New York to create oversight body for PPPs(2)

New York will create a state-level entity to oversee, approve and enable the use of public-private partnerships (PPPs) for infrastructure projects, the state’s governor, David Paterson, said today.

The board will be similar in functionality to that of organisations such as Partnerships BC and Infrastructure Ontario, which serve as central clearinghouses for shepherding along PPP projects from conception to creation in the Canadian provinces of British Columbia and Ontario.

David Paterson

California and New York are the first and second states, respectively, to enable the creation of similar organisations in the US, Fredric Kessler, a partner at law firm Nossaman, told Infrastructure Investor. A similar organisation, the Public Infrastructure Advisory Commission (PIAC), was authorised in California by the state’s transportation PPP law in February and is currently in the process of being set up, Kessler said.

Unlike New York's proposed State Asset Maximisation Board, though, California's PIAC does not have power to approve PPP projects, Jim Bourgart, California's deputy secretary for transportation and infrastructure, told Infrastructure Investor. Its mandate is more for advisory and educational functions, he said.

Gov. Paterson announced the creation of the board at a press conference held to unveil the final report of the State Asset Maximisation Commission. He created the commission in October of last year to examine how the state can better deliver public services such as building roads and repairing bridges.

The commission widely embraced the use of PPPs as an alternative method for meeting the $175 billion of needed spending by the New York Department of Transportation over the next 20 years and similar needs by other cash-strapped agencies.

“Over 23 states have passed legislation enabling PPPs and there’s a wave going on across the country because states are in a terrible fiscal situation and they're going up against these enormous infrastructure needs,” Samara Barend, executive director of the commission, told Infrastructure Investor.

At the press conference today, an upbeat Gov. Paterson echoed these sentiments.

“The traditional routing of state resources to infrastructure repair

have been routed by our economic collapse over the last year. But this crisis may open an opportunity for us to find a solution . . . and that solution we see as public-private partnerships,” Paterson said.

He added that there are private equity firms, pensions, developers and operators “looking to invest $180 billion dollars in these types of PPPs and there is no better place to do it than here in New York”.

To facilitate PPPs in New York, Governor Paterson expressed support for the board, once created, to go forward with several “small projects that will lead to huge projects” when the economy recovers.

Some of the pilot projects outlined in the commission’s 26 recommendations include PPPs for statewide bridge improvements, high-speed rail, transmission and distribution infrastructure, data centers, and wireless telecommunications infrastructure. They were among 120 ideas for PPPs the commission received from the public and private sectors, Barend said.

The successful completion of such projects would “empower” the state to advance larger “mega-projects” such as the $14 billion proposed replacement of the Tappan Zee bridge over the Hudson River, the commission said in its final report.

“This is a ‘walk before you run’ approach . . . that recognises the need to get some projects done that

will show the merit of these ideas,” Sean Maloney, a partner at law firm Kirkland and Ellis, told Infrastructure Investor.

Maloney also believes the creation of the asset maximization board will help the state adopt a “comprehensive and long-term approach” for implementing PPPs in a consistent method rather than on a project-by-project basis.

Various states such as Indiana and Texas have previously allowed PPPs for specific projects to go forward without the creation of central oversight bodies like the State Asset Maximisation Board. Many view their creation as the next critical step in the development of a viable PPP market in the US.

“In the face of some recent setbacks in the PPP market in the US, this is a good indicator that there is

a future for these ideas and New York will be in the lead on that,” Maloney said.

Maloney helped establish the State Asset Maximisation Commission while he served as first deputy secretary to Patterson last year. The commission has now concluded its work after a six-month study period and published its final report on its website. 

“We hope that this report will inform people from the public that PPPs come in many forms and it is not simply a matter of extracting money from an asset,” Barend said.