This document from Ernst & Young provides an overview of public-private partnerships (P3s) and trends in the US P3 market. It notes that P3s can be an effective tool but are not suitable for all projects. The US P3 market is growing and includes availability payment models where payments are made based on meeting performance standards. While P3s transfer some risks to private partners, they require careful screening and structuring to ensure projects are viable and risks are appropriately allocated between public and private entities. Success requires credibility in both specific projects and the broader P3 program.

1. Ernst & Young
Infrastructure Advisors, LLC
P3 overview
March 2014

2. Page 2
Introduction
► Public Private Partnerships (P3s) are generating a lot of excitement,
but…
► No financing mechanism alone will make a bad project good
► No matter how a project is financed, “At some point, someone has to pay”
► A powerful tool in the toolkit, but not suitable for all projects
► More than just financing
► Interaction with technical, institutional, legal framework as to what can be financed,
the appropriate capital structure and on what terms

3. Page 3
Growing US market for P3 projects
► US examples include:
► Goethals Bridge
► Port of Miami Tunnel
► I-595 Express Lanes
► RTD Denver P3 Eagle
► Long Beach Courthouse
► I-4 Managed Lanes
► Numerous other toll projects and facilities
► Considerable interest for transit as well as social infrastructure
(courthouses, schools, etc.)
► Being applied to HOT Lanes and toll facilities with toll revenues
accruing to the public owner – e.g., I-595, Goethals, I-4
► Hundreds of closed examples internationally (Canada, UK, etc.)

4. Page 4
P3 – more than just financing
► Sometimes confused with tolling or “new/free” money
► Raising capital is not delivering a project and a traffic forecast is not
the same as cash …
► Lifecycle of facility extends through and beyond financing duration
► There can be significant sources of risk besides just demand
► How experienced is the owner in the delivery and O&M of a major project?
► Who bears the risks of construction overruns, delays, operational
underperformance, revenue shortfalls, higher than expected lifecycle costs, and/or
unexpected or more frequent major maintenance?
► Public trust is compromised if the performance and cost assumptions used to justify
spending and dedicated taxes or other commitments are not achieved.
► Whether or not a P3 is ultimately warranted, considering a full range of
delivery options fosters communication among disciplines and can
lead to better outcomes and understanding of risks.

5. Page 5
Delivery option examplesBudgetCertainty
DBB
Design-Bid-Build (Public Finance)
DB
Design-Build (Public Finance)
DBF
Design-Build-Finance
DBFM
Design-Build-Finance-Maintain
Availability Payments
DBFOM
Design-Build-Finance-Operate-Maintain
Availability payments
DBFOM
Design-Build-Finance-Operate-Maintain
Revenue risk transfer
DBOM
Design-Build-Operate-Maintain
Private sector risk
I-595, Port of Miami Tunnel, Goethals
Bridge, Ohio Portsmouth Bypass,
Nevada I-15
Texas IH-635,
Virginia I-95
HOT lanes
Texas SH-183, BART
OAC, Hudson-
Bergen LRT
GA Northwest Corridor ,
Cleveland Innerbelt Phase 2
Tappan Zee Bridge, I-75/Palmetto
Expressway, First Coast Outer Beltway, T-
REX

6. Page 6
Availability Payment P3s
► Alternative to toll revenue P3s
► Payments made to the Concessionaire are earned from public agency:
► Solely on the basis of meeting performance standards (regardless of traffic)
► Only after successful construction completion (mitigating cost and delay risk)
► In return for the opportunity to earn payments:
► Concessionaire designs, builds, finances, operates and maintains facility for
~20-40 years
► Equity investors and debt providers are at-risk if payments are not earned
► Often appropriate for a project if:
► It does not generate direct revenue or government wishes to retain control of
rates (e.g. Florida I-4, Goethals Bridge)
► Revenue/demand is difficult to predict or influence (Illiana Expressway)
► Service quality is more important or applicable goal than revenue maximization
► Performance / operational outcomes can be defined and monitored
► Opportunities exist for innovative design solutions and lifecycle risk management
► Strong public counterparty can credibly commit to make payments

7. Page 7
Project roles – conventional project delivery
Government Tax-exempt
Public debt
Operator or government
Contractor(s)
Design-Bid-Build
(DBB)
Designer
User fees

8. Page 8
Project roles – alternative project delivery
Lenders
OperatorDB contractor
Government
Equity investors
Public-private
Partnership
(DBFOM)
Government Tax-exempt
Public debt
Operator or governmentDB contractor
Design-Build(DB)
Concessionaire
User fees
User fees

9. Page 9
► P3 concessionaire can’t borrow 100% of an expected revenue stream
► Need a cushion or “coverage” – risk capital that absorbs financial
impact of poor performance
► The coverage revenue is equity’s return – or risk
Understanding equity
Simplified example: 1.2x debt service coverage
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Years
Equity Return
Debt Service
Net Revenues

10. Page 10
P3 - Trends and Best Practices

11. Page 11
Trends and emerging lessons from US P3s
► High valuations for ultra-long concessions sparked U.S. P3 market, but:
► Winners curse for investors in a bubble market (Chicago Skyway, ITR, SR-
125, etc.)
► Construction pricing and efficiency took a backseat to traffic optimism in bid
outcomes
► Marginal projects advanced as P3s
► Also triggered public backlash (“tolls are public funds too”)
► Recognition that reductions in concession lengths potentially benefit both parties
► Now tighter credit and low growth leave most toll projects needing
subsidies
► Also a changing universe of projects:
► Emphasis on state of good repair and managed toll facilities and
networks, transit and rail, latterly emerging social infra
► Deflation of housing bubble is changing demand patterns
► Benefits exist but need to be more carefully vetted and priced
► Equity can increase the amount of upfront funding available, particularly when
coupled with federal programs to equalize cost of capital (e.g. TIFIA loan, PABs)
► P3 can provide substantial management of risks (cost and revenue)

12. Page 12
Best practices – Screening for suitability
CRITERIA DETAIL CONSEQUENCE OF A “NO”
Will the total project
cost exceeds [$200M]?
Is the project of sufficient size to justify the
increased transaction costs and complexity that
public and private participants will incur?
If no, then unlikely candidate for P3
unless there is potential for bundling
with another project.
O&M Potential?
Is there a reasonable and material potential
scope for long-term O&M (10 years or more)?
Priority?
Is the project a priority relative to other potential
projects?
(i) Is the Public Agency already planning to
pay for the project and is it in the MYP?
(ii) Is the project a priority but no current
funding available?
If no to both questions, further
resources should not be invested to
study the project as P3 at this time
And/or can the project bring significant new
revenues and/or self-finance?
Schedule and
Environmental
Approvals?
Is the project within two (or possibly three)
years of receiving an ROD or other applicable
environmental clearance?
If no, the project may lack sufficient
definition for detailed screening.
Instead, project planning process
should include preliminary analyses
of project delivery options and
potential financial plan.

13. Page 13
Best practices – Detailed Delivery Analysis
► Comparing a P3 to next best alternative(s)
► Must take into account objectives and constraints of procuring agency and the
characteristics of the project itself
► Should result in a better understanding of project regardless of delivery
approach ultimately selected
► Considerations can include all-in cost, affordability, risk management
and relevant qualitative factors (NPV analysis is often imperfect)
► The decision to retain or transfer revenue risk is related but distinct from
the decision to use a form of P3
► Pre-procurement analysis inherently relies on assumptions
► Consider carefully any differentiated cost or revenue risk adjustment factors and
discount rates
► Emphasize sensitivity analysis
► Recognize that overly detailed analysis may not improve decision making,
especially when estimates are indicative
► Post-procurement outcomes can be studied for P3 & non-P3 projects

14. Page 14
Best practices – Structuring
► Defining the business model – how will the concessionaire earn
revenue and over what period?
► Is there a dedicated revenue stream?
► Drives financing options available to private partner
► Begin with the project’s specific characteristics and public goals
► Confirm feasibility
► Seek efficiencies – e.g. tunnel maintenance for Port of Miami
► Optimize risk allocation – including traffic risk e.g. Goethals Bridge
► Retain risks that cannot be efficiently transferred or priced by private partner –
e.g. permitting, government approvals, right of way acquisition
► Develop performance specifications, stated in output terms
► Be sure that the business model align interests: private partner should
maximize profit by meeting public goals

15. Page 15
Achieving success
Project Credibility
► Viable – defined, buildable and
feasible with environmental
approvals in place or pending
► Approval steps concentrated
before procurement rather than
after award
► Strong champion
► Multi-disciplinary project team
with policy level support for major
decisions
Program Credibility
► Effective legislation in place
► Project screening process
► Publicly defensible rationales for
alternative delivery
► Competitive and transparent
procurement processes
► Growing institutional knowledge
and capacity
► Reasonable, clear and
appropriate specifications

16. EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in
assurance, tax, transaction and advisory
services. The insights and quality services we
deliver help build trust and confidence in
the capital markets and in economies the
world over. We develop outstanding leaders
who team to deliver on our promises to all
of our stakeholders. In so doing, we play a
critical role in building a better working
world for our people, for our clients and
for our communities.
EY refers to the global organization, and
may refer to one or more, of the member
firms of Ernst & Young Global Limited, each
of which is a separate legal entity. Ernst &
Young Global Limited, a UK company limited
by guarantee, does not provide services to
clients. For more information about our
organization, please visit ey.com.
Ernst & Young LPP is an EY member firm
operating in the US. Ernst & Young
Infrastructure Advisory, LLC is an affiliate
thereof and a registered municipal advisor.
© 2014 Ernst & Young LLP.
All Rights Reserved.
1402-1208926_NY
ED None
This material has been prepared for general
informational purposes only and is not intended to
be relied upon as accounting, tax, or other
professional advice. Please refer to your advisors
for specific advice.
ey.com