PPP Legislation - Public Private Partnerships

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PPP Legislation

ANALYSIS FOR STATE OF CALIFORNIA	« back
Statute:
CAL STS & HY CODE §§ 143 CAL STS & HY CODE §§149-149.6 CAL STS & HY CODE § 149.7 CAL GOV CODE §§5956-5956.10

Summary:
AB 1467, enacted by the Governor and Chaptered by the Secretary of State in May 2006, added §§143 and 149.7 to the California Streets and Highways Code. The bill authorizes the department and regional transportation agencies to enter into lease agreements with public and private entities. The pilot program limited to 2 projects in northern California and 2 in southern California until January 1, 2012. This statute also authorizes high-occupancy toll lanes. Solicited and unsolicited proposals are permitted under the statute. AB 521, enacted by the Governor and Chaptered by the Secretary of State in September 2006, amended §143 California Streets and Highways Code to limit the time and scope of the Legislature’s review of a lease agreement. Cal. Sts. & Hy Code §§ 149.1-149.6 authorizes the San Diego Association of Governments to undertake specified tolling and public-private partnership projects. Cal Gov Code §§ 5956-5956.10 (AB 2660 (1996)) authorizes local governments to pursue PPPs for a range of “fee-producing infrastructure projects,” but explicitly excludes the use of toll roads on state highways (§ 5956.10).

Key Elements of California's PPP Enabling Legislation	Last Updated: October 2006

No.	Issue:	Short Answer:	Sample Provision:
1.	Does the relevant law allow solicited and unsolicited proposals for PPP projects?	Yes.	§143 allows the department to “solicit proposal and accept unsolicited proposals.”
2.	Does the relevant law permit local/state/federal funds to be combined with private sector funds on a PPP project?	No express provision.
3.	Who has rate-setting authority to impose user fees and under what circumstances may they be changed or otherwise reviewed?	By Agreement.	§143(e)(2) requires the initial toll to be set by the lease agreement and all increases to be approved by the department or regional transportation agency after a public hearing.
4.	Does the relevant law permit TIFIA loans to be used on PPP projects?	No express provision.
5.	Is the number of PPP projects limited to only a few "pilot" or "demonstration" projects?	Yes.	§143(b)(2) limits the number of projects to 4. §143(m) prohibits lease agreements after January 1, 2012.
6.	Are there restrictions concerning the geographic location of PPP projects?	Yes.	§143(b)(2) requires 2 of the 4 projects to be in northern California and 2 of the 4 projects to be in southern California.
7.	Are there restrictions concerning the particular mode of transportation eligible to be developed as a PPP project (e.g., truck, passenger auto, freight rail, passenger rail)?	Yes.	§143(b)(2) requires the PPP to be for the “improvement of goods movement”, with “exclusive truck lanes and rail access” cited as examples.
8.	Is there a legal requirement to remove tolls after the repayment of project debt?	No.	The tolls may be continued after the lease expires, but they must be used to benefit the same facility.
9.	Does the relevant law permit the conversion of existing or partially constructed highways into toll roads?	Yes.	§143(k) allows the conversion of existing highways only for HOT lanes.
10.	Is there a restriction that prevents the revenues from PPP projects from being diverted to the state's general fund or for other unrelated uses?	Yes.	§143(e)(1) requires toll revenues to go to the facility, debt, or the State Highway Account.
11.	Is prior legislative approval required when an individual PPP proposal is received?	Yes.	§143(b)(3) requires negotiated lease agreements to be submitted to the State Legislature. The Legislature has 60 days from the day of submission to reject a lease agreement, otherwise it is deemed approved. The Legislature is prohibited from amending a lease agreement.
12.	Are there any similar requirements that subject the PPP proposal or the negotiated PPP agreement to a local veto?	No.	§143(b)(3) only requires a public hearing near the proposed facility’s location, but only the legislature has veto power.
13.	Does the relevant law permit all kinds of procurements for PPP project delivery? These might include, for example, calls for projects, competitive RFQ and RFPs, qualifications review followed by an evaluation of proposer concepts, use of design build, procurements based on financial terms such as return on equity rather than on price, long-term asset leases for some period of up to 60 years or longer from the time operations commence?	Yes.	§143(d)(2) allow the transportation agency to utilize a variety of procurement approaches.
14.	Are there explicit exemptions/supplemental procurement authority from the application of the state's general procurement laws?	No.	§143(n) applies certain provisions of California’s Public Contracts Code to design-build projects.
15.	Does the relevant law authorize the public sector to grant long-term leases/franchises for the construction, operation and maintenance of toll facilities?	Yes.	See §143(b)(1).
16.	Does the public sector have the authority to issue toll revenue bonds or notes?	No express provision.
17.	Does the public sector have the authority to form nonprofits and let them issue debt on behalf of a public agency?	No express provision.
18.	Does the relevant public agency have the authority to hire its own technical and legal consultants?	No express provision.
19.	Does the relevant law permit the public sector to make payments to unsuccessful bidders for work product contained in their proposals?	No express provision.
20.	Can the agency charge application fees to offset its proposal review costs?	No express provision.
21.	Does the relevant law allow adequate time for the preparation, submission and evaluation of competitive proposals? Note that the agency should have the authority to establish these deadlines on a case-by-case basis depending on the complexity and scope of the initial proposal or other factors that might promote competition (e.g., more review time during holiday periods).	Yes.	§143(b) does not include any time restrictions.
22.	Is the public sector required to maintain comparable non-toll routes when it establishes new toll roads?	No.
23.	Are there any non-compete clause prohibitions?	Yes.	§143(d)(3) prohibits an agreement from infringing on the authority of the department or regional transportation authority. This section would allow reasonable compensation to a leaseholder for adverse impacts under certain circumstances.
24.	Is the authority to enter into PPPs restricted to the state DOT or state turnpike authority or may regional or local entities also do so?	Restricted.	§143(b)(2) allows only the department, in cooperation with regional transportation agencies, to solicit PPP proposals. However, CAL GOV CODE §§5956-5956.10 gives local governments the authority to pursue PPPs.
25.	Does the relevant law specify evaluation criteria for PPP proposals received under a given procurement approach?	No.
26.	Does the relevant law specify the structure and participants for the review process involving PPP proposals?	Yes.	§143(b)(2)-(3) require the California Transportation Commission, legislature, regional transportation agency, and public to be involved.
27.	Does the relevant law protect the confidentiality of PPP proposals and any related negotiations in the period prior to execution of the PPP agreement?	No.
28.	Does the relevant law provide for the ability of the public sector to outsource long-term operations and maintenance and other asset management duties to the private sector?	No express provision.

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