An Innovative Public-Private Partnership
A landmark public-private partnership provides improvements to Connecticut’s public infrastructure, puts in place environmental innovations and creates jobs across the state.
About Project Service LLC and the Transaction
In December 2009, Carlyle, a global alternative asset manager, entered into a joint venture called Project Service LLC with Doctor’s Associates, Inc., the parent company of SUBWAY Restaurants, forming a 35-year public-private partnership with the State of Connecticut to redevelop, operate and maintain Connecticut’s 23 highway service areas. Project Service and its tenants expect to invest approximately $230 million in improvements and upgrades to the service areas and to create approximately 375 jobs. In total, the state is expected to receive nearly $500 million in economic benefit from the redevelopment effort.
- Innovative public-private partnership facilitates private investment in public infrastructure assets.
- Connecticut is expected to receive nearly $500 million in economic benefit from the project, including approximately $230 from capital investments to improve and maintain the facilities and $250 million in projected revenue sharing.
- Project Service is expected to create approximately 375 new jobs (50% increase in headcount), including custodial positions represented by the Service Employees International Union.
- The renovations are expected to result in new and upgraded facilities that are cleaner and safer, including new environmental technologies and police substations.
An Innovative Public-Private Partnership
At Project Service, private sector funding will help to rebuild and maintain public infrastructure, an example of the type of creative thinking private equity brings to business challenges. The effort is distinguished by the innovative economic alignment of the public and private partners through the 35-year life of the project. Project Service will pay for 100% of the improvements to the service areas in exchange for a right to operate the facilities for 35 years. The state will continue to own the facilities through the term of the agreement, and at the end of 35 years, the state will resume responsibility for the operations and maintenance of the facilities.
Capital to Renovate and Upgrade Service Areas
Carlyle and its joint venture partners expect to invest approximately $230 million in redeveloping and maintaining the 23 service areas on Interstates 95 and 395 and Route 15 (the Wilbur Cross and Merritt Parkways). The current facilities were built in the 1940s and 1950s and have had no significant capital improvements in the past 25 years. Project Service and its tenants are expected to invest approximately $178 million over a five-year period to renovate and upgrade the facilities and an additional $52 million to maintain the facilities after they are redeveloped.
Project Service’s goal is to provide Connecticut with clean, safe and upgraded facilities that meet or exceed the needs and expectations of the traveling public. Project Service will also reduce the energy usage and emissions associated with trucks by implementing new environmental technologies that include silver LEED design elements and truck-idle reduction technology. Project Service will also install police substations in select service areas in order to provide increased public safety.
The partnership began operating the service areas on December 7, 2009, beginning a five-year redevelopment process. In July 2010, Project Service broke ground on the first redevelopment project, on Route 15 in North Haven,Connecticut, and work on I-95 service areas has also begun, with expected completion of the two largest locations, in Milford,Connecticut, by Spring 2012.
In addition to funding the initial redevelopment costs, Project Service will share revenue with the state. It is projected that the state will receive $250 million in payments during the term of the agreement. Such payments allow the state to share in financial growth achieved by the partnership as the renovated facilities attract more customers and generate more revenues. In total, the state is expected to receive nearly $500 million in economic benefit from the project.
Employment Growth/Partnership with the SEIU
Project Service is expected to add an estimated 375 new jobs to the approximately 750 current positions—a 50% increase in headcount. The redevelopment period is expected to create a minimum of 100 new construction jobs. After redevelopment, the new food and retail businesses are expected to employ approximately 200 new full- and part-time positions and 75 custodial positions. Custodial services will be provided by a local company whose workers are represented by the Service Employees International Union.
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