SOURCE: Bay Area Economic Forum

June 14, 2006 11:00 ET

Bay Area Economic Forum Report Proposes Infrastructure Expansion Through Public-Private Partnerships

SAN FRANCISCO, CA -- (MARKET WIRE) -- June 14, 2006 --A new report by the Bay Area Economic Forum assesses opportunities for the State of California to extend the limited public funds available for infrastructure investment, through an expanded use of public-private partnerships.

The report finds that the ten-year level of infrastructure investment proposed by the Governor in his Strategic Growth Plan is approximately 1% of Gross State Product (GSP). The $37 billion in infrastructure bonds recently approved by the Legislature for submission to the voters in November is considerably less (54% of the $68 billion in general obligations bonds originally proposed by the Governor). However, over the last 45 years the state has invested an average of 2.5% of GSP on infrastructure. To sustain that historical rate of investment California would have to invest 2.4 times the Governor's original proposal.

Sean Randolph, President of the Bay Area Economic Forum, observed that, "Even if the state were to invest at the levels proposed by the Governor, which were considered high, it is clear that the public funding available will be insufficient to do the job. We therefore have to look for new ways to extend the public dollars that are available."

The report recommends that California look to global best practices for innovative approaches to infrastructure investment. It proposes that state government adopt the model developed in the United Kingdom, an economy the same size as California's which has more than ten years of experience with public-private infrastructure development. The report discusses specific mechanisms developed in the UK for deciding whether a project should be publicly or privately developed, and for ensuring that privately developed projects (using the design, build, finance, operate model) deliver public value. The UK experience shows that using public-private partnerships for capital-intensive, long-lived projects can deliver net savings of 15-30% over a project's life cycle, conserving taxpayer funds and accelerating project delivery.

Peter Luchetti, CEO of GFP Advisors and principal author of the report, observed that "Public private partnerships have been used around the world much more extensively than in the US, with good results. By learning from other countries' experience and where appropriate harnessing the experience of the private sector, California has the opportunity to extend its limited public funds to achieve investment levels close to the historical average of 2.5% of Gross State Product, which is also the global rate of investment for economies of similar size."

California engaged in an important debate about its competitive position in the national and global economy. The report concludes that by addressing short, medium and long term fiscal management issues when planning its infrastructure investment, the state has a unique opportunity to solidify the base for it economic future.

"Infrastructure has always been critical to economic growth in California," said Jim Wunderman, President & CEO of the Bay Area Council. "But decades of neglect have created a desperate situation for residents and businesses alike. The private sector is now willing to put billions of dollars on the table to fix key problems. Public-private partnerships offer a model to guide that new investment while protecting everyone involved." Lenny Mendonca, Chairman of the Bay Area Economic Forum, added, "Investing in our future is key to the ongoing vitality of our state. With this report the Bay Area Economic Forum hopes to bring a spirit of innovation through public-private collaboration, as a model to make that investment happen quickly and economically."

The Bay Area Economic Forum is a public-private organization of civic leaders in the Bay Area, sponsored by the Bay Area Council and the Association of Bay Area Governments that addresses issues affecting the competitiveness of the California and Bay Area economies. The report can be accessed on the Bay Area Economic Forum's website at

Contact Information

    Sean Randolph
    Peter Luchetti