and Associates Pollard, Trip Southern Environmental Law Center Poole, Robert Reason Foundation Redfield, Beth Office of Program Research, Washington State Legislature Richards, Mary Massachusetts Organization of State Engineers and Scientists Staley, Samuel Reason Foundation Toppin, Ted Professional Engineers in California Government Woodland, John New Mexico Department of Transportation *Note: The list of respondents is organized by alphabetical order, and in no way does it reflect the order of responses provided in the following pages.

103 Respondent #1 Type of Organization c. Legislature Top benefits of PPP 1. Rapid construction 2. Less costly PPP Concern 1 Another alternative PPP Concern Mitigation 1 [State] passed an Act that made it possible to have a regional highway provider PPP Concern 2 PPP Concern Mitigation 2 PPP Concern 3 PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers State loses control Contract structures/techniques to protect public interests Other perspectives Respondent #2 Type of Organization c. Legislature Top benefits of PPP 1. Cash flow 2. More flexibility in use of resources PPP Concern 1 Less control over toll rates PPP Concern Mitigation 1 Law and contract terms to include public role in setting toll rates. PPP Concern 2 Contractual provisions that tie the hands of public entities PPP Concern Mitigation 2 More knowledgeable public contract negotiators PPP Concern 3 More expensive toll rates for longer periods of time with less public benefit PPP Concern Mitigation 3 Public financing PPP Concern 4 Not clear whether the private lessor will exercise good stewardship for the facility. When the lease is up, in what condition will the facility be returned to the public? PPP Concern Mitigation 4 Performance measures PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers Is it really cheaper? Are the benefits from using a PPP worth any additional costs borne by the public? Are the benefits worth loss of control of the facility? Contract structures/techniques to protect public interests Other perspectives

104 Respondent #3 Type of Organization l. Transportation Consulting Top benefits of PPP 1. Private Sector Expertise 2. Use Others Money 3. Promote Innovation in Project Development and Delivery/Profit Motive 4. Accelerate High Profile Projects PPP Concern 1 Lack of understanding and clear communication on what a PPP is and is not such as PPPs do not solve funding shortfalls and are a delivery tool. A funding option, such as tolls, is needed for a PPP to be successful. PPP Concern Mitigation 1 Education of key policy makers at a high level of PPPs and also training programs for key staff such as CFOs, chief engineers, etc. PPP Concern 2 A few “risky-on the edge” PPP deals cause concerns among the key policy makers and a good delivery tool is thrown out. For example, some risky toll roads built by public entities have struggled, yet toll roads continue to get promoted. It should be the same with PPPs. PPP Concern Mitigation 2 Put in place solid PPP processes that help promote the best projects and finance plans moving forward and limit the highly risky projects/schemes from moving forward. PPP Concern 3 Brownfield toll roads being leased over long period without the public owner sharing in the upside of the revenue stream. PPP Concern Mitigation 3 There should be strong consideration for policy provisions that require the governmental entity to share in the upside revenue on the lease of toll roads. This should not be overly prescriptive, but give the flexibility needed for each state to work within an overall policy and then apply this based on the specific situation. PPP Concern 4 Some PPP projects seem to be starting way too early in the project development process. This may lead to “negotiated” deals that might or might not generate the best bang for the public owner. PPP Concern Mitigation 4 This is a tough one. How do you prescribe a one size fits all policy without killing innovation? Possibly requiring a solid Value for Money analysis at a minimum before moving forward and then based on the final proposal would help ensure a good analysis is provided before signing the deal. PPP Concern 5 Congress might become overly prescriptive on the PPP process and toll roads. PPP Concern Mitigation 5 States must educate their Congressional members that all tools must be provided in today’s environment to provide states the flexibility needed to deliver timely transportation improvements. Factors to consider by decision- makers 1. Pick the right projects that fit the PPP profile 2. Be patient and start at the right time in the project development process (generally with environmental clear or almost clear) 3. Hire good PPP advisors (legal and financial are most important) 4. Develop a clear and consistent PPP process 5. Be patient and persistent—large PPPs are not for the faint of heart!

105 Contract structures/techniques to protect public interests This depends on the goals to be accomplished. The best answer is to build a solid transparent PPP process that is competitive and the results will speak for themselves. Other perspectives It seems the survey focuses mostly on the “needs improvement” side of the PPP discussion. This may tend to convey there are “problems” when the facts are showing the states that have been working with PPPs for several years have good solid PPP processes. The key seems to be to find a way to shorten the learning curve for those new to PPPs. Respondent #4 Type of Organization Other; Public Policy Think Tank Top benefits of PPP 1. new capital brought into infrastructure, 2. economic life-cycle management, 3. customer driven focus, 4. access to private equity markets, and 5. long-term incentives to maintain facilities PPP Concern 1 Consistent, sustained investment in facilities PPP Concern Mitigation 1 Solved by including performance outcomes in contracts, including pavement standards, LOS goals/targets PPP Concern 2 Financial viability of projects as stand alone facilities PPP Concern Mitigation 2 Solved by supplementing user fees (e.g., tolls) with public funds, altering the length of the lease agreement, or allowing alternative revenues to be raised by private company to supplement user fees PPP Concern 3 Interoperability of technology among facilities PPP Concern Mitigation 3 Solved by ensuring technology is open-ended and RFP specifies the ability to operate with competing technologies PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers 1. Ability to improve facility or service performance; 2. Performance measures are included in the PPP agreement, allowing either party to “walk away” of one does not fulfill its part of the contract; 3. Ensure the length of the PPP agreement is appropriate for the service or facility; 4. Ensure the private entity shoulders most of the risk for failure to perform Contract structures/techniques to protect public interests Other perspectives

106 Respondent #5 Type of Organization n. Investment Bank Top benefits of PPP 1. Transfer of financial and operating risk from a public to a private entity; 2. Up-front benefit paid to leaser; 3. Deployment of up-front benefit to other capital projects PPP Concern 1 1. Misuse of up-front benefit; 2. Hijacking of up-front benefit by subsequent political regimes PPP Concern Mitigation 1 Public statements and commitments to authorizing bodies about the intended use of the up-front proceeds. PPP Concern 2 Placing the up-front proceeds in an irrevocable trust, to be governed in accordance with the trust agreement for the purposes enumerated by the trust. PPP Concern Mitigation 2 PPP Concern 3 PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers 1. That the user of the facility receives the same if not better service from the facility being leased or sold; 2. That the new operator is capable from both a financial and operating standpoint to provide the service to the user; 3. That the leaser or seller uses the proceeds in an appropriate Manner; i.e., a capital-for-capital exchange. Contract structures/techniques to protect public interests Duplicating the concession agreements from the [project] and [project] deals. Other perspectives

107 Respondent #6 Type of Organization m. Financial Advisor Top benefits of PPP - More favorable risk allocation; - New business model for infrastructure development; - New entrants to the marketplace increasing competition; - New technologies and improved attention to life cycle cost PPP Concern 1 Excessive focus on revenue maximization PPP Concern Mitigation 1 Greater public policy focus on underlying goals for each P3 project PPP Concern 2 Deal terms that are perceived to be contrary to the public interest PPP Concern Mitigation 2 Provide meaningful caps on toll rate escalation, limit concession tenors, focus competition on lowest toll rates, etc. PPP Concern 3 Inadequate criteria for selecting candidate projects for P3 implementation PPP Concern Mitigation 3 Better public sector understanding of the trade-offs inherent in P3— private sector money is not “free” and P3 is not necessarily the answer when everything else has failed PPP Concern 4 Attempting to apply existing finance, contracting and O&M tools to P3 PPP Concern Mitigation 4 Study commercially-acceptable practice so that the public owner understands the P3 framework and doesn’t either give away the store or offer a deal that can’t be financed. Seek industry input on project concepts. PPP Concern 5 Separate P3 activity from the agency’s core production and contracting functions PPP Concern Mitigation 5 Make the investment in time and energy to involve District-level staff in the procurement process. They know the project best and will maintain a balance between technical and financial considerations. Lessons learned will migrate to the overall work program, magnifying benefits from new approaches to risk allocation. Factors to consider by decision- makers - Project readiness—don’t put projects out for tender before they are ready; - Clear goals—risk transfer and revenue risk; - Use a competitive process—avoid losing control through unsolicited proposals; - There is no free lunch—private equity Contract structures/techniques to protect public interests Our experience with availability payments has been extremely positive in [project] and [project] in [state]. Emphasis must be given to institutionalizing the P3 process and providing the necessary training to make P3 part of the everyday toolkit for project implementation. Other perspectives

108 Respondent #7 Type of Organization Other; commercial bank Top benefits of PPP The key feature is bringing private money to Infrastructure that governments at all levels from Federal down to local do not have the money to improve, let alone provide for growth. PPP Concern 1 Documents in the P3 arena are very specific about the service level the private firm will provide. The concern is how high and how fast tolls will rise. Clearly if raising tolls were politically expedient we would not need a P3. To much concern about congestion pricing and simply increasing tolls to the point where governmental bodies can provide for repair and growth. PPP Concern Mitigation 1 Raise the tolls PPP Concern 2 PPP Concern Mitigation 2 PPP Concern 3 PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers Long-term costs; Control of the asset; Clearly spelled out documents; Ability to reclaim the asset if there is a failure. Contract structures/techniques to protect public interests Other perspectives In light of the fact that we can’t just raise tolls the P3 is the next best answer. Over time these deals will be negotiated in a better fashion than the [state] Toll Road.

109 Respondent #8 Type of Organization i. Interest Groups (Please specify in question 3a) Non-partisan, non-profit membership group that takes no money from corporations or unions. Our mission is to take on powerful special interests to protect the public. Top benefits of PPP 1. Can leverage technological know-how not currently in the public sector. PPP Concern 1 1. Allows public officials to avoid responsibility for increasing taxes or otherwise raising revenue for public purposes. PPP Concern Mitigation 1 No deals over thirty years; greater transparency. PPP Concern 2 2. Relinquishes public control over management and planning of vital government functions. PPP Concern Mitigation 2 No deal should last for more than 30 years since even the most detailed concession agreement can not adequately anticipate future public needs, technological advances, demographic changes, or the appropriate value of a contract. Road operators should not be able to require compensation for measures that would be the normal course of transportation policy or for establishing state-of-the-art safety standards. Road operators should compensate the public for legal fees in the future enforcement of contracts. PPP Concern 3 3. Concession or lease payments will not meet the long-term value of the tolls paid by the public. PPP Concern Mitigation 3 It must be clearly established that the same upfront borrowing could not be done more cheaply by public entities. The public should not pay a premium for higher private borrowing costs, oversight costs for monitoring private entities, and shareholder profits. PPP Concern 4 4. Lack of transparency and accountability, especially from concession agreements that are not public before signing. PPP Concern Mitigation 4 All concession bids and subcontracts by private vendors should be open public record on-line from the moment they are introduced. Proposed agreements should be divulged at least six months before being put to vote. Legislatures must approve of final concession agreements, not simply empower the administration to enter an agreement. Most importantly, no agreement should last more than 30 years. PPP Concern 5 5. Non-compete clauses PPP Concern Mitigation 5 Should be prohibited. Factors to consider by decision- makers What value is the private entity actually bringing to the table that the public could not subcontract for in a shorter deal or accomplish with their own toll hikes. Contract structures/techniques to protect public interests Availability contracts; Prohibition of non-compete clauses; Sunshine laws disclosing details of concession agreements Other perspectives See [link]

110 Respondent #9 Type of Organization i. Interest Groups Public interest organization Top benefits of PPP 1. Motorists internalizing costs of road use; 2. When done right, ensuring money from roads for public transportation; 3. Potentially faster construction/operational changes PPP Concern 1 Public entities might strike economically harmful deals PPP Concern Mitigation 1 Ensure sufficient public input and governmental oversight, along with expert independent advice, to prevent such situations. Protections probably need to be in state authorizing statutes. PPP Concern 2 Private sector’s interest is not always consistent with the public interest; e.g., toll increases could put more vehicles on non-toll roads and thus increase public costs. PPP Concern Mitigation 2 Increase public interest protections in P3 contracts PPP Concern 3 Greenhouse gas emissions typically are not addressed, since more vehicles mean more profit for the private sector. PPP Concern Mitigation 3 PPP Concern 4 Concession lengths are too long to address technological changes, accountability of decision makers, etc. PPP Concern Mitigation 4 Limit concession lengths to approximately 30–35 years, or roughly one generation. PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers 1. Economic advantage over the long term; 2. Effects on related transportation systems; 3. Public involvement and buy-in. Contract structures/techniques to protect public interests Other perspectives The [state] P3 statute does not include any public involvement requirements or legislative voting on the contract, does not have a concession length limitation, and does not require high-level state DOT involvement. This could lead to a very poorly written P3 contract (for one of the “bridges to nowhere”) that costs the state lots of money and gives P3 agreements a bad name.

111 Respondent #10 Type of Organization Other; Chair Neighborhood Board Transportation Top benefits of PPP HOT PPP Concern 1 Fixed rail costs PPP Concern Mitigation 1 BUS and HOT PPP Concern 2 PPP Concern Mitigation 2 PPP Concern 3 PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision makers Tax reduction Contract structures/techniques to protect public interests Other perspectives See my [newspaper] Letters to the Editor 23 JAN.

112 Respondent #11 Type of Organization Other; University Top benefits of PPP 1. Ability to attract private capital to invest in transportation, 2. Ability to price transportation services at market rates rather than political prices PPP Concern 1 PPP may seek to avoid compliance with local, state, and national land use and environmental policies PPP Concern Mitigation 1 State and federal laws that require compliance with all land use and environmental laws PPP Concern 2 PPP may seek to avoid innovations such as congestion pricing PPP Concern Mitigation 2 Require congestion pricing for all new PPP or toll facilities PPP Concern 3 PPP may oppose investments in transit and other alternatives to highways PPP Concern Mitigation 3 Strict ethics and disclosure rules PPP Concern 4 PPP may undermine comprehensive transportation planning and work of MPOs PPP Concern Mitigation 4 Require PPP projects to be consistent with state, local and MPO transportation plans. PPP projects need to be part of plans not separate from them. PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers 1. Financial viability; 2. Comparison of all transportation alternatives; 3. Cost-benefit analysis; 4. Environmental assessment, including air quality and greenhouse gas emissions Contract structures/techniques to protect public interests Other perspectives PPP should be thoroughly reviewed on a periodic basis.

113 Respondent #12 Type of Organization i. Interest Groups (Please specify in question 3a) Nonprofit, grassroots advocacy organization based in [city, state] Top benefits of PPP I can’t think of even a single true public benefit of PPP agreements. They merely facilitate private gain at public expense by reducing proper oversight. PPP Concern 1 Undermines full, fair, and open planning processes for transportation projects. PPP Concern Mitigation 1 1. Enact statutes and/or administrative regulations that prohibit all PPP agreements prior to the completion of the NEPA process, including the issuance of a Record of Decision. PPP Concern 2 Failure to adequately accommodate all alternatives to private motor vehicle travel in PPP transportation projects. PPP Concern Mitigation 2 1. Enact statutes and/or administrative regulations that prohibit all PPP agreements prior to the completion of the NEPA process, including the issuance of a Record of Decision; 2. Require full transparency in PPP negotiations; 3. Explicitly require all PPP projects to adequately accommodate all alternative transportation modes, especially bicycling, walking, and public transportation, by stipulating adherence to specific performance measures. PPP Concern 3 Unrealistic forecasts of toll and fare revenue, leading to financial insolvency. PPP Concern Mitigation 3 1. Enact statutes and/or administrative regulations that prohibit all PPP agreements prior to the completion of the NEPA process, including the issuance of a Record of Decision; 2. Require PPP awardees to purchase adequate insurance coverage (performance bonds) for the financial solvency of their projects; 3. Require PPP awardees to cover all financial shortfalls. PPP Concern 4 Biased analyses of viable project alternatives and environmental impacts. PPP Concern Mitigation 4 1. Enact statutes and/or administrative regulations that prohibit all PPP agreements prior to the completion of the NEPA process, including the issuance of a Record of Decision; 2. Prohibit PPP vendors from participating in all project planning activities, such as alternatives analyses and environmental impact studies; 3. Require all urban transportation projects to meet a set of performance measures that includes reduced VMT per capita, reduced global warming emissions, and enhanced travel by all alternative modes. PPP Concern 5 Bias and corruption in the award of PPP agreements. PPP Concern Mitigation 5 1. Enact statutes and/or administrative regulations that prohibit all PPP agreements prior to the completion of the NEPA process, including the issuance of a Record of Decision; 2. Require full transparency in all PPP negotiations; 3. Require independent audits of proposed PPP agreements.

114 Factors to consider by decision- makers 1. Biased planning not in the public’s best interest; 2. Lack of transparency (secrecy, bias, and corruption; 3. Lack of financial and/or technical capacity; 4. Excessive adverse environmental impacts; 5. Social and economic injustice. Contract structures/techniques to protect public interests 1. Enact statutes and/or administrative regulations that prohibit all PPP agreements prior to the completion of the NEPA process, including the issuance of a Record of Decision; 2. Prohibit PPP vendors from participating in all project planning activities, such as alternatives analyses and environmental impact studies; 3. Require all urban transportation projects to meet a set of performance measures that includes reduced VMT per capita, reduced global warming emissions, and enhanced travel by all alternative modes; 4. Require full transparency in PPP negotiations; 5. Explicitly require all PPP projects to adequately accommodate all alternative transportation modes, especially bicycling, walking, and public transportation, by stipulating adherence to specific performance measures; 6. Require PPP awardees to purchase adequate insurance coverage (performance bonds) for the financial solvency of their projects; 7. Require PPP awardees to cover all financial shortfalls; 8. Require independent audits of proposed PPP agreements. Other perspectives PPP transportation projects have no redeeming benefits.

115 Respondent #13 Type of Organization Other Citizen Top benefits of PPP Help finance necessary infrastructure PPP Concern 1 It is not clear to me that the private sector can build and maintain infrastructure more cheaply than state and local governments. In the specific example of which I am aware, the private entity will offer a small amount of its own funds and leverage that with low-cost government funds like TIFFIA and activity bonds. The private entity will take its equity out at the front end, leaving government to cover any deficits. PPP Concern Mitigation 1 Prohibit private entities from accessing government financing for these projects, or insist on a minimum percentage of private funds PPP Concern 2 Government loses control over the asset. Decisions about what to build, when to build and what to charge are left to private entities. Private entities make decisions solely based on profit motives, which may be in direct conflict with the public interest. PPP Concern Mitigation 2 I don’t know. PPP Concern 3 PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers Maintain government control and oversight of all aspects of the project Contract structures/techniques to protect public interests Don’t know Other perspectives

116 Respondent #14 Type of Organization l. Transportation Consulting Top benefits of PPP Better project selection (based on ROI); Greater accountability; Reduced life-cycle cost; More timely additions of needed capacity PPP Concern 1 Transparency; Concern over how decisions to award concessions get made, raising suspicions of sweetheart deals. PPP Concern Mitigation 1 Balance needs for temporary confidentiality with full disclosure of selection criteria, scoring, and concession agreement details. PPP Concern 2 Politicization of process, especially to unfairly favor public-sector toll agencies. PPP Concern Mitigation 2 Need to adopt level-playing-field competition procedures, to permit fair competitions that don’t tilt toward either public-sector or private- sector bidders. PPP Concern 3 One-size-fits-all rules and regulations for PPPs PPP Concern Mitigation 3 Educate public officials on the differences among projects (e.g., robustness of potential traffic demand, extent of capital investment needed, role of pricing, etc.) to explain the need to tailor concession agreements to the specifics of each project, resisting standard lengths of term, toll rate formulas, etc. PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers Competitive procurements; Tailoring the deal structure to the specifics of each project; Full disclosure/transparency; Prudent limits on “non-compete” provisions Contract structures/techniques to protect public interests Long-term concessions offer the greatest set of benefits. But to take maximum advantage, it’s important to include availability payments as well as real tolls—and in some cases, combinations of these [e.g., (project) in (state)]. Other perspectives

117 Respondent #15 Type of Organization Other Non-profit environmental group Top benefits of PPP 1. Potential to harness private sector creativity and efficiency; 2. Potential to leverage public sector transportation funding by attracting private sector capital. PPP Concern 1 1. Tend to circumvent normal planning processes PPP Concern Mitigation 1 Limit or prohibit unsolicited bids; require bids go through normal planning process PPP Concern 2 Circumvent and/or undermine environmental reviews PPP Concern Mitigation 2 As condition of signing agreement, require NEPA process completed or substantially complete; provide clarity what can be negotiated with proponent before NEPA process complete PPP Concern 3 Has not tended to attract private risk sector capital proponents promised. PPP Concern Mitigation 3 Require proposer invest a certain amount of equity PPP Concern 4 Non-compete clauses limit investments that are in public interest PPP Concern Mitigation 4 Prohibit non-compete clauses PPP Concern 5 Failure to adequately account for public costs and potential taxpayer liability, and environmental costs (including sprawl promote). PPP Concern Mitigation 5 Require full, independent accounting of these items. Factors to consider by decision makers 1. full cost and potential taxpayer liability; 2. consistency with planning process; 3. impact on funding and function of other projects; 4. full environmental costs, including secondary impacts promoting sprawl; 5. full alternatives analysis Contract structures/techniques to protect public interests See above for various provisions and requirements. Other perspectives Our experience with PPPs is that they are far more complex than initially advertised, and often the public interest is not well-protected.

118 Respondent #16 Type of Organization a. State Department of Transportation Top benefits of PPP 1. Accelerated project delivery; 2. Access to private capital markets; 3. Reduced project costs PPP Concern 1 Public accountability PPP Concern Mitigation 1 The private entity needs to be held to the same standard of access to documents and information as a state DOT would be and implement full, effective public engagement methods PPP Concern 2 Stewardship of public assets PPP Concern Mitigation 2 Public assets, like highway right of way, are held for the benefit of the citizens of the state. The public interest in those public assets must be protected—citizens must be confident that private entities aren’t “profiting” on public resources PPP Concern 3 Risk allocation—what is the proper allocation of risk for project’s moving forward? How can risk be allocated in the contracting? PPP Concern Mitigation 3 It is imperative to work with sophisticated legal counsel to address these issues and for state DOTs to work hard to understand and analyze the risks in advance. PPP Concern 4 Loss of DOT staff or inability to attract and retain top staff PPP Concern Mitigation 4 If all the big interesting projects are contracted out, it will become increasingly difficult to attract and retain top engineers at DOTs PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision makers 1. Risk Allocation; 2. Ownership of assets—who ultimately owns and controls the facility?; 3. Capitalization and financial responsibility—does the private party have the assets to stand behind the work?; 4. Public accountability—does the private company share the values of the DOT and will they assure public accountability—on the environmental performance, labor, etc. Contract structures/techniques to protect public interests A key structure is phasing a contract so that there are “off ramps” at key points. Another key contract term is to assure public access to all information. Public rights of way must be retained by the public-private ownership of roads or other facilities leads to distrust. Other perspectives PPP’s range from concessions to construction contracting methods. It is very important to differentiate between the various types of PPPs in use rather than lumping them all together. The public accountability varies significantly from type to type.

119 Respondent #17 Type of Organization a. State Department of Transportation Top benefits of PPP Cost. Ability to deliver projects sooner. PPP Concern 1 Lack of ability of state DOTs to competently administer and provide oversight to P3s. PPP Concern Mitigation 1 PPP Concern 2 Cost factor and the use of public funds for services providing essential public services to the private sector. PPP Concern Mitigation 2 PPP Concern 3 What entity will have final oversight and decision-making authority on these PPP, particularly as it may involve public safety, homeland security, and other interest of national priorities. PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision makers Level of authority/oversight. Cost Ownership—National/International Interests Contract structures/techniques to protect public interests Other perspectives

120 Respondent #18 Type of Organization i. Interest Groups (Please specify in question 3a) Labor union representing professional employees in state government including transportation workers. Top benefits of PPP I see none in its present form. Having lived through [project] which used this dangerous and wasteful construction scheme and having witnessed the dismissal of our struggles to ensure greater oversight by enough workers who represent the taxpayer’s interests, there is little to like about this practice. PPP Concern 1 Public Safety: The lack of proper oversight with full authority by state DOT engineers, resulting in a “fox watching the chicken house” scenario and public safety concerns. PPP Concern Mitigation 1 Any such contract must have strict language as to who is in charge, who has authorization to stop projects and who is responsible for failures of the process and who represents the public’s interest. Unfettered private interest with profit motives will cut corners every time. PPP Concern 2 Too cozy relationship between the public entity, which should be there for enforcement and oversight, and the private sector. PPP Concern Mitigation 2 Need strong demarcation between private and public interest responsibilities. This concept of one big happy family, and we are all in this together mindset has had dire consequences as we all now realize. Public employees in their role should not be reporting to private contractors. Causes huge oversight problems. This should be prohibited. [(previously referenced project) scenario]. PPP Concern 3 Lack of cost benefit analysis to ensure there are any cost savings or benefits using these practices. PPP Concern Mitigation 3 Federal decision makers should require a cost-benefit analysis particularly in areas of survey, design, materials and construction inspections, and maintenance to ascertain if practice is saving any tax dollars compared to DOT engineers performing these services. Many states have established criteria for such analysis with huge cost savings being realized. PPP Concern 4 Public Access to Private Company documents. PPP Concern Mitigation 4 Contract must clearly state that any and all documents relating to a particular project are accessible to the “public” under FOIA or other state regulations. PPP Concern 5 Conflicts of interests PPP Concern Mitigation 5 Open door policies that allowed state engineers and private sector employees to move from one entity to the other unfettered on the same project [(previously referenced project)]. Need checks and balances possibly outright prohibition. (Who is my master conflict?)

121 Factors to consider by decision- makers How to Ensure Public Safety. Are there actual Cost Savings? Is there enough oversight by state engineers? Are there strict rules for line of Command? Who has Responsibilities and Authority over project aspects including failures? Are the penalties enough to deter? Are their sufficient policies in place to prevent conflicts of interest? What are the consequences of finances if contractor files bankruptcy? Contract structures/techniques to protect public interests A return to old, well-established construction techniques with the right checks and balances that existed and worked well before the profiteers and the smaller government crowd dismantled a proven process in order to increase their profits. Government entities, particularly decision makers, were sold a bill of goods. No tunnels or bridges were collapsing with the proven methods we once used. Now everyone feels unsafe. Other perspectives I would strongly suggest for insightful reading on this subject the numerous documents prepared by the [state’s] and U.S. Inspectors General and the [state] State Auditor’s Office on the [previously referenced project] for lessons learned on the biggest PPI boondoggle, known to man. Respondent #19 Type of Organization m. Financial Advisor Top benefits of PPP up front cash faster design/build PPP Concern 1 Underpricing PPP Concern Mitigation 1 Regulate investment returns when met return road to public PPP Concern 2 excessive toll regime PPP Concern Mitigation 2 limit to cpi PPP Concern 3 term beyond 30 years PPP Concern Mitigation 3 limit term PPP Concern 4 protection of public interest PPP Concern Mitigation 4 Full transparency of procurement process, no shields regarding vendor proposals before award PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers Will they actually achieve economic benefit, could the same result be achieved by a public entity, why pay for 12%+ in equity returns? Contract structures/techniques to protect public interests Other perspectives

122 Respondent #20 Type of Organization a. State Department of Transportation Top benefits of PPP 1. Ability to provide resources, and leverage of resources, unavailable to public entity. 2. Knowledge of things that public personnel don’t have. 3. Transfer of certain risks to private entity. 4. Relinquishment of public service/democratic responsibilities— private entities are not subject to the same freedom of information, accountability, and oversight requirements as the public entity is. So less hassles and you can hide things. Good for plausible deniability. PPP Concern 1 Lack of private entity transparency and accountability in regard to records and information. PPP Concern Mitigation 1 Build transparency into the contract. Delineate what is proprietary and what is not in the contract. Require records and information as a deliverable. PPP Concern 2 Private entity won’t tell you what risks public is assuming, even if they know. Public entity often doesn’t know what risks they are transferring to private entity—sometimes they do but are only serving upper class interests. As a result, underclass sections of society are often impacted unfairly or their needs are discounted. PPP Concern Mitigation 2 How can distribution of transportation benefits/burdens and risks be decided in a strategically equitable manner? Government deal making in transportation infrastructure development may only include stakeholders and interests of upper class membership. However, it is the role of government to assure that these deals benefit society as a whole, including the underclasses. If the spectrum of public interests is not represented, inequitable distributions of benefits, burdens, and risks may occur. There must be an approach to uncovering hidden and indeterminate public risk. In PPP, the paradigm for business interests where the business interest short term gain means the long-term public loss, must be changed. The public interest must be of paramount benefit. PPP Concern 3 There is often limited state oversight during design and construction management. PPP Concern Mitigation 3 The state should do oversight and quality measurements at all stages of the project. PPP Concern 4 Selling off our transportation system requires everyone to play by the rules of business rather than the U.S. Constitution and/or the rule of law. Constitutional rights may not apply to the privately owned road. This is a serious concern. PPP Concern Mitigation 4 The public should not relinquish control of public assets and services. PPPs are helpers, not a way to sell off the democracy or the “commons.” PPP Concern 5 PPP Concern Mitigation 5

123 Factors to consider by decision makers 1. The rules of the business game when negotiating a PPP contract— transfer of risk, short term gain, costing, etc. 2. The consequences of long-term social dangers when ignoring underclass needs and impacts to the environment. 3. How will decision makers assure functional accountability of the private partner. 4. How will the PPP contribute to equitable distribution of economic benefits. 5. Long-term developmental impacts both in terms of the value of money and assets and in risks. Contract structures/techniques to protect public interests In the contract, deliverables should include freedom of information requirements, breach of contract definitions, liquidated damage provisions, and special oversight provisions that require audits and quality control actions by public entity on the documents, products, and actions of the private entity. Other perspectives PPPs for transportation seem to be moving toward the privatization of all transportation services and assets. This has happened with many public lands, with communications, and with the air ways. We can see the results—it is not in the public interest and dismantles the democracy while profiting only a few.

124 Respondent #21 Type of Organization i. Interest Groups (Please specify in question 3a) Environmental Top benefits of PPP If a government has reached a debt limit, it may be a way to finance a public works project. PPP Concern 1 The private corporation negotiating a project desires to keep the information confidential, thereby denying the public (and even elected officials) of many financial details of what they are paying for. PPP Concern Mitigation 1 Limit what can be kept secret. PPP Concern 2 Because a private corporation is most interested in the most profitable project, and not the one that is most needed, they may force the public agency to entertain construction of projects that are not a priority for the public—but of course the public will pay. PPP Concern Mitigation 2 Only allow projects that are the top priority for consideration. PPP Concern 3 Even for projects that are a priority, there is a limited opportunity to seek competitive bidding. The agency has a tendency, or even a requirement, to accept the first proposal with only a narrow and insufficient window for other bidders to participate. PPP Concern Mitigation 3 Require a much longer window for additional parties to bid. PPP Concern 4 There may be a limit on public involvement in the design and final acceptance of a proposed project. As noted in Concern #1, the same goes for financial viability. Corporations are resistant to accepting public opinion, and I believe that is true generally, but a characteristic that can vary greatly. PPP Concern Mitigation 4 The public agency has to take control of the project and insist that the public be involved. This requires political will that may be lacking if the public agency has (or perceives) a financial need. It may not be possible to overcome this issue. PPP Concern 5 The public is inherently the guarantor of last resort. If for any of a multitude of reasons, a PPP project (and the private partner) fails, the public picks up the tab. In a proposed local project, the bonds are to be paid back from tolls for 75 years. Nobody can predict anything for 75 years, and is there a bond big enough to cover it that won’t depreciate in 75 years? I doubt it. PPP Concern Mitigation 5 Require that the bonds be paid in 30 years. If it can’t be done, it’s not appropriate for a PPP. Factors to consider by decision- makers Rank the above? They are all important. Transparency Risk Track record of the private firm Is it in the public interest (have alternatives been considered) Contract structures/techniques to protect public interests I am not familiar with any. Other perspectives The public has a hard time paying attention to the dry details for the PPP trend, and public officials cannot resist the easy money. The ability to have something built during their term of office without raising taxes is sooo good. So the corporations are having a field day, there is little protection for the public.

125 Respondent #22 Type of Organization Other University Top benefits of PPP 1. More efficient delivery of transportation services. 2. Service improvements since there would be greater incentives to increase quality of service. 3. Reduce the impact of politics on transportation service delivery. 4. Potential for greater innovation and service experimentation. 5. Ability to raise capital for transportation enhancements over public sector only financing. PPP Concern 1 1. Public interest can be secondary to private interest. PPP Concern Mitigation 1 Make sure that they have competition, not just trade a private monopoly for a state run monopoly. If a monopoly is created, then public regulation may be required. PPP Concern 2 Public sector workers need to be treated fairly. PPP Concern Mitigation 2 Early retirement; Buyouts; Private sector hiring public sector workers; Worker retraining. PPP Concern 3 PPP Concern Mitigation 3 PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers 1. Are you creating a private monopoly? 2. Will this result in increased capital for infrastructure needs? 3. Will prices be regulated? 4. How will externalities be dealt with? 5. Will money from a brownfields PPP be used to enhance the transportation system, or be used for general government? Contract structures/techniques to protect public interests Other perspectives

126 Respondent #23 Type of Organization d. Other State Agency Top benefits of PPP Transfer of risk (construction, toll revenue, etc.); Longer horizon on debt repayment; Less political “response”; Deeper talent pool to manage project. PPP Concern 1 May ignore important public concerns (social equity, etc.) PPP Concern Mitigation 1 Agreement might provide for public subsidy to meet public policy objectives PPP Concern 2 Default by “private entity” PPP Concern Mitigation 2 Could be complex if it involves critical public facility. Financially surety or insurance could be costly but might deal with this possibility. Suggest stiff qualifications for “private partner.” PPP Concern 3 Long-term higher cost is major political issue PPP Concern Mitigation 3 Hard to deal with—even if some good technical arguments. Explaining risk transfer and net present value of $$ is a nonstarter with most of the public. PPP Concern 4 PPP Concern Mitigation 4 PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers What are the risks: Is the private partner qualified? Is there value in removing the project from direct political control? What is the political cost of the partnership? Does the deal pencil out—reasonably? Contract structures/techniques to protect public interests Probably some form of franchise or easement. You would want to avoid too many areas of continuing negotiation with conditions and cancellation provisions (at a reasonable cost). Other perspectives No—except without some political acceptance it is DOA

127 Respondent #24 Type of Organization i. Interest Groups (Please specify in question 3a) Represent state DOT employees Top benefits of PPP PPP Concern 1 Private financing is up to 35% higher than tax exempt financing— greatly increasing the cost of the project, making them financially unstable and subject to taxpayer bailout. Also greatly increases toll levels. PPP Concern Mitigation 1 Public agencies should utilize tax exempt public financing. Not sure you can mitigate paying 35% more than you need to... both financing types—private and public—are secured with the tolls—why would we choose the far more expensive option PPP Concern 2 Use of design-build, best value eliminates competitive bidding and increase project costs. Lack of oversight and public agency involvement encourages cost overruns and projects built on the cheap on public right-of-way PPP Concern Mitigation 2 Prohibit no-bid design-build and require public oversight, design, and inspection to ensure road safety and cost controls. PPP Concern 3 Toll roads take money out of our transportation system by moving revenues/profits PPP Concern Mitigation 3 Toll revenues should be reinvested into our transportation system and not siphoned off to multi-national companies that don’t remove the revenue from the system but often take it out of the country PPP Concern 4 Non-compete clauses and cash payments prevent improvements to competing public roads and actually increase congestion PPP Concern Mitigation 4 Prohibit non-compete clauses and cash payoffs—they just confirm the notion that toll roads aren’t about reducing congestion—they are about increasing it to the point toll roads are viable profit centers. PPP Concern 5 PPP Concern Mitigation 5 Factors to consider by decision- makers See above Contract structures/techniques to protect public interests Require competitive bidding, public oversight, design, and inspection Other perspectives The only differences in a traditional toll road and a 3P, is that under the 3P model you pay up to 35% more for financing and another 20% or so must be paid out (by contract) in profit to private investors instead of being reinvested into the system to benefit the public.