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Lt. Gov. Brown leading state’s effort to make public-private partnerships common

ANNAPOLIS — As lawmakers prepare to consider tax hikes to pay for transportation projects, Maryland’s lieutenant governor is directing an effort to pump private dollars directly into state roads, bridges and rail lines and the port and airport.

Lt. Gov. Anthony G. Brown

The administration’s General Assembly agenda, heavy on bills and spending designed to spur construction hiring, includes legislation that would make public-private partnerships, or P3s, a common financing arrangement for state infrastructure.

“The recession and this slow recovery have made it more compelling that we look at this today as we look at … every tool in the toolbox,” Lt. Gov. Anthony G. Brown said. “It’s an alternative financing mechanism. This recession has caused us to look wider and broader at everything that’s available to us.”

Maryland’s needs are great.

The top unfunded transportation projects in each jurisdiction total some $12 billion, and the full list runs more than $50 billion.

Lt. Gov. Brown talks about public-private partnerships

The Blue Ribbon Commission on Maryland Transportation Funding recommended in the fall that the state find $800 million a year above what it already spends on capital projects, currently less than $2 billion per year.

Gov. Martin O’Malley said Monday the state’s “best option” is to apply the 6 percent sales tax to gasoline, a move that would bring in $613 million a year. At the current statewide average of $3.50, the tax would add 18 cents to a gallon when fully implemented. [The sales tax would be calculated based on retail prices, less federal and state gas taxes that add up to 41.9 cents per gallon.]

“There’s absolutely no money to build those [transportation] projects,” said Kathleen T. Snyder, president and CEO of the Maryland Chamber of Commerce. “Some of those projects are in engineering studies, but there is absolutely no money to build.”

Snyder said P3s are “not the answer to Maryland’s transportation funding issue. It’s a piece of the pie.”

Such partnerships have been commonplace in Europe.

From 2001 to 2006, P3s accounted for nearly a third of the investments in public infrastructure in the United Kingdom, and 22.8 percent of those in Portugal.

Partnerships have since become more popular in the United States.

Virginia has used the financing arrangements on toll roads — the Pocahontas Parkway near Richmond, the Dulles Greenway and, most recently, express lanes on the Capital Beltway.

Maryland settled on a P3 arrangement on Jan. 23 to redevelop the aging travel plazas on Interstate 95. Areas USA MDTP will spend $56 million to rebuild Maryland House and Chesapeake House, and the state expects to collect $400 million from the company over the 30-year lifespan of the deal.

The state entered its largest P3 in 2010, leasing the Seagirt Marine Terminal to Ports America Chesapeake for 50 years in a deal valued at up to $1.8 billion.

Brown said P3s could account for up to 6 percent of the state’s infrastructure spending.

Countless examples

“There are countless examples of projects that may very well lend themselves to P3s,” Brown said. “We’re talking about the Purple Line in the suburbs of Washington. Some of that could include P3. So could the Red Line in Baltimore City.”

The lieutenant governor said a second span over the Potomac River on Route 301 could also be done by P3, as could expansions at Baltimore-Washington International Thurgood Marshall Airport and the Port of Baltimore.

James J. White, executive director of the Maryland Port Administration, said the MPA is considering using a P3 to build a cruise terminal.

The governor’s legislation, filed Monday as SB 358, would refine the state’s traditional procurement process to allow for nontraditional financing arrangements such as P3s, Brown said.

An executive order requiring departments to focus on the partnerships as part of their construction programs would follow.

“I think that we could be out there actively by the fall,” Brown said. “When do you close the first deal? That will probably be early next year.”

Brown said he has fielded calls from investors eyeing infrastructure projects.

“There’s a real interest,” he said. “I’ve met with a number of private investors. I’ve been careful not to talk about specific projects. I think that’s getting ahead of ourselves.”

A U.S. Department of Transportation report in 2008 found that P3s “reduce costs, accelerate project delivery, provide high quality projects and transfer risks to the private sector.”

Bipartisan support

They have also gained support across the political spectrum.

P3s “have been successful in Virginia for quite some time,” said Sen. Richard F. Colburn, R-Eastern Shore. “We’re really behind the 8 ball.”

Colburn said he hopes the state can use a P3 arrangement to redevelop the Sailwinds Park property in Cambridge.

Bumble Bee Tuna offloaded fish at the former port facility in the ’60s and ’70s before shipping them inland.

The state hopes to develop a hotel, retail space and tourist attractions on the waterside spot.

“Probably the only route to take would be a P3 with this project,” said Colburn.

Del. Brian K. McHale, a Baltimore Democrat and longshoreman with Local 953, said the Seagirt P3 has not changed operations at the terminal, but has given Baltimore a competitive edge over other East Coast ports.

Indeed, Ports America Chesapeake is on pace to open a 50-foot berth in the coming months and install four new, plus-sized cargo container cranes there in the summer.

The $105 million project will finish two years ahead of schedule. It is due in summer 2014, when the expanded Panama Canal will open, allowing larger ships from Asia to reach East Coast ports with deeper berths, like the one at Seagirt.

Ports America helped land a deal with Hapag-Lloyd, the fifth-largest container shipping company in the world, that will move 30,000 containers a year through Baltimore.

“They [Ports America] have some relationships that are better than ours,” said White, the port’s executive director. “We have some relationships with container carriers that are better than theirs. Combined, we both stand to benefit.”

As part of the P3, Ports America paid the Maryland Transportation Authority $140 million, which the agency used for other transportation projects. Ports America will also pay the MPA every year for its use of Seagirt.

$3.4M per year in rent

Those rent payments will be $3.4 million every year until 2015, when they will be adjusted for inflation.

The port will also get $15 per container shipped through the terminal beyond 500,000. Seagirt handles about 400,000 containers per year now.

But the big boon is the new berth.

A low bridge will keep the largest ships out of New York. The water in Philadelphia isn’t deep enough. Hampton Roads, Va., doesn’t reach a population base that can compare to the 14 million people Baltimore can reach.

And until Ports America came along, Maryland just didn’t have the money to bring in the hulking cargo ships three times the size of those that now call at the port.

“That berth is costing them $105 million,” said White. “I would never get $105 million to build the berth and put four container cranes there with all the demands the Transportation Trust Fund has on it. We didn’t have one nickel in there, in the six-year capital program to improve Seagirt. System preservation, that’s all we had money for.”