Lawmakers Approve Bill Allowing Local Governments to Partner with Private Entities for Public Projects
A bill soon headed to the Governor’s desk for signature will greatly expand the opportunities for state and local governments to partner with private entities on a wide array of new public projects. Senate Bill 59, known as the “Partnership for Public Facilities and Infrastructure Act,” (the “P3 Act”), was approved by Georgia legislators on April 2, 2015, just before the end of the 2015 legislative session. This bill, which almost certainly will be signed by the Governor, will permit private developers and construction companies to partner with state and local governments to pursue a wide array of projects that meet a public purpose or a public need.
This Legal Update focuses on the portion of the P3 Act that addresses “local governments” (counties, municipalities, consolidated governments and boards of education). The P3 Act creates significant new opportunities for local governments to meet the needs of their communities by creating an alternative means of financing and shifting certain development, construction and operation risks to private entities. In contrast to current law, the P3 Act allows private entities to shoulder certain project costs typically borne by local governments, such as financing, designing, constructing and operating the project. In exchange for contributions in these areas, private entities are permitted to earn a fee through operation of the project for a designated time period before the project is eventually turned over to the local government.
The P3 Act will allow local governments to consider solicited and unsolicited proposals from private entities for “qualifying projects” (projects that meet a public purpose or public need). When submitting an unsolicited proposal to a local government, private entities are required to include certain information about the proposed qualifying project, including a description of the project, a feasibility statement, and a schedule for completion. Local governments are permitted to reject any proposal or unsolicited proposal at any time and are not required to provide a reason for their denial.
If an unsolicited proposal is accepted as a qualifying project, the local government must then seek competing proposals by issuing a request for proposals for at least 90 days. At the end of the proposal period, the local government is to rank proposals pursuant to factors set forth in its RFP and, thereafter, must begin negotiations with the first-ranked private entity.
In ranking the proposals, the lowest cost proposal may not end up being the first-ranked bid. Other factors, which were set forth in the RFP, can be considered by local governments in evaluating proposals. Factors like the reputation of the private entity, the proposed design of the qualifying project, the benefit to the public, the private entity’s compliance with MBE participation plan and plans to employ locally, as well as other criteria may be considered.
Once a proposal is accepted by the local government, both parties are to enter into a “comprehensive agreement.” Under the P3 Act, a comprehensive agreement must address certain factors, including the duties of each party in completing and operating the qualifying project, dates and schedules for the project’s completion, fees that may take the form of user fees, lease payments or service payments, reimbursements to be paid to the local government, periodic and final inspections by the local government, performance and payment bonds, liability insurance, quality control, and the rights of each party in the event of default or material breach. At any time prior to executing a comprehensive agreement, a local government, without liability, may cancel its request for proposal or reject all proposals, including unsolicited proposals, for any reason whatsoever.
The P3 Act also establishes the Partnership for Public Facilities and Infrastructure Act Guidelines Committee, which is to prepare model guidelines for local governments in the implementation of the P3 Act. The model guidelines will be updated every two years. Certain committee members will be appointed by the Governor, Speaker of the House and Lieutenant Governor. Each appointed committee member will serve for two years. Upon the Governor’s signature, committee member appointments are to be made before August 1, 2015, and model guidelines are to be issued no later than July 1, 2016.