Model Public-Private Partnership Core Toll Concession Contract Guide Model Public-Private Partnerships Core Toll Concessions Contract Guide September 2014 1 Model Public-Private Partnership Core Toll Concession Contract Guide Table of Contents 1 Introduction ............................................................................................................................................................ 4 1.1 Public-Private Partnerships ................................................................................................................... 4 1.2 Contractual Terms of P3s ...................................................................................................................... 4 1.3 P3s, the Federal Highway Administration, and the Moving Ahead for Progress in the 21st Century Act ............................................................................................................................................. 5 1.4 Background ............................................................................................................................................ 5 1.5 Objectives/Purpose ............................................................................................................................... 5 1.6 Description of Chapter Topics ............................................................................................................... 6 1.7 Suggested Utilization of the Toll Concession Contracts Chapters ...................................................... 7 1.8 Conclusion .............................................................................................................................................. 8 2 Tolling Regulation .................................................................................................................................................. 9 2.1 Introduction ............................................................................................................................................ 9 2.2 Right to Collect Tolls .............................................................................................................................. 9 2.3 User Classification ............................................................................................................................... 10 2.4 Toll Rates .............................................................................................................................................. 12 2.5 Toll Collection ....................................................................................................................................... 13 2.6 Use of Toll Revenues ........................................................................................................................... 15 2.7 Other Matters Related to Toll Regulation ........................................................................................... 16 3 Benefit-Sharing .................................................................................................................................................... 20 3.1 Introduction .......................................................................................................................................... 20 3.2 Revenue-Sharing Triggers ................................................................................................................... 20 3.3 Revenue-Sharing Mechanics ............................................................................................................... 23 4 Supervening Events ............................................................................................................................................. 26 4.1 Introduction .......................................................................................................................................... 26 4.2 The Role of Insurance to Mitigate Against Risk ................................................................................. 26 4.3 Categorization of Supervening Events ................................................................................................ 27 4.4 Types of Contractual Relief Generally Granted .................................................................................. 32 5 Changes in Equity Interests ................................................................................................................................ 37 5.1 Introduction .......................................................................................................................................... 37 5.2 When Does a Change in Ownership Occur? ....................................................................................... 37 5.3 Common Equity Investor Concerns ..................................................................................................... 38 5.4 Permitted and Prohibited Changes in Ownership .............................................................................. 38 5.5 Example Provisions .............................................................................................................................. 39 6 Change in Law ...................................................................................................................................................... 41 6.1 Understanding the Concerns of All Parties ......................................................................................... 41 6.2 Unforeseeable Changes in Law – Relevant Considerations.............................................................. 41 6.3 Trends in the United States P3 Market .............................................................................................. 42 6.4 Compensation, Relief from Delay, and Mitigation ............................................................................. 42 6.5 Discriminatory Changes in Law ........................................................................................................... 43 6.6 Tax-Related Issues ............................................................................................................................... 43 6.7 Example Provisions .............................................................................................................................. 43 2 Model Public-Private Partnership Core Toll Concession Contract Guide 7 Defaults, Early Termination, and Compensation ............................................................................................. 45 7.1 Introduction .......................................................................................................................................... 45 7.2 Termination for Department Default .................................................................................................. 45 7.3 Termination for Developer Default ..................................................................................................... 50 7.4 Termination for Extended Force Majeure Events ............................................................................... 55 7.5 Termination for Convenience by Department .................................................................................... 56 7.6 Other Issues Related to Calculation of Compensation for Early Termination .................................. 57 8 Handback .............................................................................................................................................................. 61 8.1 Introduction .......................................................................................................................................... 61 8.2 Handback Requirements ..................................................................................................................... 61 8.3 Handback Inspections ......................................................................................................................... 64 8.4 Handback Reserve Accounts and Letters of Credit ........................................................................... 64 8.5 Payments in Lieu of Meeting Handback Requirements .................................................................... 67 3 Model Public-Private Partnership Core Toll Concession Contract Guide 1 Introduction This guide presents key concepts for the structuring and development of legal contracts for highway transportation Public-Private Partnerships (P3) in the United States. It is part of the broader effort by the Federal Highway Administration (FHWA) to promote understanding of P3 transactions, which will include a document similar to this guide on availability payment contracts used in P3 transactions. This guide is designed to provide industry-standard concepts, relevant common tools and mechanisms, and situational examples applicable to P3 transactions. A glossary of terms is included as Appendix A to assist in understanding the terminology used in this guide. 1.1 Public-Private Partnerships A P3 describes a contractual arrangement between a Department (public authority) and a Developer (private entity) in connection with the design, construction, financing, operation and maintenance of an asset that will be used by or is otherwise valuable to the public. Unlike conventional methods of contracting for new construction (e.g., design-build), in which discrete functions are divided and procured through separate solicitations, P3 transactions contemplate a single private entity (generally a consortium of private