PUBLIC-PRIVATE-PARTNERSHIP

The Public Private Partnership methodology is an innovative approach to finance, develop, and construct public projects for municipalities.

PPP METHODOLOGY:

A more innovative approach is to enter into a Public Private Partnership arrangement wherein a public project developer, who acts on behalf of and as an agent for the municipality, is designated by the municipality. The said developer employs a design-build approach with a guaranteed maximum price (GMP) for the total finance, development and construction cost of the project. Through this approach, the finance, design and construction of the project is streamlined, which results in a hedge against inflationary costs with no potential for change orders. Off balance sheet financing, via tax exempt bonds, which are not counted against the municipality’s bonding capacity, provide the financing. Funds for project construction costs can usually be available in 90 days.


The financing is a lease-purchase using Certificates of Participation (“COPs”). COPs are securities that look and “feel” similar to typical tax-exempt bonds in that they pay the holder principal and interest on the securities. The COPs represent fractionalized interests in the lease payments made by the municipality under the lease-purchase documents. The COPs are used to pay development costs in the same manner as bonds and notes are used to finance permanent improvement projects.


Lease-purchase financing typically provides for and allows the lease payments to be “subject to annual appropriation” by the municipality. The municipality thereby reserves the right to” walk away” from the transaction without penalty if it elects not to appropriate funds for the lease in subsequent years. The municipality receives a credit for each lease payment and at the end of the lease term; the municipality can acquire full ownership of the asset at no cost or for a nominal amount