New Law Allows Creative Public-Private Partnerships at Municipal Level – A Potential Option to Help Pay for Public Projects
Foster Swift Municipal Law News
All municipalities know too well the challenges to pay for transportation and public infrastructure costs. This has forced creativity in finding or stretching funding to make improvements. Municipalities should note a new law just passed that might provide for a workable, creative option to help get funding for public projects – involving the use of public-private partnerships.
A public-private partnership involves public and private entities partnering to achieve a greater level of private sector involvement in public works projects, such as road construction. Before this new law, some municipalities have pursued a type of public-private partnerships (contract special assessments, installment purchase agreements, etc.) as an alternative method to help pay for transportation and other public infrastructure projects. But the new law gives express authority to municipalities to pursue specific types of public-private partnerships.
The new law is called the Private Investment Infrastructure Funding Act (the "Act"), MCL 125.1871 et seq. It permits more private sector involvement in public projects, helping municipalities find funding sources for those projects. Briefly, here are some of the highlights of the Act:
- The Act promotes public-private partnerships at the local level. Generally speaking, the Act lets municipalities enter into collaborative relationships (called "negotiating partnerships") to develop "public facilities," and solicit a private sector entity to fund that project through a bid process.
- The Act broadly defines "public facilities" to include roads, road improvements and beautification, parking facilities, parks, bridges, ponds, canals, utility lines and pipes, wastewater facilities, recreational facilities, and light and commuter rail projects.
- The Act allows the "public facility" to be financed through multiple arrangements, including (i) proceeds from a special assessment district, or (ii) soliciting private sector funding sources through a bid process.
- If private sector investors are tapped for financing, the Act sets out a repayment scheme that, generally speaking, lets the private investors recover funds loaned with a return on investment via tax increment revenues pledged by the collaborating municipalities.
If you have any questions regarding the Act or how it may help municipalities pay for public projects, please contact any member of Foster Swift’s Municipal Team.