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Environmental Blog

Texas Legislature Authorizes New Public-Private Partnership Center

Legislation passed by the Texas Legislature may catalyze more private investment in water infrastructure across the Lone Star State. House Bill 2475, signed into law by Governor Abbott on June 19, establishes a new “center for alternative finance and procurement” that will assist government entities in selecting public-private partnership projects for nearly any type of public infrastructure. The law will take effect on September 1, 2015.

Bill Analysis


House Bill 2475 amends the Texas Government Code to create a new center for alternative finance and procurement within the Texas Facilities Commission. The center will consult with government entities1 regarding best practices for procurement and financing of qualifying projects.2 It will also assist government entities in the receipt of proposals, negotiation of interim and comprehensive agreements, and project management.

To advise government entities regarding the costs and benefits of project proposals, the center will engage the services of an independent professional, including an architect, professional engineer, or a registered municipal advisor. In addition, the bill allows a government entity to charge a “reasonable fee” for the costs of the center’s review or consultation services.

Proprietary records and trade secrets involved in the procurement process and the negotiation of project agreements will receive broad protection from public disclosure. Both the project procurer and the proposer are eligible for such protection, except that the terms of interim or comprehensive agreements, financial arrangements involving the use of public money, and records of performance of any person involved in the development or operation of a qualifying project must be disclosed. Further, all protected information must be disclosed to the Texas Facilities Commission and the presiding officer of the House Appropriations Committee and of the Senate Finance Committee, or their designees.

Previous public-private partnership enabling legislation


In 2011, the Texas Legislature enacted the Public and Private Facilities and Infrastructure Act to encourage private investment in public use facilities and infrastructure. The law authorized public-private partnerships for a wide range of social infrastructure projects, including facilities for mass transit, water supply and power generation, and oil and gas pipelines. 

In 2012, the Texas Public-Private Partnership Association published model guidelines to assist state governmental entities (as opposed to local government entities, whose guidelines are afforded greater flexibility under the Public and Private Facilities and Infrastructure Act to account for local procurement processes and decision-making) in adopting their own agency-specific guidelines for implementation of the Act. 

Two state agencies—the Texas Facilities Commission and the Texas Department of Transportation—have adopted guidelines that establish application requirements for qualifying projects and the review criteria and processes by which applications will be evaluated. In addition, several Texas cities, including El Paso, San Antonio, Dallas, and Houston have adopted similar guidelines in accordance with the Public and Private Facilities and Infrastructure Act to encourage private investment. 

Modeled after Canada’s public-private partnership office 


Texas’ new public-private partnership center is largely modeled after PPP Canada, which was created by the Canadian government as a federal Crown corporation in 2008. Owned by the government, but operating like a private company, PPP Canada reports through the Minister of Finance to the Canadian Parliament. It is governed by an independent Board of Directors, comprised of a chair and six additional members from the private sector.

A notable feature of PPP Canada is the P3 Canada Fund. With a $1.2 billion, five-year budget, the Fund is the federal financial incentive for sub-national political authorities (provinces, territories, municipalities, or First Nations) to consider public-private partnerships in infrastructure procurement. The Fund invests in public-private partnership projects in a wide range of sectors, including transportation, water, energy solid waste, connectivity and broadband, maritime, and aerospace. The P3 Canada Fund limits its financial contribution, together with any other direct federal financial assistance, to twenty-five percent of the direct construction costs of a project. 

Unlike PPP Canada, Texas’s new public-private partnership center will not have funds to disburse to qualifying projects. However, Texas’ center will perform a similar advisory role as its Canadian counterpart. PPP Canada develops policies and best practices for PPP management, which are optional for Canadian provinces and municipalities (PPP Canada has no authority to impose a standard PPP management practice across all government levels). In addition, PPP Canada also provides technical assistance to political authorities pursuing public-private partnership projects, as well as projects that receive funding from PPP Canada. However, these authorities are not required to engage PPP Canada if they wish to pursue public-private partnerships. Further, even though PPP Canada provides technical assistance regarding public-private partnership procurement and management, the procuring authorities are ultimately responsible for the projects. 

Reflections


By enacting House Bill 2475, the Texas Legislature sent a strong signal that it is open to private involvement in infrastructure financing and delivery across a wide range of sectors. The law could encourage cash-stretched municipalities and public agencies to reach out to the private sector for financing and management services and provides state and local governments with new tools to address critical investment needs related to water infrastructure. With Texas’ demand for water on the rise, coupled with projected population and economic growth, the bill is an important step toward meeting emerging challenges to the state’s water security.

1 “Government entity” means: a board, commission, department, or any other agency of the state, as well as any political subdivision of the state that elects to operate under Chapter 2267 by adoption of a resolution by the governing body of the political subdivision. 

2 “Qualifying project” is defined broadly and includes, among other things, facilities for mass transit, water supply or power generation, oil or gas pipelines, waste treatment, or other similar facility available or to be made available to a governmental entity for public use.

Posted at 07/17/2015 4:30 PM

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