Transit Public-Private Partnerships: Legal Issues (2014) / Chapter Skim
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Pages 33-39
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33 utes are "ineffective vehicles for public-private partnerships given provisions that create risk and uncertainty."398 Some state laws impose significant restrictions on the ability of partners to engage in effective PPP arrangements, such as prohibiting the use of certain types of contracts. Some state statutes prohibit or restrict the use of DB contracts, revenue sharing, innovative financing methods, or the use of performance-based contracts.399 State competitive bidding laws also may be a barrier to DB-type contracting.
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34 ticipation, such as private activity bonds, bonds issued by qualified 63-20 nonprofit corporations, long-term leasing of transit facilities, and crossborder leasing.415 The primary objectives of the financial structuring of a PPP are to utilize fully all sources of public funds, including tax revenue and grants from federal, state, and local sources, as well as credit enhancement techniques; to secure private sources of capital and noncapital financing; to use financing methods to decrease costs and enhance cash flow; and to utilize transit-owned real estate and other assets productively that are underutilized.416 Although financing for PPPs in the United States has been described as quite "fragmented," the United States has been described also as "a virtual PPP laboratory."417 There are several methods for financing PPP infrastructure projects that embrace participation by the private sector.418 PPPs for transit projects continue to require, however, a "high degree of government financial assistance."419 B Private Activity Bonds 1.
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35 high-speed intercity rail facilities, and qualified highway or surface freight transfer facilities) .426 (emphasis added)
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36 D Grant Anticipation Notes Another form of revenue bond is a Grant Anticipation Revenue Vehicle (GARVEE)
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37 agreement.458 COPs may be used to finance the purchase of transit equipment or facilities for transit projects. COPs are "sold as securities to investors in both private placements and public offerings."459 Under the regulations, a capital lease is any transaction by which an entity that receives FTA financial assistance "acquires the right to use a capital asset without obtaining full ownership regardless of the tax status of the transaction."460 Under 49 C.F.R.
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38 • FTA's guidance on capital leases states that capital leases may not be for longer than the useful life of the asset nor for less than 75 percent of the useful life of the leased asset.470 • The government entity's lease payments are assigned to a trustee who acts on behalf of the holders of the COPs.471 Federal law and FTA regulations allow transit agencies to receive federal funds and use COPs for long-term financing of capital facilities and equipment.472 As a result of Section 308 of the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURRA) , FTA funding under 49 U.S.C.
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39 agencies may "promise the use" of such future funds to enhance creditworthiness.487 F 63-20 Nonprofit Corporations State and local governments may use "established conduit issuers" or create not-for-profit corporations to raise money through the issuance of tax-exempt bonds for a project.488 (Conduit revenue bonds are also known as private activity bonds.489)
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