Governor Stresses Use of Public-Private Partnerships
for Infrastructure Projects

Delivering his annual State of the State address before a joint session of the California State Legislature, Governor Arnold Schwarzenegger asked legislators
to work with him to tackle some of California’s most pressing challenges, including reforming the state budget system and stressing the use of public-private partnerships to deliver on much needed infrastructure work.

“This coming year will test us in very hard ways,” says said Governor Schwarzenegger. “In any number of areas, we’ve tackled politically risky things that no one in the past wanted to touch. To me, this is progress. And now, we must make progress on another problem that’s been put off for many years. We cannot continue to put people through the binge and purge of our budget process. It is not fair. It is not reasonable. It is not in the best interests of anyone. So I am again proposing a constitutional amendment so that our spending has some relationship to our revenues.”

California’s economic growth and environmental leadership are still closely tied to improving how infrastructure is built, operated and maintained, the governor maintains. The Department of Finance estimates that California needs $500 billion worth of infrastructure over the next two decades.

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Governor Schwarzenegger says he is committed to further boosting economic growth, preserving the environment, enhancing services for citizens and getting taxpayers the most for their money by strengthening how California plans, finances and delivers infrastructure projects.

Governor Schwarzenegger proposes a set of new policies to leverage partnerships with the private sector, increase synergy between public agencies and educate thousands of new engineers to build the California of tomorrow.

To achieve this, the Governor proposes:

• Establishing a Strategic Growth Council to coordinate SGP projects and spending. The five-member council will help state agencies allocate Strategic Growth Program money in ways that best promote efficiency, sustainability and support the governor’s economic and environmental goals.
• Expanding the types of projects, services and government entities that can enter into Performance Based Infrastructure (PBI), or public-private partnership, arrangements.
• Establishing “PBI California,” a center for excellence to help determine which state projects can benefit from PBI to represent the state in negotiations with PBI participants, ensure transparency and monitor performance. This will empower California to build, operate and maintain infrastructure better, faster and for less.
• Bringing approximately 20,000 new engineers into California's workforce over the next decade by expanding existing educational programs and building new partnerships between our schools, the military and the private sector.

PBI, according to the state, combines the strength and values of the public and private sectors. PBI allows government and private companies to enter into contracts that make both responsible for the delivery of infrastructure services. These partnerships produce results by combining the advantages of the private sector – dynamism, access to finance, knowledge of technologies, management efficiency and entrepreneurial spirit – with the social responsibility, environmental awareness, local knowledge, safety requirements and job generation concerns of the public sector.

PBI is not mandatory; it’s simply an optional alternative for governments to employ if and when doing so provides value when compared to traditional infrastructure provision.

PBI is used successfully around the world, the state says. The United Kingdom has used PBI in hundreds of cases, including more than 350 schools, hospitals and transportation systems, more than 100 government office buildings, waste treatment facilities, prisons, museums, courts and public recreation projects.

The state adds that where PBI arrangements are widely enables and available, such as in Europe, Australia and Canada, they account for approximately 15% to 20% of new infrastructure. Applied to California’s $500 billion infrastructure needs, this suggests that PBI has the potential to provide approximately $75 billion to $100 billion of new infrastructure in the state.

During the speech, the governor discussed his bold proposals to reform the state budget system that will ensure greater financial stability in the future and addressed why health care reform is critical to fixing our failing budget.

He also discussed why the current budget challenge does not change California’s critical need for infrastructure investment and how the most needed
education reforms are still possible.

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