PPP project:

Underground Car Park

of the National Theatre of Latvia

Country context

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Population of Latvia1:

1,995,600

Total area2: 64,589 km2

Capital city: Riga with 643,368

inhabitants

Latvia proclaimed

independence in 1918, was

occupied in 1940, but regained

its de facto freedom in 1991

Member of the EU since 2004

1 Data: Central Statistics Bureau (CSB), 2014 2 Data: CSB, 2013

Historical context

Built between 1899–1902 to house Riga’s second (Russian) theatre

On November 18, 1918, the first independence of the Republic of Latvia was proclaimed in the theatre building

The National Theatre of Latvia was established on November 30, 1919

In 2018: 100th anniversary of the proclamation

In 2019: 100th season of the National theatre of Latvia

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Location

- The theatre building is at the corner of two major streets, and on the right side there is a canal

- At the back of the theatre there are what used to be tennis courts, but they haven’t been maintained for years

- Currently there is a small spare place in front of the theatre with restricted parking – only couches bringing organised groups attending the theatre are allowed to park

- Theatre building is owned by the City Council of Riga, whereas the tennis courts belong to the state

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[https://tools.wmflabs.org/wiwosm/osm-on-ol/commons-on-

osm.php?zoom=16&lat=56.953008333333&lon=24.105322222222]

The National

Theatre of

Latvia

Abandoned

tennis courts

Infrastructure gap

The theatre building was fully reconstructed in 2004

Need for a car park that would serve the theatre’s customers has been discussed for years, but hasn’t been solved as of yet

There are a few car parks in the nearby area, but none of them have sufficient capacity to service the theatre’s customers

Both the city and the theatre have to meet the standards of the 21st century — increased number of motorised vehicles used in the city and customer demands for a full service

In order to preserve the cultural legacy, development and building options in terms of architectural design and public finance are limited

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Required services

• The National Theatre needs a car park nearby the

theatre building that would provide 300 parking

places for the theatre’s customers

• It has to be an underground car park, as the future

plans entail further expansion of the theatre building

by adding another hall and additional buildings to

serve the production and maintenance needs

• Estimated contract term: 20 years

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Status quo

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[https://www.google.com/maps/place/Latvian+National+Theatre/@56.9539276,24.1048502,282m/data=!

3m1!1e3!4m2!3m1!1s0x46eecfda883449cb:0xfaf327acc6345f21!6m1!1e1]

[1 http://www.rdpad.lv/en/development-strategy/]

• State property agency has failed to operate and maintain the territory of 3,475 m2 at the back of the theatre

• According to the Sustainable Development Strategy of Riga until 2030 and Development Programme of Riga for 2014–2020 the City Council of Riga is planning to acquire this land by the end of 20151

• According to the spatial planning of the city and further development plans of the theatre building this territory should be used to provide public infrastructure service and expand the theatre building

Why PPP?

• Public procurement law in Latvia limits the contract term for public procurements to 5 years

• It is risky for the City Council to transfer full control of the object to a private developer who might not comply with the major requirement to provide socially responsible services for the theatre's customers

• This territory comes with various restrictions in terms of the object to be built (according to the spatial planning) and the connection with the theatre, which, although produces income, maintains a cultural not a business function; that limits development options for private investors

• By the Law, the City Council is obliged to provide infrastructure services, which include ensuring sufficient parking spaces for the clients of public buildings

• Within the current budget, the City Council cannot develop this project on its own, because it has to prioritise its long-term financial liabilities

• From the perspective of the public partner, PPP provides better value for money and allows to allocate risks between the contracting partners

• Correct risk allocation would allow the public partner to avoid a risk of cost overruns and late deliveries, which are quite common in the public procurements

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Reasons for the private sector to participate

• Operating a car park at the back of the National Theatre of Latvia is commercially viable project with a steady cash flow and additional business opportunities

• Over the years there’s been a huge interest in the abandoned tennis courts because of its location and development opportunities

• There are numerous business prospects in the future, if this project proves to be successful

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Risk allocation: public partner

• Regulatory risk

Public partner is responsible for regulating the parking

tariffs in the city

• Force majeure

Public partner is responsible for risks associated with

uninsurable events beyond the control of contracting

parties

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Risk allocation: private partner

• Construction risk

Private partner has to design and build the underground car park which complies with the output requirements requested in the technical specification

• Operating risk

Private partner is responsible for operating the car park according to defined performance and quality standards

• Availability risk

Private partner has to ensure that a certain amount of parking places are available for theatre’s customers throughout the season (September–June)

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Risk allocation: shared risks

• Demand (revenue) risk Public partner has to guarantee regular cash flow from the

estimated numbers of theatre's clients; if not supplied, sufficient compensation should be added to the annual compensation paid to the private partner

Seasonality has to be take into account when estimating the annual demand

In order to get reliable data, payment system has to be designed so that the clients with theatre tickets can be registered and charged at a lower rate

Free parking spaces can be used by other clients at a higher rate; private partner gets to keep these revenues

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Risk allocation: shared risks

• Financial risk Private partner has to finance the whole construction,

operating and maintenance of the object

Public partner guarantees a certain part of construction costs covered by a commercial loan

Guarantee terms in the contract have to be clear, concise and in public interest; proper control and monitoring mechanisms should be established in order to disciple the private partner and prevent the public partner from excessive financial liabilities

Public partner guarantees annual payment for the infrastructure services provided by the private partner

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References

• Concessions, Build-Operate-Transfer (BOT) and Design-Build-Operate (DBO) Projects, http://ppp.worldbank.org/public-private-partnership/agreements/concessions-bots-dbos

• Different Models of PPP, www.ppiaf.org

• The National Theatre Dreams about a New Car Park and a New Hall, http://nra.lv/izklaide/6081-nacionalais-teatris-sapno-par-autostavvietu-un-jaunu-zali.htm

• PPP Car Park Project at Glasgow Royal Infirmary, www.nhsggc.org.uk

• The WA Experience: Public Private Partnerships (PPPs), www.apha.org.au

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