Puerto Rico moves to privatize local ferry services

by Michael Hansen, Hawaii Shippers Council, February 25, 2016

Puerto Rico Public-Private Partnerships Authority announced in a press release issued on February 24, 2016, their intention to partially privatize the Commonwealth's government –owned and -operated intrastate ferry services.

Towards that end, the Authority intends to release a Request for Qualifications and Proposals (RFQP) by the end of this week (i.e., the week ending Sunday, February 28, 2016).

This is a continuation of the Commonwealth’s Public-Private Partnership – or “P3” – policy enacted into law by the Puerto Rico Legislative Assembly in 2009.

There are two separate local ferry services involved:

METRO SERVICE – operated by the Maritime Transportation Authority for Puerto Rico and the Municipal Islands (MTA) to islands within San Juan Bay

ISLAND SERVICE – operated by the Puerto Rico Integrated Transit Authority (PRITA) to the nearby Commonwealth islands of Vieques and Culbebra

The authority said that the intent of the RFQP is to select a private sector operator for the government-owned ferry vessels and maintenance base located on Isla Grande, San Juan Harbor.

This move by the Commonwealth government to partially privatize their government-owned local ferry follows a trend in Europe where governments are also privatizing ferry service through tender offers and other mechanisms.

Quote:

The Puerto Rico Public-Private Partnerships Authority (the “Authority”) in connection with the Maritime Transportation Authority for Puerto Rico and the Municipal Islands (“MTA”) and the Puerto Rico Integrated Transit Authority (“PRITA”) has started the process to develop a Public-Private Partnership (“P3”) as a Minor Scale Project, for the operation and maintenance of the public maritime transportation services currently provided by MTA and PRITA within the San Juan Bay (“Metro Service”) and the Municipal Islands of Puerto Rico - Vieques and Culebra - (“Island Service”) and the operation of the maintenance base located in Isla Grande, San Juan (collectively known as the “Project”).

The Project goals established by the MTA and PRITA are to:

• improve the quality of customer service;

• increase ridership of the Metro and Island Service;

• identify and introduce efficiencies in MTA’s operations by leveraging the private sector’s ferry operations expertise; and

• increase revenues through improved ancillary services (i.e. food and beverages), not related to ticket fares, in order to reduce net public subsidies.

The Authority is the sole entity responsible for the implementation of P3s in Puerto Rico, while MTA and PRITA are public corporations responsible for executing innovative infrastructure and transit plans, programs and projects that effectively facilitate the movement of people and goods, while protecting the natural resources of Puerto Rico.

To that end, the Authority commissioned and completed the Desirability and Convenience Study required by Art. 7(b) of Act No. 29 of 2009, as amended. The Desirability and Convenience Study recommended that the Authority pursue a P3 to operate and maintain the Project through an operations and maintenance contract (the “O&M Contract”). This O&M Contract would likely be of a medium term, 5 to 10 years, with a private entity (the “Operator”) selected through a competitive procurement process that will be compliant with the Federal Transit Administration (“FTA”) guidelines.

It is anticipated that risks related to the operation and maintenance of the ferry service will be transferred to an Operator, with compensation to the Operator sourced from existing public appropriations, applicable federal funding and Project revenues.

A Request for Qualifications and Proposals (“RFQP”) will be released this week.