HJR 72: Joint Subcommittee Studying Public-Private
Partnerships Related to Seaports in Virginia
August 12, 2009
The Joint Subcommittee
Studying Public-Private Partnerships Related to Seaports in Virginia held
its fifth meeting at Old Dominion University.
Paul D. Fraim,
Mayor, Norfolk City
Mayor Fraim spoke on behalf of the City of Norfolk and the mayors of Newport
News and Portsmouth. Mayor Fraim first stated that if privatization occurs,
host cities should be treated fairly and equitably for costs they have
incurred. Moreover, Mayor Fraim expressed concerns about private port
operators being granted tax-exempt status because the status would prevent
host cities from collecting revenue from them.
The mayor argued
that cities do not necessarily benefit economically from having seaports
located within their jurisdictions. The mayor referenced data that host
cities lose more revenue because of unreimbursed municipal services given
to ports (e.g., extra police, road construction, etc.). Finally, the mayor
argued that the Public-Private Transportation Act was never designed to
address the privatization of the Commonwealth's seaports.
Colvin, Project Leader, Joint Legislative Audit and Review Commission
presentation centered on two issues: (i) the variation of legislative
oversight of public-private partnerships and (ii) lessons learned from
selected public-private partnerships. Mr. Colvin discussed the legislative
history of the Public-Private Transportation Act and the Public-Private
Education Facilities and Infrastructure Act. He then reviewed the Public-Private
Partnership Advisory Commission's mission, membership, and relationship
with the Joint Commission on Transportation Accountability. In addition,
Mr. Colvin commented that public-private partnerships sometimes require
a public role and support, including the need for public moneys to be
expended on partnership and the need by a public entity to have experienced
staff. Mr. Colvin listed several factors to consider in evaluating public-private
- The proposal may
identify a need, but the public entity may be able to provide services
without a partnership.
- Problems with
a proposal's feasibility may not come to light until completion of agreement.
- Budget flexibility
may be lost if long-term financial commitment is made to the private
Colvin noted that there is implicit tension between the executive branch
and the legislative branch over partnership projects because the executive
branch is authorized to solicit, negotiate, and implement proposals, but
there is no traditional role for the legislature in the approval process.
Mr. Colvin suggested that a role should exist for legislative financial
auditing and performance evaluation, including a defined role in a public-private
partnership agreement for legislative auditors (JLARC and APA) to evaluate
and audit the project periodically.
Homer, Virginia Secretary of Transportation
presentation centered on the Commonwealth's port and Public-Private Transportation
Act (PPTA) priorities, which present both an economic opportunity and
a transportation challenge. The three main priorities include:
- The promotion
and realization of benefits of continued economic growth.
- The provision
of surface transportation to serve the community and port.
- The addressing
of community impacts of the ports.
Next, Secretary Homer
discussed Virginia's public-private partnership transportation program.
Secretary Homer explained that the program has several components, including
special taxing districts and tolling revenues. Also, the program's goals
are shared goals with other components of the Commonwealth's transportation
program and include less cost, timeliness, accountability, and private
risk sharing. Second, Secretary Homer explained certain current requirements
of the PPTA, including the requirement of private sector commitments and
the rejection of unsolicited bids that do not include private risk. Third,
Secretary Homer discussed and gave examples of PPTA concession payments.
Some examples included supporting other transportation projects and increasing
access or mobility within the scope of the project. Fourth, the Secretary
gave an update on the status of several PPTA construction projects, including
four construction projects that have been cancelled or withdrawn since
2002, and three projects that are currently under negotiation.
Homer explained how the proposals to privatize Virginia's seaports are
and will be handled under the PPTA. He further emphasized that the independent
- Will be constituted
and serve as advisory body.
- Will hold public
meetings, receive formal public comments, discuss proposals, and make
a recommendation to the Virginia Port Authority (VPA) and the Secretary
of Transportation on whether to advance the PPTA process.
- May recommend
to advance all or none of the PPTA proposals to the detailed proposal
Homer stated that the Virginia Port Authority must take affirmative action
to request a detailed proposal, and execution of a comprehensive agreement
would require successful submission of a detailed proposal and subsequent
negotiation of a comprehensive agreement between the VPA and a private
V. Koch, President Emeritus and Board of Visitors Professor of Economics,
Old Dominion University
Dr. Koch began by stating that the privatization of port operation in
Virginia is a discussable idea. He stated that 35 ports in the United
States are privately operated with 56% of 20-foot equivalent units (TEU)
internationally handled in ports with private operators.
Dr. Koch listed the
following possible benefits of private operation:
- Reduction of costs.
- Increase in cargo
- Increase in business
- Stimulation of
- Attraction of
higher value cargoes.
- Additional investments
in equipment and infrastructure.
- Additional tax
Dr. Koch also spoke
on whether a private operation/partnership can:
- Lower costs.
- Increase speed/efficiency.
- Increase volume
- Stimulate Virginia
Attract higher value
cargoes and investments in port equipment and infrastructure.
Dr. Koch then discussed evaluating systemic and nonsystemic risk. Systemic
risk refers to economywide risk, as when the world economy suffers a decline
or the value of the U.S. dollar declines. Nonsystemic risk refers to the
risk associated with a specific firm or operator, e.g. if the firm or
operator goes broke or doesn’t meet performance standards. Dr. Koch
advised a rigorous assessment of the three proposals versus an unstated
fourth option - keeping the ports.
Jo Anne Maxwell,
Sr. Assistant Attorney General/Section Chief for Transportation
Maxwell answered questions posed by joint subcommittee members. First,
Ms. Maxwell informed the joint subcommittee that a responsible public
entity involved in a proposed PPTA project is responsible for paying for
legal counsel/attorney fees incurred in negotiating the partnership agreement.
Ms. Maxwell stated that while the Office of the Attorney General (OAG)
takes into account input made by the responsible public entity, the OAG
is responsible for appointing outside legal counsel to represent a responsible
public entity involved in a proposed PPTA project. Ms. Maxwell also advised
that, generally, the Virginia General Assembly has no role in a PPTA project;
however, when there is an outright sale of an asset, the responsible public
entity must notify the General Assembly.
Chairman Purkey stated
that the joint subcommittee will attempt to meet in September, October,
and November. The next meeting dates will be posted on the joint subcommittee’s
website and the General Assembly calendar as soon as information is available.
The Hon. Harry
Kevin Stokes, Caroline
Stalker , DLS Staff
of Legislative Services > Legislative
Record > 2009