As of February 10, 2019, municipalities are permitted to enter into public-private partnership (P3) agreements with a private entity to assume full financial and administrative responsibility for a project of or for the benefit of the local unit. P.L. 2018, c. 90 permits public-private partnership agreements with municipalities, counties, school districts, county colleges, state colleges, New Jersey Institute of Technology, and the State for roads, infrastructure and buildings. The law outlines a public process for P3 agreements and requires State review and approval process.

A P3 is a contractual agreement between a public agency and a private entity that allows for greater private sector participation in the delivery and financing of a project. P3’s are not privatization, as the public agency retains ownership of the assets.

The new law permits a P3 agreement for development, construction, reconstruction, repair, alteration, improvement, extension, operation, and maintenance of any building, local or county road, vertical structure, or facility constructed or acquired by a local government unit and to operate local government functions, including any infrastructure or facility used or to be used by the public or in support of a public purpose or activity.  The law also allows for a P3 agreement for a lease of a revenue-producing public building, road, structure, infrastructure, or facility in exchange for up-front or structured financing by the private entity for the project.

Any public-private partnership project, while not subject to the Local Public Contracts Law, will be subject to the Local Bond Law and will require a Project Labor Agreement and be subject to prevailing wages.

The law outlines two distinct methods in which a public agency may consider a P3 contract.  Either the municipality solicits proposals or qualifications from at least two private entities or receives an unsolicited proposal. For solicitation of proposals, the municipality must advertise at least 45 days on their website and at least one or more newspapers with statewide circulation.  The request for proposals must include relevant technical submissions, documents, and evaluation criteria. The State Treasurer, through rulemaking, will establish the minimum standards of the evaluation criteria.

For unsolicited proposals, if the municipality determines that the proposals meet the standards required by law, they must publish a notice of the receipt of the proposal on their website and in at least one or more newspapers with statewide circulation as well a notice at their next scheduled public meeting and to the State Treasurer. To qualify the unsolicited proposal must at a minimum include a description of the project, the estimated construction and life-cycle costs, a timeline for development, proposed plan of financing, including projected revenues, public or private debt, equity investment, description of how the project meets needs identified in existing plans, the permits and approvals needed to develop the project from local, state and federal agencies and a projected schedule for obtaining such permits and approvals, a statement of risks, liabilities and responsibilities to be assumed by the private entity.

Prior to submitting any proposal to the State Treasurer for review and approval, all projects must have a public hearing. The public hearing notice must prominently state the purpose and nature of the proposed project.  The notice must be no less than 14 days prior to the public hearing and be published on the municipal website and at least once in one or more newspapers with statewide circulation. At the public hearing the municipality must find that the project is in the best interest of the public by finding (i) it will cost less than the public sector option, or if it costs more there are factors that warrant the additional expense; (ii) there is a public need for the project and the project is consistent with existing long-term plans; (iii) there are specific significant benefits to the project; (iv) there are specific significant benefits to using the public-private partnership instead of other options including No-Build; (v) the private development will result in timely and efficient development and operation; and (vi) the risks, liabilities and responsibilities transferred to the private entity provide sufficient benefits to warrant not using other means of procurement.

After the proposal or proposals have been received, and any public notification period has expired, the public agency must rank the proposals in order of preference. In ranking the proposals, the public agency must rely upon, at the minimum, the evaluation criteria established by the State Treasurer.  In addition, the public agency may consider factors that include, but may not be limited to, professional qualifications, general business terms, innovative engineering, architectural services, or cost-reduction terms, finance plans, and the need for local government funds to deliver the project and discharge the agreement.

Please note that the public agency may require, upon receipt of one or more proposals, that the private entity assumes responsibility for all costs incurred by the local government unit before execution of the public-private partnership agreement, including costs of retaining independent experts to review, analyze, and advise the local government unit with respect to the proposal.

The League supported this new law as it provides a unique option for municipalities looking to develop, construct, repair, alter, improve, or maintain any public building, road or another municipal facility while providing appropriate oversight.

For more information please see recent NJ Municipalities magazine articles providing greater details on P3 generally (February) and Municipalities and P3 (March).

Contact: Lori Buckelew, Senior Legislative Analyst, , 609-695-3481, x112.