BUILDING CALIFORNIA’S FUTURE WITH THE STRATEGIC GROWTH PLAN
In January 2006 Governor Schwarzenegger launched the ambitious Strategic Growth Plan (SGP) and since then the state has achieved significant progress through initial SGP funding. In November 2006, voters approved $42 billion for the plan, and in November 2007, the legislature authorized $7.7 billion to address prison overcrowding and improve health care delivery in the prison system. As a result, California is now undertaking the largest infrastructure improvement plan in a generation.
California’s economic growth and environmental leadership remain closely tied to improving how infrastructure - including schools, bridges, hospitals, parks, levees, housing and more - is built, operated and maintained. The Department of Finance estimates that California needs $500 billion worth of infrastructure over the next two decades. Governor Schwarzenegger is committed to further boosting economic growth, preserving our environment, enhancing services for citizens and getting taxpayers the most for their money by strengthening how California plans, finances and delivers infrastructure projects.
To achieve this, 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.
In December, the Governor called on California to pass legislation that will permit the broad use of Performance Based Infrastructure (PBI) - also referred to as public-private partnership - when this method can boost service for citizens or lower costs for taxpayers.
PBI can improve services for citizens and save taxpayer dollars. The Governor proposes:
- Expanding the types of projects, services and government entities that can enter into PBI arrangements.
- Increasing contracting flexibility so the state can better negotiate with potential contractors.
- Establishing "PBI California," a center for excellence that will help determine which projects can benefit from PBI, provide expertise in negotiations with PBI participants, ensure transparency and monitor performance. PBI California will manage and implement contractual arrangements and will also assemble statewide demand in order to enhance negotiating leverage and improve terms and conditions for taxpayers and citizens. PBI California will contract with governmental entities (local and state) and act as a repository of knowledge, understanding, expertise and practical experience in connection with PBI-related transactions.
PBI combines the strengths 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 is simply an optional alternative for governments to employ if and when doing so provides value when compared to traditional infrastructure provision.
PBI is used widely used around the world, with great success.
- 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.
- In France, PBI has been used for decades, especially in the transportation and public utility sectors. Recent contracts granted include two high speed rail lines out of Paris, four prisons, an inland waterway and waste water treatment plants.
- Using PBI, Australian states have built schools, prisons, courthouses, convention centers, freeways, freight and commuter rail, power stations, hospitals and health campuses. Australia’s national government is now exploring the use of PBI in the national freight and transportation networks and energy and water sectors.
- Ireland has used PBI on over 100 wastewater projects, and the Netherlands leads the world in employing PBI for social housing and urban regeneration.
- Since 2005, Ontario, Canada has employed PBI for the procurement of 47 major infrastructure projects, including courthouses, youth centers, hospitals and cancer treatment centers.
- Over the last five years, British Columbia, with a population less than one-eighth the size of California’s, has employed PBI for the procurement of nearly $5 billion in infrastructure financing. Roughly 64 percent of that financing has been privately supplied for projects ranging from mass transit to roads and wastewater treatment facilities.
PBI arrangements are newer to the United States, but are being used to achieve efficiencies and savings. Some recent examples include: the federal government obtaining more than $25 billion of private financing in connection with a PBI arrangement to provide military housing at Camp Pendleton and other bases, leading to higher tenant satisfaction; the city of Miami recently approving a new $1 billion tunnel to speed goods movement, reduce congestion and improve the environment at a cost that is 40 percent less than if the government did everything itself; and the state of Missouri seeking PBI bids to rehabilitate or replace 802 bridges.
PBI has the potential to provide approximately $75 billion to $100 billion of new infrastructure in California.
- Where PBI arrangements are widely enabled and available such as in Europe, Australia and Canada, they account for approximately 15 to 20 percent 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 California.
Fixing traffic congestion. Increasing flood protection. Improving school facilities. These, and many other challenges tackled by SGP bond funds, are tied to land use and our natural resources. It is critical that state agencies deliver these projects in ways that encourage constructive growth and preserve the Golden State’s natural beauty while using taxpayer dollars in the most efficient way. Achieving this requires close collaboration between state agencies.
This proposal establishes a Strategic Growth Council to coordinate SGP projects and spending. The five-member Council will help state agencies allocate SGP money in ways that best promote efficiency, sustainability and support the Governor’s economic and environmental goals.
The Council brings public and state representatives together to chart the best path for growth. Chaired by the Director of the Office of Planning and Research, the Council will consist of the Secretaries from four state agencies (Resources; Environmental Protection; Business, Transportation and Housing; Food and Agriculture).
The Council will:
- Award and manage grants and loans from Proposition 84 funds to support the development of sustainable communities. The Council’s responsibilities will include establishing application requirements and evaluation criteria.
- Coordinate the four member state agencies, as they undertake infrastructure and development projects, to encourage sustainable land use; protect natural resources; improve air and water quality; increase the availability of affordable housing; improve transportation; and meet the goals of the Global Warming Solutions Act (AB 32).
- Recommend policies to the Governor, the legislature and state agencies that encourage sustainable development.
- Collect and provide data to local governments to help them develop and plan sustainable communities. While the state has little direct say in local land-use planning, the Council will provide leadership and support for locals.
In December 2007, Governor Schwarzenegger announced his plan to address California's critical need for new engineers. The Governor's proposal will bring 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.
- California currently faces a significant shortage of engineers. Without adequate numbers of engineers, the state cannot achieve the much needed improvements to our roads, schools and other infrastructure that voters envisioned when they passed the Strategic Growth Plan bonds.
- Unless California takes action now, we face a shortfall of almost 40,000 engineers by 2014. The Labor and Workforce Development Agency projects that California will need approximately 20,000 to 24,000 additional engineers educated in California to begin meeting the growing engineering needs of both the private and public sectors over the next decade.
The Governor proposes to:
- Establish programs at UC and CSU to expedite certification for veterans with engineering backgrounds. This will open up important employment opportunities to the approximately 3,000 service members discharged to California each year that hold engineering-related military jobs.
- Direct $1 million in federal Workforce Investment Act funds to develop new apprenticeship programs that partner private industry and CCC.
- Launch the Engineering Education Council to bring more private funds into “pipeline” programs at UC, CSU, CCC and other engineering programs. These programs help move math and science students into the engineering field.
- Expand the statewide charter of High Tech High, a California charter school organization, to build out engineering-focused charter schools. In 2006, the State Board of Education approved 10 High Tech High charter schools; the Governor proposes to raise this number and expand its charter to grades K-12.
Governors Wilson, Davis and Deukmejian – Public Private Partnerships Can “Ensure Our State’s Future Success” And “The Time To Move Forward Is Now”: “It's clear we need a new solution, a Plan B, to ensure our state's future success. We can do so by creating ‘Public Private Partnerships’ or ‘P3.’…We need a fair, open process that clears the way to plan for major new infrastructure projects that attract private sector planning, management and financial skills, while protecting the long-term interests of the broader community. The time to move forward is now. Each year we fall farther behind. We already have the worst congestion and air quality in the nation. Either we implement Plan B and ensure a vibrant future for all, or we face impending gridlock and a slow decline into a Third World existence.” (George Argyros, John Hawkins, Pete Wilson, Gray Davis and George Deukmejian, ”California needs infrastructure `Plan B',” Inland Valley Daily Bulletin, 10/22/07)
Reason Foundation Director of Government Reform George Passantino – Billions Of Dollars In Private Investments Are Going To Other States Because California “Has No Authority To Enter Into These Agreements”: “California is clearly beyond tinkering—we need major work! Though not a panacea, public-private partnerships are a critical component of that effort. There is a global market awash in capital eager to invest in these large-scale transportation projects. Billions upon billions of dollars are going all around the world and into other states…but not California because we have no authority to enter into these agreements.” (George Passantino, “The Role of Public-Private Partnerships in California's Transportation Future,” California State Senate, Committee on Transportation & Housing, Testimony, 5/17/05)
Climate Group CEO Steve Howard – Research Shows That Public-Private Partnerships “Deliver Results For The Climate”: “It clearly shows that there are significant opportunities available for cities and businesses working together to reduce carbon dioxide emissions, that these partnerships deliver results for the climate, and that they are financially rewarding for the city governments and businesses involved.” (The Climate Group, “Public Private Partnerships: Local Initiatives 2007,” Report, 5/07)
British Train Drivers Union [Former] Secretary General And UK Strategic Rail Authority Representative Lew Adams – With These Partnerships, “Today There Are More Members In The Trade Union, More Train Drivers And More Trains Running”: "The business actually grew. The entrepreneurs came in, and where government had actually turned around and said that they wanted to reduce the size of the services, when the entrepreneur came in, they said, ‘Well, we're going to build on this.’ ...I've been in the rail industry a long while and all the time it's in the public sector, all we got were cuts, cuts, cuts. And today there are more members in the trade union, more train drivers and more trains running." (Lew Adams, "The Bill Good Show,” CKNW radio, Vancouver, BC, 11/26/04)
A Comprehensive Analysis Of Public-Private Partnerships In Australia Found They Delivered Infrastructure With Greater Transparency And Cost And Time Efficiency Than Traditionally Procured Infrastructure Projects. “Our overall conclusion is that PPPs provide superior performance in both the cost and time dimensions…and that PPP projects were far more transparent than traditional projects.” (Allen Consulting Group and the University of Melbourne, “Performance of PPPs and Traditional Procurement in Australia,” Report to Infrastructure Partnerships Australia, 11/30/07)
Infrastructure Projects Built In Canada And The UK Through Public-Private Partnerships Are More Often On Budget And On Time Than Those Built Through Traditional Infrastructure Procurement: “With payments better aligned to the delivery of project objectives, public-private partnerships also have a solid track record of completing construction on time or even ahead of schedule. In Canada, for example, Terminal 3 at the Toronto Pearson Airport was completed 18 months ahead of schedule under a PPP contract. The United Kingdom’s National Audit Office reported in 2003 that 73 percent of non-PFI construction projects were over budget and 70 percent were delivered late. In contrast, only 22 percent of the PFI projects came in over budget and 24 percent were late.” (Deloitte Research, “Closing the Infrastructure Gap: The Role of Public-Private Partnerships,” Deloitte Research Study, 10/16/07)
For more examples of how PBI is used around the world, visit the Governor's PBI Issue page.