1. CONFIDENTIAL www.mcguirewoodsconsulting.com Christopher D. Lloyd DBIA Water & Wastewater/Transportation Joint Program April 21, 2010 Emerging Policy Trends For Innovative Project Delivery

2. 2 Presentation Overview America’s Infrastructure Crisis Historical Solutions Public Policy Barriers and Opportunities Emerging Statutory Frameworks Recent Project Examples

3. 3 America’s Crumbling Infrastructure

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7. 7 Public complains but has no interest in increasing taxes/fees/tolls to pay for it Politicians talk infrastructure, but it is always the first to item to go when money gets tight Cost of maintaining existing infrastructure is eroding construction budgets Failing infrastructure is harming US competitiveness

8. 8 Why Use Alternative Procurement? Faster, better, cheaper (sometimes) Single point of responsibility Shift of risk away from public sector Distances rate making/price setting decisions from the political sector Lack of faith in the public sector

9. 9 Virginia in the Vanguard Virginia PPTA (1995) and PPEA (2002) legislation seen as model statutes Virginia has done 100+ deals Range from $1.5 million - $5 billion+ Provides fast track to design-build, predictable process

10. 10 PPEA: Process Public entity solicits for proposals or accepts unsolicited proposals Minimum of 45 day open competition period for unsolicited proposals FOIA protections for confidential information are negotiated Conceptual proposal outlines team qualifications, proposed cost, proposed scope and public benefits Public entity may levy a proposal review fee on both solicited and unsolicited proposals Proposal review fee is used to cover procurement costs

11. 11 PPEA: Process All competing proposals are reviewed, followed by a downselect Detailed proposals are requested – often relies on recommendations of outside/inside advisors Detailed proposals start to lock in project scope, costs, schedule Leads to an interim or comprehensive agreement with one firm Significant requirements for public notification and hearings

12. 12 Evolution of Virginia’s PPEA Creation of interim agreement concept Increased public input and transparency Development of “best practices criteria” Creation of legislative oversight panel Expansion to technology projects and services

13. 13 Creating the Ideal Procurement Law Allows solicited and unsolicited proposals Open to all financing vehicles Ensures transparency and public participation Fairly balances public and private risks Provides for sufficient competition Adequate public staffing to speed project approvals

14. 14 Barriers to Public Private Partnerships - 2010 Stimulus promises diminished public sector appetite for creative approaches CIP budgets were first cuts to meet government fiscal challenges General distrust of Wall Street/corporate America Public sector layoffs create staffing/evaluation challenges

15. 15 Support for Public Private Partnerships - 2010 Stimulus “list making” exercise shows need for infrastructure Lack of funding causing public sector to be more open to creative financing/development opportunities Construction price declines/increased competition Failure of other alternatives leaves few options Appetite for “asset maximization”

16. 16 Recent Transactions (post-Lehman) Several major players have exited the market (RBS, Babcock & Brown) Several major deals faltered (Midway Airport, PA Turnpike) Despite financial crisis, some deals are being done Infrastructure funds are still successfully raising money Era of cheap equity has ended (for now) Market expects major public participation – risk aversion

17. 17 I-595 Florida 10.5 mile, $1.8 billion project Creates new express lanes, BRT Financial close March 2009 ACS Dragados as equity investor with bank consortium $800 million bank debt, $600 million TIFIA, $232 million FDOT, $200 million equity First “availability payment” scheme in US - $63.98 million per year for 30 years, FDOT controls toll revenue and rates Additional information at http://www.i- 595.com/default.aspx http://www.i- 595.com/default.aspx

18. 18 SPSA Waste to Energy Sale of waste-to-energy plant to Wheelabrator/Waste Management Provides for substantial rehabilitation to neglected facility $150 million cash infusion lowers SPSA debt/tipping fees Allocation of PAB’s lowers costs – merges public and private financing vehicles

19. 19 Recent Transactions – Market Reaction Private sector looking for more legal certainty, traffic track record, public financial participation Public sector looking for stronger parent guarantees, additional sweat equity, assistance in building public support for project Increased interest in “social” infrastructure projects Strong interest in energy-related infrastructure

20. 20 Future Opportunities and Issues How will SAFETEA-LU reauthorization impact the development of new infrastructure? Will the availability of new bond vehicles dampen desire for non-traditional financing? How much flexibility will states/feds have to raise taxes to develop/maintain crumbling infrastructure? Will governments be able to deliver on funding and matching commitments in a challenging fiscal environment? Will new environmental/safety/labor requirements restrict infrastructure development?

21. 21 Infrastructure & Economic Development | Federal Public Affairs | Strategic Communications & Grassroots Mobilization State & Local Government Affairs | Emerging European Markets Atlanta Charlotte Charlottesville Chicago Columbia Norfolk Raleigh Springfield Tyson’s Corner Washington, D.C. | Bucharest, Romania www.mcguirewoodsconsulting.com