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California assembly nixes public-private infrastructure bill

May 1, 2008
The California Assembly Business and Professions Committee voted down a measure (AB 2600) that would have allowed the state to enter into private-public partnerships for infrastructure development

The California Assembly Business and Professions Committee voted down a measure (AB 2600) that would have allowed the state to enter into private-public partnerships for infrastructure development by a five to three vote on Tuesday. The proposal had been strongly endorsed by Governor (R) Arnold Schwarzenegger.

The plan, described as performance based infrastructure (PBI), would authorize state agencies to award contracts to private sector partners for the construction, operation and maintenance of public infrastructure projects through solicited or unsolicited proposals. The private partner would be able to collect user fees, tolls, fares or other charges.

State agencies would be able to enter into partnerships without legislative approval, and the state might reimburse a losing bidder’s cost of preparing the bid, according to the proposed bill. Other provisions dictated the public sponsor would share revenues, development costs and risks with the private party.

"Given that California is facing huge budget cuts in this economic downturn, it is irresponsible for legislators to turn down billions of dollars in private sector funding for infrastructure projects," Gov. Schwarzenegger said. "Why should those billions of dollars go to other states and not California?

"PBI gives government another tool with which to finance, build and maintain high quality school buildings, hospitals, transportation systems and other infrastructure,” Schwarzenegger added. “For far too long now, Californians and our environment have suffered from inadequate infrastructure. I will continue to fight to provide them with the facilities and services they deserve, and I urge the legislature to do the same and reconsider this bill."

Public-private partnerships have been highly contested in the state, with numerous groups campaigning on both sides of the issue. The California Conference of Carpenters, Consulting Engineers and Land Surveyors of California, and Southern California Leadership Council (SCLC) have been in support, while the American Federation of State, County, and Municipal Employees (AFSCME), California School Employees Association, AFL-CIO and Professional Engineers in California Government (PECG) have been among the opposition.

Proponents have pointed out the lack of funds the state currently has for numerous pressing infrastructure demands. SCLC came out in support of PBI last year, issuing a statement signed by former California governors and council ex-officios Pete Wilson, Gray Davis and George Deukmejian.

“It is the unrelenting growth of container traffic (tripling in 20 years) through our ports and destined for markets throughout the U.S. that is creating this capacity catastrophe on our highways and impacting our local communities,” the statement said. “Forty percent of the nation's imports flow through the Ports of Los Angeles and Long Beach. The pressure on trade corridors like the 710, 60, 5, 10 and 15 freeways, and adjacent rail lines to move more than half of this cargo out of the region, increases our congestion and impacts our air quality. The situation demands our urgent attention.”

SCLC executive director Lee Harrington was discouraged by the legislative council’s decision. “Considering how essential public-private partnership is to the future needs of California, the failure today of Governor Schwarzenegger's enabling legislation for performance based infrastructure is a real set back for the people of this state,” he said.

"There is no way public funds alone can provide the resources to erase the infrastructure deficit,” said the California Conference of Carpenters. “AB 2600 will allow public dollars to be stretched by the infusion of private investment as part of the effort to meet our infrastructure needs. Equally important, private sector investors will bring a fresh set of eyes to the infrastructure issue that will result in innovative approaches to the infrastructure problem."

California bus fleet Foothill Transit also supported the bill. “We’ll continue to support the facilitation of PBI initatives,” said Paula Lantz, president of Foothill’s executive board. “The flexibility and cost savings that are possible would benefit the region immensely as we look to improve our local transportation infrastructure.”

However, the opposition to the plan focused on the control the state would have ceded to private entities. "AB 2600 provides broad unlimited PPP [public-private partnership] authorization for unlimited infrastructure projects in the state of California,” said Professional Engineers in California Government (PECG). “AB 2600 does not have any protections for the public. This bill eliminates competitive bidding, eliminates public inspection, does not require public meetings or community events, provides a subjective selection process and allows unlimited profit."

"There is growing and widespread dissatisfaction and opposition to P3 [public-private partnership] from labor unions, environmental groups and taxpayers due to their poor performance, lack of accountability and long-term negative effects on public services,” said the California School Employees Association. "Should the Legislature decide that there are circumstances where P3 should be undertaken, clear safeguards for the public should be written into law. These include safeguards relating to missed deadlines, cost over-runs, displacement of public employees, excessive profits, shoddy work, inferior maintenance, oversight, inspection, public hearings, transparency, competitive bidding, international treaties and lawsuits."

About the Author

Justin Carretta

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