Law360 - April 10, 2015
Jason Tomasulo was interviewed for the Law360 article "Pa. Ripe For P3s In Wake Of $1.1B Bridge Deal" on April 10, 2015.
By: Dan Packel
Law360, Philadelphia (April 10, 2015, 6:12 PM ET) -- With financing now complete for a $1.1 billion project to replace nearly 600 structurally deficient bridges in Pennsylvania, experts say that the successful start to the commonwealth's first public-private partnership will enable future infrastructure revitalization projects in the Keystone State and could serve as a model for other states to follow.
Figures on the inside of the Rapid Bridge Replacement Project and observers both agreed that the smoothness of the procurement phase — which led to a winning bid by consortium Plenary Walsh Keystone Partners LLC — and the subsequent financing showcased the virtues of the state's enabling legislation for P3s.
The state's P3 law, Act 88, which was signed by former Gov. Tom Corbett in 2012, works to balance the involvement of the state Legislature in individual projects, by allowing it to review whether a P3 makes sense, before the actual procurement process begins.
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The bridge project itself shifts the majority of design, construction, financing and maintenance risks over the deal's 28-year term to Plenary Walsh, which is expected to spend an average of $1.6 million on each bridge. PennDOT has said that these costs would reach $2 million under a standard contracting process.
"It's also much quicker than if you bid these out one by one," (Brian) Walsh said.
The commonwealth raised $800 million in private activity bonds to finance the work. It will also put in $225 million during construction as Plenary Walsh meets specified milestones. Plenary Walsh is contributing $60 million of its own money as equity.
"One of the big benefits from PennDOT's perspective is that it's not going to cripple their budget for the next 20 to 30 years. It will still have plenty of money to do other projects," said Jason Tomasulo, senior counsel at Philadelphia-based construction firm Cohen Seglias Pallas Greenhall & Furman PC. "On the private side, it's also a great opportunity."
Observers and participants noted that the Pennsylvania project was an unusual P3, in that most projects advanced under the mechanism have been large efforts at building a single bridge, tunnel or highway. While Plenary Walsh can realize economies of scale in designing and building a number of the bridges to the same specifications, they do bear a certain amount of risk.
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