1. Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. Non-Traditional Approaches for Solving Budgetary Pressure The National Association of State Auditors, Comptrollers and Treasurers Annual Conference Joe Seliga Partner 312.701.8818 jseliga@mayerbrown.com August 2011

2. Public-Private Partnerships for Infrastructure Projects Public-private partnerships are being used increasingly by state and local governmental entities for large infrastructure projects. – “Greenfield” projects involve the construction of new infrastructure assets. – Existing asset projects involve the long-term operation and maintenance of existing infrastructure assets. 2

3. Greenfield Public-Private Partnerships Greenfield infrastructure public-private partnerships have been used for the construction of toll road, highway, bridge, tunnel, mass transit and social infrastructure (e.g., courthouse) projects: – Florida Port of Miami Tunnel and I-595 – Virginia Capital Beltway – Texas North Tarrant Expressway and SH 130 – California Presidio Parkway – Denver FasTracks Eagle P3 – Long Beach Courthouse 3

4. Greenfield Public-Private Partnerships Greenfield public-private partnerships take one of two general forms: 1.Revenue Projects -Private partner takes on revenue risk. -Private partner constructs, operates and maintains the project and obtains revenue from the project up to certain permitted rate of return. 2.Availability Payment Projects -Public partner retains revenue risk. -Private partner receives payments from the public partner for construction, operation and maintenance to the extent the project is “available” in accordance with terms of contract. 4

5. Existing Asset Public-Private Partnerships Existing asset infrastructure public-private partnerships have been used for the long-term operation and maintenance of toll roads, toll bridges, airports, public parking and maritime ports: – Toll Roads and Toll Bridges: Chicago Skyway; Indiana Toll Road; Northwest Parkway (Colorado); Puerto Rico PR-22/PR-5 Toll Roads – Airports: Chicago Midway International Airport; San Juan Luis Muñoz Marín International Airport – Public Parking: Chicago Underground Parking System; Chicago Metered Parking System; Indianapolis Public Parking System – Maritime Ports: Port of Oakland Outer Harbor Terminal; Port of Baltimore Seagirt Terminal; Port of Portland Terminal 6 5

6. Existing Asset Public-Private Partnerships Public partner receives upfront payment and/or ongoing payment and/or revenue share. Private partner takes on: – Operations risk – Maintenance risk – Construction risk – Revenue risk subject to terms of project agreement that impose legal and regulatory requirements on private partner’s operation of asset. 6

7. Existing Asset Public-Private Partnerships Existing asset PPPs can be used to relieve budgetary pressures. – Should NOT be used to relieve immediate operating budget pressures – Should be used for long-term investment, including to: Pay off existing debt (e.g., Puerto Rico toll roads and airport) Create reserve fund (e.g., City of Chicago used $500 million of Chicago Skyway proceeds to create reserve fund that resulted in increase in City’s bond ratings) Reinvest in infrastructure (e.g., Indiana Toll Road proceeds of $3.8 billion used for State’s 10-year transportation plan; $140 million Seagirt terminal capital reinvestment payment used for other infrastructure in Maryland) Fund pensions (e.g., Illinois legislation related to Midway Airport transaction requires 90% of proceeds to be used for infrastructure or pensions) 7

8. Existing Asset Public-Private Partnerships Benefits of Existing Asset Public-Private Partnerships – Shift of long-term operation and maintenance to private partner – Efficiencies of private sector operation – Encourages private sector innovation – Future construction to be undertaken by private sector – Shifts revenue (and financing) risk to private sector – Upfront and/or ongoing revenue to public partner – Private partner subject to government regulation under terms of contract (i.e., not a sale, but regulated long-term operation of asset) 8

9. Existing Asset Public-Private Partnerships Policy Issues to be Addressed: – Legal authorization for project – Transparent process for selection of private partner – Incorporating public protections in project contract – Detailed operating standards – Balancing revenue maximization and protection of public interest – Ensuring proper use of project proceeds 9

10. Thank You Joe Seliga Mayer Brown LLP 71 South Wacker Drive Chicago, Illinois 60606 312.701.8818 jseliga@mayerbrown.com www.mayerbrown.com 10