Dec 9, 2015, 9:40 AM ETConference Presentation, Fireside Chat, Panel, Interview

2015 CA Summit - Notice to Proceed: Clearing a Path for Infrastructure Financing

California's infrastructure was originally designed for half its current population in the 1950s, creating a dual crisis of deferred maintenance and inadequate capacity for future growth.
Deferred maintenance costs in California are estimated at $64 billion to $65 billion, while the Governor's proposed five-year infrastructure plan allocates only $59 billion.
Under the current $59 billion five-year proposal, less than $1 billion is designated specifically to address the $64 billion deferred maintenance backlog.
Approximately 50% of every $2 spent on California infrastructure goes toward servicing debt from prior borrowing, leaving significantly less capital for actual asset investment.
State infrastructure spending currently represents roughly 0.5% of the state's GDP, falling short of the 2.5% GDP benchmark considered necessary for adequate investment.
The transportation sector receives the lion's share of public infrastructure investment in California, followed by K-12 education, and water/resources sectors.

Mark Levine (California Assembly) proposes transforming the Metropolitan Transportation Commission (MTC) into an entity with an elected board to address "divestment of responsibility" from staff to part-time elected officials.
Levine cites the Bay Bridge as a primary example of governance failure, noting its cost escalated from $1.5 billion to $6.5 billion due to lack of accountability and third-party verification.
A specific legislative proposal aims to mandate third-party verification of construction work before contractors receive performance bonuses to restore public trust.
Levine identifies a "political will" gap where legislators face a "reward" deficit for approving tax increases, requiring a two-thirds vote in both chambers to pass new revenue measures.
Dean Palumbo notes that project approval timelines often exceed the political life expectancy of sponsors, making long-term perseverance difficult without strong governance structures.
The Port of Miami Tunnel and Florida's I-4 project served as case studies cited for P3 models saving over $1 billion, illustrating the "value for money" argument often missing from public discourse.

California leads in P3 adoption across sectors including water (Carlsbad desalination), justice (Long Beach Civic Center), and higher education (UC Merced), though lacks a centralized state-level P3 authority.
Tavia Barnes (California Infrastructure and Economic Development Bank, or I-Bank) confirms I-Bank is now authorized to finance P3 projects, having restructured its revolving fund to reduce decision timelines from years to 90 days.
I-Bank reports that $2.6 billion in financing was approved for the Bay Bridge and that the institution aims to price risk based on creditworthiness rather than demanding fixed high returns from private partners.
The discussion highlights a shift from "privatization" (private ownership) to "partnership" models where ownership remains public but private capital funds delivery and operations.
Samara Berend (AECOM) argues that P3s provide an "insurance policy" for governments, ensuring on-time, on-budget delivery and lifecycle performance through risk transfer.
A national effort supported by Plenary and AECOM is underway to create a new category of tax-exempt private activity bonds specifically for public buildings to complement P3 financing.
New federal financing tools like WIFIA (Water Infrastructure Finance and Innovation Act) allow for subordinated debt for water projects, but TIFIA funding levels were reduced in recent reauthorization.

The "GoMentum" consortium, including 45 entities, is utilizing the former Concord Naval Base as a testbed to refine automated vehicles with the goal of increasing transit capacity by 60% and reducing accidents by 90%.
Private sector deployment of technology is outpacing government grant cycles; the GoMentum program, originally funded by a TIGER grant, became fully privatized by private industry.
The South San Joaquin Irrigation District deployed technology to reduce water usage by 30% while simultaneously increasing crop yields by 30%.
Dean Palumbo suggests leveraging California's tech sector to self-fund infrastructure by increasing operational efficiency rather than relying solely on increased taxes.
Future infrastructure updates may require synchronization of public assets, such as traffic lights, to support vehicle-to-vehicle communication networks.

The recently passed House/Senate transportation bill (FAST Act) faces uncertainty regarding the full appropriation of federal funds, and does not provide a long-term sustainable solution for surface transportation.
The potential for California to substitute its CEQA environmental review process for the federal NEPA process is being considered to accelerate project development for multi-funded projects.
Federal permitting reforms, such as expedited processes for vital infrastructure, are seen as critical for overcoming bureaucratic delays in California.
Local water projects in Carlsbad and Huntington Beach faced an 8-12 year delay due to regulatory enforcement by bureaucrats with differing agendas, requiring a strategic pivot to "jobs" messaging to secure political will.

Local agencies like Long Beach, Rialto, and UC Merced are actively pursuing innovative P3 models, whereas the State of California (specifically Sacramento) remains risk-averse regarding building rehabilitation and P3s for state facilities.
The California Department of General Services is reportedly engaged in reviews to structure P3 financing for state buildings, acknowledging that while it requires navigating annual appropriation risks, it is feasible.
The "myth" that no capital exists for municipal projects was debunked by I-Bank, which receives weekly inquiries from investors seeking to partner with public entities.
Tavia Barnes notes that the "not yet" approach by I-Bank, providing specific feedback on how to structure deals rather than flat denials, has improved the viability of projects for municipalities.
The Governor's proposed $64 billion (later cited as $59 billion) infrastructure plan includes dedicated funding for the California Water Commission, which is expected to release bond funds in December 2026 to address drought mitigation.