Florida bills expand P3 authority

Florida would expand its already broad public-private partnership powers under a pair of bills, one that GOP Gov. Ron DeSantis has already signed and another that would allow for revenue-risk projects of up to 75 years.

All of Florida’s P3s are currently based on the availability-payment model.

The General Assembly has passed the revenue-risk bill, House Bill 287, and is awaiting DeSantis’ action. The bill, which features several non-P3 related provisions — including one that limits the amount of money the transportation department can spend on transit projects — would allow for “a comprehensive agreement with a term of more than 50 and no more than 75 years” for “projects that are partially or completely funded from project user fees.”
That would for the first time allow revenue-risk greenfield and brownfield projects, according to Reason’s transportation policy director Robert Poole in the May 7 Surface Transportation News.

House Bill 781, which the governor signed in April, becomes law in July and will mean that private entities pitching Florida local governments on unsolicited bids would face less competition and a smoother approval process.

Despite the pro-P3 legislation from state lawmakers and DeSantis, at least one agency, the Florida Division of Bond Finance, appears to be more cautious on the financing tool.

“You’re taking a triple-A rated state and turning it into a BB-rated credit,” said Charlie Yadon, senior associate at the Florida Division of Bond Finance, which issues debt on behalf of state agencies and local governments. Yadon made the comments Monday at The Bond Buyer’s southeast conference.

“One of the questions is how much risk is actually being transferred,” Yadon said, noting that state payments are treated as debt and if the private entity “messes up,” the state can be “backed into a corner and you kind of have to pay for it.”

The agency has even started to “struggle with the terms of a P3,” Yadon said. When the state has refinanced debt associated with a P3, the developer has asked for half of the savings from the refunding, he said. “That’s a nonstarter for us. Why are you benefiting from our balance sheet?”

When it comes down to it, the state can often do it cheaper, Yadon said. “We think it doesn’t make sense,” he said. “We’re very focused on traditional municipal bonds.”

Yadon added that Florida “has not done a P3 in awhile” and that he didn’t know of any in the pipeline.

Miami CFO Larry Spring, who was also a panelist, admitted that politically “it can look bad” if the private entity is seen to be making a lot of money “on the backs of the public.”

But a government needs to examine the “true public benefit” of the deal, Spring said. Miami has recently inked a $2 billion deal with Hyatt for a 99-year lease on city land. “They’re going to put $2 billion in the space, should I care how much they make? As long as I get my convention center and affordable housing.”

Spring also said the city, which is nearing its debt limit, needs to replace its fire and police stations. “They sit on prime real estate in downtown Miami,” he said. “So instead of the traditional market, let’s work out a deal; that will be done as a P3,” he said.