April 29, 2002

Legislation Update!

Senate Bill 681 was passed by the General Assembly and Governor Warner, creating The Virginia Public-Private Education Facilities & Infrastructure Act of 2002.

What is it?
Virginia’s new "Public-Private Education Facilities & Infrastructure Act of 2002" (PPEFIA) allows the establishment of public-private partnerships for designing, constructing, financing, and operating schools and other governmental buildings or public infrastructure – extending the public-private partnership concept initiated in Virginia’s Public-Private Transportation Act (PPTA). PPEFIA, designed to permit maximum use of federal tax advantages, is available to all Virginia governmental entities including counties, cities, towns, and regional authorities as well as state agencies and institutions.

PPEFIA can be used for the acquisition, design, construction, improvement, renovation, expansion, equipping, maintenance or operation of virtually any school buildings, stadiums (and other school sports facilities), equipment (and other depreciables used in schools), government buildings, government facilities, security enhancements and equipment, utilities, communications infrastructure and recreation centers and facilities.

Projects can be privately or publicly initiated. In privately initiated projects, the offeror conceives the project and submits a proposal to the governmental entity for consideration. In publicly initiated projects, the governmental entity formally requests proposals and bids. However the project is initiated, the governmental entity involved must approve the project. Approval requires the public entity to find that the project will serve a public need, that its cost is reasonable in comparison to that of similar projects, and that the proposed plans will result in timely fulfillment of the proposal. Final approval occurs when the operator and the public entity enter into a comprehensive agreement relating to the project. In order to enter into this agreement, the public body must develop and follow procedures that are "consistent with" procurement through sealed bidding or competitive negotiation. Model procedures are expected to be developed no later than September 30, 2002.

Why should you care?
The delays, expense and uncertainty involved in traditional public capital financing – including the requirement of public referenda in most counties and some cities – are effectively eliminated, along with competitive bidding and similar public procurement requirements.

Private entities are able to identify and evaluate public needs and then, without any solicitation from public bodies at all, make proposals to the public bodies for projects.

PPEFIA provides wide flexibility to design financing packages that will make projects viable. Operators are given broad authority, with local assent, to collect rents, charge user fees or impose other service charges to create the revenue streams necessary to fund a qualifying project. In addition, public entities are authorized to make grants or loans, including funds received from other governmental entities. Funds utilized by state agencies must move through the appropriations process.