Kentucky Amends Public-Private Partnership Laws to Reduce Red Tape
Stites & Harbison Client Alert, April 20, 2018
In 2016, Kentucky enacted legislation that opened the door for innovative market-driven solutions for infrastructure projects through the use of public-private partnerships (“P3”). P3 allows for a contractual agreement between a public owner and a private entity in which the private entity assumes financial, technical, and/or operational risk for the project. P3s allow public and private entities to share their resources and expertise in delivering facilities to the public. More importantly, they allow private entities to provide needed infrastructure improvements that might otherwise be impossible due to the lack of traditional public funding sources.
KRS 45A.077, as originally enacted, contained what many viewed as burdensome oversight provisions that stifled the development of P3 projects. On April 2, 2018, Governor Bevin signed Senate Bill 203, which temporarily eliminates some of these bureaucratic speed bumps. KRS 45A.077 is being amended to suspend the requirement for General Assembly approval for P3 capital projects with an aggregate value of $25,000,000 or more that are publicized, either through public agency solicitation or public notice, prior to July 1, 2020. The amendments also remove the requirement for P3 contract approval by the Government Contract Review Committee.
Many viewed these requirements as an impediment to P3 projects. Private companies make significant upfront investments to pursue P3 projects. The requirement for General Assembly approval of major projects delays the P3 approval process and presents a risk that a P3 project will not go forward even after a public agency has negotiated a final contract with the proposer. This reduces the likelihood that private companies will pursue P3 projects. The temporary suspension of these requirements will hopefully entice more private sector investment in Kentucky’s public infrastructure.
The amendments to KRS 45A.077 do not impact the laws applicable to Kentucky P3 transportation projects. Transportation projects are governed by KRS 175B.0005, et seq., which among other things, requires General Assembly ratification for all P3 agreements.