Summary Public-Private Partnerships Act,
Act No. 29 of June 8, 2009

Public Policy

The Act states that the public policy of the Government of Puerto Rico is to favor and promote the establishment of Public-Private Partnerships for the creation of Priority Projects, and among other things, to further the development and maintenance of infrastructure facilities, share between the Commonwealth and the Contractor the risk involved in the development, operation or maintenance of such Projects, improve the services rendered and the functions of the Government, encourage job creation and promote the Island’s socio-economic development and competitiveness.

Priority Projects: 

Landfills

Water reservoirs

Power plants that use alternative sources of energy or renewable sources of energy

Transportation systems

Health, security, education, correctional and rehabilitation facilities

Low-income housing projects

Facilities for sport, recreation, tourism and cultural activities

Ground and wireless communication systems

High technology information and mechanical systems

Any other kinds of activity, facility or service identified as a Priority Project through legislation

Puerto Rico Public-Private Partnerships Authority

The Public-Private Partnership Authority is created as a public corporation of the Commonwealth of Puerto Rico, attached to the Government Development Bank for Puerto Rico (GDB). The duties and powers of the Authority shall be discharged by a Board of Directors. The Board shall be constituted by five members:

the President of the Government Development Bank

the Secretary of the Treasury

the President of the Planning Board; and two (2) persons in representation of the public interest

The Authority is designated as the sole government entity authorized and responsible for implementing the public policy on Partnerships and for determining the functions, services or facilities for which such Partnerships are to be established. The Authority shall establish priorities in the development of projects, in order for Partnership Contracts to address infrastructure needs or services that hold priority for the Commonwealth. The Authority, with the support of GDB, shall conduct analysis on the desirability and convenience of the project as necessary to determine whether it is advisable to carry out the project and establish such Partnership.

The Authority shall create a Partnership Committee for each PPP. The Committee shall be constituted by the GDB President or his/her delegate, the officer of the partnering government entity with direct authority over the project or his/her delegate, one member of the Board of Directors of the partnering government entity or, in the case of government entities that do not have Board of Directors, the Secretary of the department that the partnering government entity is attached to or his/her delegate or an official of the same with specialized knowledge of the kind of project of the partnership chosen by the PPPA Board, and two officials from any government entity chosen by the Board of Directors of the Authority for their knowledge and experience in the kind of project that is the object of the Partnership under consideration.

The Committee shall be responsible for the qualifications, evaluation and selection processes of the entities, in order to create a PPP, for establishing the basis for the Partnership Contract and for documenting the procedures followed.

Any proponent who wishes to be contracted for a Partnership must meet the obligations and requirements as stated in the Act, in addition to those requirements provided for in the request for qualifications or request for proposals for a given PPP. To select proponents to enter into a Partnership, the Authority must use, firstly, a procedure for requests for proposals based on the qualifications, the best value in proposals or both. Upon completion of the negotiation for the Partnership Contract, the Partnership Committee shall prepare a report, which shall include the reasons for establishing a Partnership, for the selection of the chosen Proponent and includes a description of the procedure followed. The report shall be presented for the approval of the Board of Directors of the Authority and the Board of Directors of the partnering government entity or the head of the entity or the Secretary of the Department to which the same is attached, no later than thirty (30) days after completion of the negotiation of the Partnership Contract. Upon receiving the report from the Partnership Committee and the Partnership Contract, the Governor or the executive official onto whom he/she delegates shall have thirty (30) days to approve or deny the same in writing. If the Governor were to approve the Partnership Contract, the same shall be deemed to have been perfected when the selected proponent and the partnering government entity, signed such Contract.

Partnership Contract

The Contract executed by the selected proponent and the partnering government entity to establish a Partnership shall include a description of the services to be provided, the function that will be performed or the facility that will be developed or improved. In the case of new facilities, or repairs, replacements or improvements to existing facilities, it shall include the plan for financing, development, construction, reconstructions, repairs, replacement, improvement, maintenance, operation or management of the facility. The Contract shall include the kind of right to personal or real estate and its distribution between the proponent and the government entity, the mechanisms to ensure the compliance of the proponent, the areas related to the imposition of rates, charges, or rents, as applicable, the causes for termination, and the informal procedures for resolution of conflicts, among others. The term of a Partnership Contract shall in no case exceed fifty (50) years.

The Contractor under a Partnership Contract neither shall assume nor is responsible for any existing obligations or debts of the partnering government entity, unless the Partnership Contract expressly provides the contrary. In addition, the Contractor shall not be responsible for obligations related to accumulated merit, time or service by   employees of the partnering government entity, who the Contractor agrees to employ at the time of performing the Partnership Contract, nor any other obligation the Partnering Government Entity had with said employees, except those obligations and responsibilities expressly assumed by the Contractor in the Partnership Contract.  

Tax Liability and Benefits

The Contractors in a Partnership established under this Act shall be subject to a fixed income tax rate of ten percent (10%) over the net income derived from the operations provided in the Partnership Contract. Said special rate shall not apply nor shall it in any way alter the taxes levied by Sections 1221 and 1231 of the Puerto Rico Internal Revenue Code. Neither shall it be subject to the surtax provided in Act No. 7 of March 9, 2009. Participants are exempted of paying tax on personal property. A contractor under a Partnership Contract may not receive tax benefits provided for under the Economic Incentives Act for the Development of Puerto Rico, Act No. 73 of May 28, 2008. If a Contractor decides to operate as a Special Society (as described in Subchapter K of the Puerto Rico Internal Revenue Code), the shareholder of a special contracting partnership shall be subject to a fixed income tax rate of twenty percent (20%) on the net income derived from the operations agreed to in the Partnership Contract. The participation of a nonprofit corporation in a Partnership Contract shall not affect its eligibility for the purpose of availing itself of the benefits of the Puerto Rico Internal Revenue Code provided for the type of particular entity or organization in question.

GDB is authorized to design and implement any mechanism, method or instrument as it may deem pertinent and appropriate, including, but not limited to total or partial sureties, letters of assurance, letters of credit, and others to ensure compliance by the partnering government entity of its contract and financial obligations under the Partnering Contract. Any mechanism, method or instrument that GDB may decide to implement in connection with a Partnering Contract, shall be subject to such terms and conditions that the GDB Board of Directors may determine and shall be previously recommended by the Director of the Office of Management and Budget and approved by the Governor or the executive official on whom he/she delegates.

A Partnership Contract shall allow for the contractor to assign, sub-lease, sub-concede or encumber its interests under a Partnership Contract, or for its stockholders, partners or members to assign, pledge or encumber their shares or interests upon the contractor.

A Partnership Contract may constitute or allow for the constitution of a lien on the rights held by the contractor over the Partnership Contract, including but not limited to: a pledge, an assignment or any other lien on the rights under the Partnership Contract, on any payments pledged by the Government or the partnering government entity to the contractor by virtue of the Partnership Contract, on the income of the contractor over any property of the contractor or on the use, enjoyment, usufruct or other rights granted to the contractor under the Contract, as well as allow for bondholders, partners or members of the contractor to assign, pledge or encumber their shares or interest in the contracting entity, all of the foregoing, to secure any financing relative to the Partnership Contract.

Joint Committee on Public-Private Partnerships

The Joint Committee on Public-Private Partnerships of the Legislature of Puerto Rico is created, to be composed of four (4) senators and four (4) representatives, from among whom one (1) in each House shall belong to the Parliamentary Minority. The Joint Committee shall have jurisdiction to examine, investigate, evaluate, and study all matters relative to PPPs.

Applicability of the Ethics in Government Act

The Ethics in Government Act of the Commonwealth of Puerto Rico, Act No. 12 of July 24, 1985, as amended, particularly the Code of Ethics under Article III of said Act, shall apply to all members of the Board of Directors of the Authority, including public interest representatives, directors, officers, and employees of the Authority, members of the Partnership Committees, the Board of Directors, and officials and employees of the partnering government entity.