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MI to use P3 to cut $1B highway project schedule by 10 years
ConstructionDIVE ^ | October 2, 2017 | Kim Slowey

Posted on 10/22/2017 10:07:49 AM PDT by Tolerance Sucks Rocks

Dive Brief:

Dive Insight:

As of February 2017, just 28 U.S. highway P3s achieved financial close, according to the Federal Highway Administration. As in Michigan, P3s let DOTs shift the risk of virtually every aspect of a project to the private sector. That doesn't protect the public entity completely, however.

This past summer, a Texas toll road emerged from Chapter 11 bankruptcy reorganization with new management after the original concessionaire allegedly experienced financial difficulties as a result of toll revenues failing to meet projections set prior to the Great Recession. The potential for failure is one reason why public agencies typically favor large companies when selecting a private partner.

A P3's private partners should do their due diligence to ensure the revenue projections, such as those from a toll road, are solid as this could represent the bulk, if not all, of their reimbursement, Lee Weintraub, chair of Fort Lauderdale, FL–based law firm Becker & Poliakoff's P3 group, told Construction Dive in August.

Yet stories of failed P3s are few and far between. Rather, they have consistently been promoted as a way to complete projects faster and with fewer taxpayer dollars. As a result, many supporters of the model were likely surprised at reports last week that President Donald Trump has soured on private investment as a strategy to help finance his $1 trillion infrastructure initiative.

During the 2016 presidential campaign and since the election, the Trump administration has consistently pushed private investment as a way to tackle the modernization and repair of the nation's aging bridges, tunnels, highways and other public assets.

Last week, however, the president told a bipartisan group of lawmakers that P3s are "more trouble than they're worth." One alternative is increased direct federal spending, which Republicans have vowed to fight.

Recommended Reading:



TOPICS: Business/Economy; Government; News/Current Events; US: Michigan; US: Texas
KEYWORDS: construction; i75; infrastructure; mdot; michigan; oaklandcounty; p3; ppp; spending; texas; transportation; trump

1 posted on 10/22/2017 10:07:49 AM PDT by Tolerance Sucks Rocks
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To: Tolerance Sucks Rocks

Great AC that P3:

http://www.military.com/equipment/p-3c-orion


2 posted on 10/22/2017 10:13:40 AM PDT by CGASMIA68
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To: Tolerance Sucks Rocks

In my opinion, the only involvement the type of government should have in Road building is the interstate transportation system. Beyond that it’s each state’s responsibility.

No more federal funds or involvement in state roads. It’s nothing but blackmail money.


3 posted on 10/22/2017 10:20:32 AM PDT by ChildOfThe60s (If you can remember the 60's....You weren't really there)
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To: Tolerance Sucks Rocks

So private companies get things done faster and cheaper?

Ya don’t say...


4 posted on 10/22/2017 10:21:12 AM PDT by wastedyears (Anime is real.)
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To: Tolerance Sucks Rocks

This is a new twist...

Tell the private contractors they will be reimbursed from future tolls collected.

Then, oh darn! they don’t have enough

A great new scheme for the government to screw private businesses.

If the government is involved, you can bet it will be screwed up.


5 posted on 10/22/2017 10:21:51 AM PDT by Mr. K (NO CONSEQUENCE OF REPEALING OBAMACARE IS WORSE THAN OBAMACARE ITSELF)
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To: CGASMIA68
You beat me to it. A real workhorse.


6 posted on 10/22/2017 10:39:01 AM PDT by moovova
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To: ChildOfThe60s

“In my opinion, the only involvement the type of government should have in Road building is the interstate transportation system. Beyond that it’s each state’s responsibility.”

I agree. I’m not even sure the Feds should be involved in maintaining existing stretches of the interstate system. New interstate highways, maybe, but the states benefit from the systems enough so that they ought to be responsible to rapid them, as necessary.

I’m not sure about P3’s. I don’t like the idea of toll roads and I’m inclined to think state taxes on vehicle fuel is a better way of financing road maintenance.


7 posted on 10/22/2017 11:02:04 AM PDT by be-baw
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To: moovova
Friend from high-school flew them his entire career.

I thought it could be this P3:


8 posted on 10/22/2017 12:01:13 PM PDT by SaveFerris (Luke 17:28 ... as it was in the days of Lot; they did eat, they drank, they bought, they sold ......)
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To: Tolerance Sucks Rocks

In other words,

Communist Leftists BANKRUPTED the State
and are now selling off the people’s assets.

Fake story is toll road.


9 posted on 10/22/2017 12:40:23 PM PDT by TheNext (FBI FAKE STORY: Lone Shooter, But Died)
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To: Tolerance Sucks Rocks
We could use help in Massachusetts. Sixth highest costs per mile of highway:

What Are Road Construction Costs Per Lane Mile in Your State?

10 posted on 10/22/2017 12:57:38 PM PDT by Fractal Trader
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To: Tolerance Sucks Rocks
I-75 will be state's largest public-private transportation project (9/25)

by Lindsay VanHulle

LANSING — A plan to have the private sector pay for construction and maintenance of part of the busy I-75 corridor in Oakland County will be the largest public-private transportation project in state history, Michigan transportation administrators said.

The plan to hire a contractor or a group of contractors to design, build, finance and maintain a stretch of the freeway from Eight Mile Road to 13 Mile Road would top a 2015 private-sector partnership to update 15,000 freeway and tunnel lights, according to the Michigan Department of Transportation.

So-called "P3s," while still relatively new in Michigan, are being viewed more favorably by transportation administrators as a way to stretch taxpayer dollars for transportation and maximize efficiency of construction projects. Rather than having to borrow for the entire project cost up front or build one section of road at a time over years as money becomes available — a process that likely would cost more when factoring in rising prices for materials and labor — a private company could finance multiple sections at once and the state could repay the investment over 25 or 30 years.

Public-private partnerships also are expected to play a large role in President Donald Trump's proposal to infuse $1 trillion into rebuilding the nation's infrastructure systems by using some federal funding to leverage even more private capital.

"The message that we're beginning to see coming out of Washington relative to infrastructure (is) looking at P3 delivery and private financing," said Joe Pavona, a senior adviser for innovative contracting and P3s for MDOT. "The feeling is that it's going to be looked at favorably."

MDOT administrators decided to speed up its original construction schedule for I-75 — an estimated $1.3 billion project in nine segments, to be completed by 2034 — in part because of feedback about the amount of time the heavily traveled corridor would be under construction.

The first segment, a $91.8 million reconstruction of three miles of the freeway near the Square Lake Road exit, was mostly completed before Labor Day. The remaining work will be condensed into two segments.

The first of those will span from 13 Mile to Coolidge Highway, with the state contracting with a company to design and build the project. That contract is expected to be awarded next summer and construction should finish in 2020, according to MDOT. This portion will use existing state dollars and the state will be responsible for long-term road repairs.

The second leg to the south, however, will include a contract not just for design and construction, but also for long-term financing and preventive road maintenance, MDOT said. That contract should be awarded by the fall of 2018, with construction set to finish in 2022.

The state will continue to be responsible for routine maintenance, such as snow removal, Pavona said. The type of long-term maintenance that will be handled under the new contract is expected to include such work as building sound and retaining walls, and surface patching.

MDOT estimated construction costs for the two remaining stretches of freeway at $325 million to $350 million for the northern section, and up to $650 million for the privately financed section to the south.

Until a contract is negotiated, state transportation leaders said they have not decided how many years Michigan will reimburse the contractors, nor the amount of long-term savings by speeding up construction, Pavona said.

Companies bidding on a P3 contract could join a consortium, with a group of firms handling everything from design to construction to securing financing from a private lender, Pavona said. The private sector can benefit from having more control over multiple aspects of the project, giving them greater efficiency and economies of scale that could lead to lower materials costs for a large, bundled project.

In addition, private firms can trust the government is not going to default on its payment obligations, Pavona said, adding that their involvement could lead to higher-quality work because the contractors have assumed more of the risk and will be required to maintain their work for decades.

"It's all calculated risk," MDOT spokesman Jeff Cranson said.

Public-private partnerships netted about $61 billion in contracts from 1989 to 2013 — a sliver of the $4 trillion spent on highway projects during those years at all levels of government, according to the Congressional Budget Office in 2014. Yet roughly half of that $61 billion was contracted in the five years before the report was issued, the budget office said, reflecting growing interest in P3s.

There is some evidence that bundling more of the project could lead to faster, cheaper construction because a company will have more of a reason to rein in costs and meet deadlines, according to the budget office.

In 2015, MDOT joined a $123 million partnership with New York-based firms BlackRock Infrastructure and Freeway Lighting Partners LLC to update 15,000 lights on Detroit-area freeways and tunnels. The private companies are responsible for operating and maintaining the lights for 15 years, while the state provides repayment over the life of the contract; MDOT has said the annual cost should be less than what the department would have to pay for the updates.

So why not use the P3 approach from the start?

"It's like buying a house or buying a car. You know, what's the perfect balance for you in terms of how much you privately finance and how much you pay for yourself?" Pavona said, adding that it was important to the state to begin the project with available funding that already had been set aside. "We continued to analyze and see what are other options that could be used that could improve delivery of the project. This is a huge project, and sometimes the right combination doesn't always reveal itself immediately."

11 posted on 10/22/2017 1:07:41 PM PDT by Tolerance Sucks Rocks (Environ-MENTAL-ism is MENTAL)
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To: Tolerance Sucks Rocks
I traveled between San Diego and Pocatello via I-15 many times since moving in 2000. I saw many businesses situated at offramps that failed. The newest ones were attempts at public/private in Utah. Most of the private only failures were in California between Barstow and Primm, NV. The Utah failures were mostly between Cove Fort and Nephi.
12 posted on 10/22/2017 6:45:48 PM PDT by Myrddin
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