With massive redevelopments of Denver International Airport, Union Station and Colorado’s busiest high-ways grabbing headlines in recent years, it might seem that public-private partnerships are a novelty in the state. But P3s in Colorado are both new and not, and the attorneys who work in these megaprojects have developed their own approaches to the evolving model.
NOT YOUR TYPICAL DESIGN-BUILD
It’s tricky to define exactly what a P3 project is. But generally, P3s are infrastructure developments that might be too huge — and perhaps too risky — for governments to finance and/or manage effectively on their own. Enter the private developers, who bring ideas as well as capital to the project and strike a deal with the public entity to design, build and manage some portion of the infrastructure for a share of the revenue. The government ideally sees a benefit by shifting some of the risks, like potential cost overruns and project delays, onto the private firms.
A P3 deal can also be summed up as a massive risk allocation agreement with a term of several decades to a century. The Union Station redevelopment completed in 2014, an iconic example of a Denver P3, is a 99-year lease between the Regional Transportation Department and a private joint venture. The revenue sharing can get creative depending on how much risk each side agrees to take on. In the Union Station deal, the private partners keep all of the annual gross retail revenue up to $12 million; RTD gets a 7.5 percent cut of anything earned in excess.
Colorado has long had private investment in many of its major public assets — just not to the degree of a P3 seen today.