We have been keeping you up to date on the effects of COVID-19 on local government contracting. Now, the federal government has taken a huge step forward. On March 27, President Trump signed the Coronavirus Aid, Relief and Economic Security Act, providing billions in funds for private individuals, businesses, and government contracts. With respect to government contracts, the CARES Act provides $3.8 million for a defense health program, $1 billion for defense purchases pursuant to the Defense Production Act of 1950 over the next two years, and funds to improve information technology services at numerous federal government departments. These funds will provide a host of opportunities for existing and prospective government contractors.
As we explained in our previous installment of this series, the impact of Covid-19 continues to create an acute strain on all areas of society. The declaration of a state of emergency by the governor and all of the resulting governmental orders demonstrate that this is a time in which emergency contracting regulations can be used. Since time is a limiting factor, it is crucial to employ the State regulations that allow for streamlined emergency procurement.
The coronavirus pandemic is taxing government services and infrastructure in numerous ways, and many of the resulting shortages are well-publicized in the media. Some of those needs are intuitive—increased hospital capacity, medical supplies, and hand sanitizer, for example. Others are more hidden, but just as critical—such as the need for additional, specialized janitorial services to clean public buses and buildings, or emergency repairs to sewer infrastructure related to the stresses caused by greater water use and the flushing of bleach and other chemicals down the drain. In the normal course, the government would conduct a competitive bidding process, often followed by a legislative-approval process, prior to entering into a contract for goods, services, or the design and construction of public facilities. The public-procurement process is often a lengthy one, and during a true public emergency such as the COVID-19 pandemic, time is the public’s most limited resource. Fortunately, most procurement regulations include exceptions to the competitive process for public emergencies, thereby permitting public agencies to enter into contracts with the private sector for the goods, services, and facilities it urgently requires, without the need to go through a lengthy procurement process. This will be the first of several blog posts dedicated to this topic, with a focus on the emergency-procurement procedures available to Miami-Dade County. For up-to-date information on Miami-Dade County’s response to coronavirus, including the Mayor’s declaration of a state of emergency, please refer to the County’s response website.
Effective as of January 1, 2020, the Florida state sales tax rate applicable to the lease of commercial real property has decreased from 5.7% to 5.5%. Therefore, the state will levy a 5.5% sales tax on all rent collected from commercial properties in Florida.
This new state sales tax rate, however, does not impact county surtax rates. Because individual counties may impose a discretionary sales surtax, the surtax rate of the county where the rental property is located must be factored in when calculating the total sales tax rate. For example, in Miami-Dade County the surtax rate is 1%. Therefore, the combined sales tax rate on rent collected from commercial properties in Miami-Dade County is 6.5% (5.5% state sales tax + 1% Miami-Dade County surtax).
- For the Florida statute on the state sales tax rate applicable to the lease of commercial real property, please see Florida Statute Section 212.031.
- For a list of county surtax rates in Florida for Calendar Year 2020, please see the Discretionary Sales Surtax Information (Form DR-15DSS).
- For an overview of Florida Sales Tax and County Discretionary Sales Surtax, please see the Florida Department of Revenue webpage.
In recent years, online platforms like Airbnb and HomeAway have made it easier for property owners to enter into the short-term rental market, which allows property owners to generate supplemental income and defray the cost of maintaining their real estate. The emergence of this “industry,” however, has faced resistance from neighboring property owners and local governments over concerns that transient occupancy negatively impacts property values, as well as general concerns for the health, safety, and welfare of the community.
In response to these concerns, the City of Miami Beach (in the exercise of its police power) enacted two ordinances that, “for all practical purposes, banned short-term rentals on Miami Beach” for single-family homes. Both ordinances prohibited the rental of properties for terms of six (6) months or less, with limited exceptions not pertinent to the issues at hand. As a penalty, if a property owner rented for a period of less than six (6) months and one (1) day in violation of the ordinances, then that property owner would be subject to escalating fines of $20,000.00 for the first offense, $40,000.00 for the second, $60,000.00 for the third, $80,000.00 for the fourth, and $100,000.00 for all offenses thereafter.
The clear evolution of infill real estate redevelopment in South Florida and Greater Miami is towards a true mixed-use environment that makes areas desirable places to work, live, and play. Coral Gables, with its vibrant commercial areas, is an example of a municipality within Greater Miami-Dade County that is leading this charge through a specific mixed-use zoning code overlay to promote these “placemaking” pedestrian friendly projects. More and more, significant knowledge of these mixed-use standards is critical to the success of any Coral Gables real estate development project.
Coral Gables’ own objectives and policies of the Coral Gables Comprehensive Plan, recognize the importance of mixed-use development. For example, Objective FLU-1.1., states that a goal of the plan is to preserve Coral Gables as a “placemaker” where the balance of existing and future uses is maintained to achieve a high quality living environment. Policy FLU-1.9.1, encourages balanced mixed-use development in the central business district and adjoining commercial areas to promote pedestrian activity and provide for specific commitments to design excellence and long-term economic and cultural vitality. Additionally, Policy HOU-1.5.2 sets out the specific City goal to “encourage residential mixed use as a means of increasing housing supply within the Downtown/Central Business District/Mixed Use Development Overlay Area, thereby promoting increase in commercial and retail activity, increased use of transit, reduction of auto dependency, in association with minimizing visual and physical impacts of nearby lower density areas.”
We posted our first installment of the National P3 Update, focusing on higher education and social infrastructure P3s in May. Here is the latest on those projects, and new P3s that have emerged since then.
State of Hawaii Entertainment District: The State of Hawaii has announced that it will be issuing an RFQ at the end of the year for a P3 that will redevelop Aloha Stadium and build an entertainment district around it.
Prince George County Public Schools: Prince George County shortlisted four proponents after issuing an RFQ for the design, build, finance, and maintenance for six new public schools in the County. The shortlisted proponents were Engie/ Meridiam/Hensel Phelps, Edgmoor/Clark/Star America/Johnson Controls, Fengate/Stantec/Gilbane/ABM Facilities, and Preston Hollow Capital. The RFP will be issued in October.
Blaisdell Center P3: The City of Honolulu received 13 responses to its Request Expressions of Interest for the redevelopment of its civic center. The project would include a concert hall, arena, and exhibition hall. The city has issued an RFQ and responses to the RFQ are due at the end of October.
Miami-Dade County Courthouse P3: Miami-Dade County selected its preferred proposer for its Civil and Probate Courthouse P3—the team led by Plenary. The County expects to get County Commission approval of the project agreement in November.
City of Los Angeles Civic Center P3: The City of Los Angeles shortlisted proponents that responded to its RFQ in August: DTLA Civic Partners, Plenary Collaborative Los Angeles, and LAC Partners. The project is a design, build, finance, operate, and maintain that will include a government office facility, childcare center, and conference center. The city expects to issue a RFP at the end of 2019, with responses due in the beginning of 2020 and award and execution of a project agreement at the end of 2020.
Alabama Department of Corrections P3: The Alabama Department of Corrections is analyzing five responses to its Request for Qualifications for the construction of three new prison facilities. The respondents were tasked with identifying the scope of the agreement. A RFQ was issued and five teams responded in August: The Geo Group, Corvias, Corrections Consultants, Core Civic, and Alabama Prison Transformation Partners.
Dartmouth Heating P3: Dartmouth College shortlisted four teams for its Heating Plant and Distribution System project in July:.ENGIE (Meridiam), Enwave District Energy (Kiewit/Enwave), John Laing (Laing/Acciona), and Blackstone Group The project is to design, build, finance, operate and maintain a thermal generation facility that will be powered by a renewable fuel source, as well as a new hot water distribution system.
California State University, Fresno Central Heating and Cooling Plant Modernization P3: Fresno State shortlisted four respondents for its Central Heating and Cooling Plant Modernization P3 in April 2019. The shortlisted teams include Bulldog Energy Alliance, Bulldog Infrastructure Group, Plenary Utilities Fresno, and Victor E. Energy Partners. The project is for the design, build, finance, and maintenance of a central utility plant, ancillary infrastructure, and implementation of energy efficiency upgrades all over campus. A RFP is to be issued in November.
Travis County Civil and Family Courts Facility P3: The Travis County Courthouse P3 reached financial close on May 9, 2019. The facility, located in Austin, Texas, is a 430,000 square foot civil and family court facility that is set to be complete in 2022.
Santa Rosa Junior College Student Housing P3: Santa Rosa Junior College selected Servitas as its preferred bidder for its student housing P3. The project is to design, build, finance, operate, and maintain a 360-student housing facility. The other shortlisted developers were Greystar and the Michaels Organization.
Vanderbilt University Student Housing: Vanderbilt selected Lendlease as its preferred bidder to design, built, operate, and maintain a graduate and professional student housing village.
The Alabama Department of Transportation recently released a “Myth Busters” communication in response to recent criticism of the agency’s plans to deliver a new bridge and byway project as a public-private partnership. ALDOT’s response focuses on common misconceptions about how the tolls will be imposed and why tolls are necessary for this particular project (which is, in fact, being delivered as a toll-revenue P3). However, in light of the recent pushback against tolls in a variety of jurisdictions, including South Florida, it is worth clarifying the relationship between tolls and public/private partnerships.
In brief, tolls and P3s are independent concepts. In fact, most toll roads are not public-private partnerships—in such situations, the government sets and collects tolls itself as a means to pay for the asset. In addition, most recent P3s do not involve tolls—the private developer of an asset is often repaid by the government directly, through annual availability payments, with no tolls imposed on users of the asset. The recent PortMiami Tunnel is an example of a recent P3 that does not involve tolling. It is also worth considering that even if a P3 asset has tolls, the private developer is not necessarily the party receiving the toll revenue–the government may choose to collect tolls on a P3, but keep the toll revenue itself and instead pay the developer an established annual availability payment. A P3 may also be structured in a manner where the private partner bears the type of risks associate with tolls, but no tolls are actually collected from the public—instead, the government will pay the developer a “shadow toll” for each user. The bottom line is that there are many ways to structure a P3 to accomplish the government’s objectives, and that tolls need not be part of the equation.
We have extensively written about how public-private partnerships (“P3s”) offer better, more efficient solutions to public infrastructure needs, and about how, given their effectiveness, they’ve become a preferred method for funding and managing infrastructure projects in and outside of the U.S. P3s, in short, effectively leverage private funding and expertise with government resources to more efficiently address public needs—often yielding extraordinary results. Yet, while P3s deliver more than just better results than traditional procurement methods tend to, they also incentivize more efficient dispute resolution, too. That is, while ordinary litigation options are typically still on the table, given the long-term arrangements between the parties involved, they tend to seek out faster dispute-resolution options like arbitration, for instance, instead of diving into years of costly, public litigation.
To be sure, P3 teaming arrangements are intricate and complex. A P3 proposer usually consists of a consortium of private entities who, through a special purpose vehicle, submit a proposal to the public entity and, if selected, enter into an agreement with that entity on the one hand, and numerous subcontractors on the other, to address a specific need—such as providing social infrastructure, transportation, or a new utility. From there, the P3 entity would then design, build, finance, operate, and maintain the asset for years to come. Essentially, they remain partners on a single, long-running project, as opposed to typical design-build arrangements where the private-party’s interests are short term. So, given the long-term nature of and goals for any given P3 project, the proposer’s and public entity’s interests tend to be more aligned as both sides have an interest in the project’s ongoing success given long-term operations and maintenance contracts are typically part of the deal.
We have previously discussed how leveraging private-sector expertise and financing through a P3 can bring many benefits to the public, including faster delivery of new infrastructure, higher-quality maintenance and operations, and lower lifecycle costs. However, in order to take full advantage of the P3 model, a government must ensure that it has the right internal resources to design and manage the project. A P3 is not a substitute for poor planning, and the best P3s are the product of thoughtful and thorough preparation with the right combination of subject-matter experts. Typically, a government will engage three types of consultants to plan and execute a P3 project: a legal advisor (to navigate regulatory hurdles and negotiate the critical project documents, which require a different risk allocation than typical public construction contracts), a technical advisor (to determine the technical criteria and design requirements for the project based on the particular asset class), and a financial advisor (to help negotiate business terms and ensure that the project yields the best value to the public). Due to the unique legal, technical, and financial challenges of a P3 (which, by its nature, will include novel approaches in each category), outside expertise in each of these areas is critical to achieve success. In fact, in all of the major local P3 projects throughout the nation that have successfully moved forward (including the UC Merced campus expansion, the Los Angeles APM, and the Long Beach Courthouse) the local government utilized experienced P3 consultants in all three areas.