Conference Presentation, Fireside Chat, Panel, Interview
2015 CA Summit - Notice to Proceed: Clearing a Path for Infrastructure Financing
- California projects significant long-term population growth while currently spending approximately $10 billion annually on transportation, a figure representing only 7 percent of the state budget or 0.5 percent of GDP, which falls far below the 2.5 percent GDP benchmark considered reasonable.
- The state faces a deferred maintenance backlog estimated between $64 billion and $65 billion, yet the Governor's five-year proposal of $59 billion is insufficient to cover these costs, with one out of every $2 spent on infrastructure currently dedicated to servicing debt from prior spending.
- Proposed revenue increases from special sessions are expected to only maintain existing road conditions rather than fund new construction, and current gas tax purchasing power is diminishing while vehicle miles traveled continues to rise.
- Political incentives to dedicate new funds are weak, as Republicans view fee and tax approvals as penalties and Democrats face pressure from the 40 percent of the budget allocated to education, making it difficult to secure agreement for new revenue or restructure existing funds.
- The federal government has transitioned from a major to a minor infrastructure funder, prompting a shift toward public-private partnerships (P3s) and private capital availability, though a formal state-level P3 entity has not yet been established.
- Private sector investment is hindered by California's political risk of annual appropriations, arduous permitting processes, and a lack of accountability mechanisms, although specific examples like the Port of Miami Tunnel and Florida's I-4 project demonstrate potential for over $1 billion in cost savings.
- Automated vehicles present opportunities to increase transit capacity by 60 percent and reduce accidents by 90 percent, but realizing these benefits requires synchronizing traffic lights and upgrading public infrastructure, as private technology deployment can currently outpace government processes.
- New financing mechanisms, such as a proposed category of private activity bonds, are being advocated to allow tax-exempt financing for public buildings and reduce reliance on 100 percent taxable financing.
- Public trust remains low due to issues like the Bay Bridge cost overruns and perceived lack of accountability, necessitating reforms such as third-party verification of work and clear value propositions to taxpayers before increased investment can be secured.
- Specific funding milestones include the California Water Commission committing funds from the water bond in December 2016 to address drought mitigation, while the iBank aims to issue decisions within 90 days of full applications to support municipalities and schools.