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The Performance Based Building Coalition 605 Third Avenue, 31st Floor New York, NY 10158 212-973-3089 July

10, 2013 Hon. Chairman David Camp Chairman House Committee on Ways and Means 1100 Longworth House Office Buildings Washington, D.C. 20515

Dear Chairman Camp, We are writing to highlight the significant opportunity at hand in the upcoming tax reform process to open the doors for private investment in the construction, renovation, and replacement of our nations government owned buildings. Such buildings which include schools, public hospitals, justice facilities, universities, police and fire stations are in a historic state of disrepair. State and local communities struggle to address mounting infrastructure needs: More than 14 million children attend deteriorating public schools that are in need of maintenance and repair projects worth $270 - $500 billion. 1 Since the start of the recession, 67 percent of hospitals have put on hold desperately needed capital projects.2 42 states have significant shortfalls in infrastructure funding for courthouses, which have resulted in facilities that often do not comply with current codes, disability requirements, and often have inadequate security.3 The Federal Bureau of Prisons 2020 long-range capacity plan projects system-wide crowding to exceed capacity by 45 percent through 2018. 4

We have come together through the Performance Based Building Coalition (see enclosed list that includes more than 50 infrastructure funds, contractors, engineering/architecture firms, and other associations) to urge Congress to take action to catalyze the use of public-private partnerships (PPP) for public buildings.
1

News Release, Crumbling schools dont provide strong foundations for Americas students, National Education Association (December 9, 2011). 2 American Hospital Association analysis of Telling the Hospital Story survey data from 572 non-federal, shortterm acute care hospitals collected in March and April 2010. 3 Wm. T. (Bill) Robinson III, Future Trends in State Courts, National Center for State Courts (2012). 4 Federal Bureau of Prisons, http://www.gao.gov/products/GAO-12-743.

As you know, PPPs have often been referred to as a jobs catalyst and a budget multiplier for their ability to stretch tax dollars, deliver infrastructure projects much faster and more efficiently than through other procurement methods. The sooner projects are delivered, the sooner jobs are realized. George Mason University economist Stephen Fuller has determined that every $1 billion in nonresidential construction spending creates or sustains 28,500 jobs. The existence of tax-exempt financing has long crowded out opportunities in the U.S. for PPPs. For instance, prior to the creation of transportation exempt facility bonds, public owners considering a PPP resisted undertaking this new approach because the financing would be 100 percent private, whereas a traditional method of delivery could utilize 100 percent tax-exempt financing, which provides a lower cost of money. Despite the value for money advantages of a PPP (cost and schedule certainty, along with long-term risk transfer and life cycle cost benefits), most public officials chose a traditionally tax-exempt financed approach for fear of press backlash due to lack of understanding that a project can have higher financing costs while still deliver much greater value and savings over the long-term. By authorizing qualified private activity bonds for transportation projects through the Safe, Accountable, Efficient Transportation Equity Act: A Legacy for Users (SAFTEA-LU) legislation in 2005, Congress negated the cost of capital issue and aligned the incentives of states to undertake an innovative PPP approach for all public transportation projects. This new category of transportation exempt facility bonds has allowed public transportation projects to combine tax exempt financing with private financing, thereby lowering the overall cost of financing for PPP projects. For the federal government, this new category of transportation exempt facility bonds is appealing because it has reduced the amount of tax exempt financing used by stimulating private investment in projects. Since 2001, tax-exempt facility bonds have facilitated more than $10 billion in innovative transportation PPP projects in the country.5

Given the success of PPPs in the U.S. transportation sector and in delivering public buildings globally, PPPs should be considered as a new way to improve our schools, justice facilities, hospitals, labs, and government offices. The utilization of PPPs for public buildings has been limited because unlike the transportation, solid waste, or water sectors, public buildings are not eligible for tax-exempt facility bonds. This inhibits public building PPPs from combining tax exempt financing with private financing, resulting in an increased cost of financing. As a result, state and local governments are apprehensive to use a PPP approach for public building infrastructure despite the significant value for money, accelerated delivery, and risk transfer benefits of a PPP. The Ways and Means Committee, as part of its tax reform legislation, should open the U.S. market to public building PPPs by creating a new category of exempt facility bonds that allows private investment to be combined with tax-exempt financing to design, build, finance, and maintain our public buildings.

Public Works Financing

Enclosed is the whitepaper that the Performance Based Building Coalition submitted in April to the Ways and Means Committees tax reform working groups. The Performance Based Building Coalition would appreciate the opportunity to meet with you to discuss how the tax reform process can be utilized as a unique chance to spur the development of PPPs for public buildings.

Sincerely,

Samara Barend Founder, Performance Based Building Coalition Vice President, Public-Private Partnership Director, AECOM Capital

Luis Fortuo, Former Governor of Puerto Rico

Steven Goldsmith, Former Mayor of Indianapolis and Deputy Mayor of New York City

Russ Alcorn, Senior Vice President - National Director Federal Center of Excellence, Skanska USA Building

Dale Bonner, Chairman, U.S. Operations, Plenary Group

Ryan Brady, Director, PPP Operations North America, Faithful + Gould

Ben Brubeck, Director of Labor and Federal Procurement, Federal Affairs, Associated Builders and Contractors, Inc.

Ed Cettina, COO-Americas for AECOM Construction Services, Tishman

Joseph Charczenko, Partner, Construction Risk Partners

Greg Ciambrone, Vice President, The Walsh Group

Sinclair Cooper, Executive Vice President, HUNT

B. Scott Douglass, Partner, Farella Braun + Martel LLP

Ron Duce, Business Development Director, Kiewit Building Group, Inc.

John Fleming, Vice President & General Manager, Performance Based Infrastructure (P3), Johnson Controls Inc.

Patrick Flinn, Managing Director, Jones Lang LaSalle Americas, Inc.

Jenny Freeman, Vice President, Project Executive and Director of Healthcare, Hunter Roberts Construction Group

Bill Gilbane III, Senior Vice President, Gilbane Inc.

Patrick Harder, Partner, Nossaman, LLP

Louis Jenny, Vice President, Advocacy and Outreach, Design Build Institute of America

Michael W. Laipple, President, LPCiminelli Solutions

Jamie Manson, Managing Partner, Brookfield

Dolly Mirchandani, Partner, Allen & Overy

Mark Morehouse, Managing Director, William Blair & Company

David Narefsky, Partner, Mayer Brown

Sallye Perrin, Senior Vice President, Strategic Pursuit Manager for P3s in the U.S. and Canada, Parsons Brinckerhoff

Eric Petersen, Partner, Hawkins Delafield & Wood LLP

Mike Pikiel, Partner, Norton Rose Fulbright

Anne Rabin, Senior Vice President, HOCHTIEF PPP Solutions North America Inc.

Frank Rapoport, Senior Partner, Chair of the Global Infrastructure and PPPs, Peckar & Abramson, P.C.

Douglas Read, Director for Government Affairs, ASHRAE

Karl Reichelt, Executive Vice President, Skanska ID

Robert Ridgway, Director of Business Development - Gulf Coast/Jackson Divisions, Yates Construction

Kevin Sharkey, Vice President, Turner

Jeffrey D. Shoaf, Senior Executive Director, Government Affairs, Associated General Contractors of America

Roger Slavin, Senior Vice President, Business Development, exp Federal

Greg Smith, President and CEO, Instar Infrastructure

Aaron Toppston, Director, AON Infrastructure Solutions

Andy Wasiniak, Asst. Vice President, New Business Development, Walbridge