Research - MARCH 26, 2014

P3 symposium aims to unlock California

by Reg Clodfelter

“Why not California?” asked one speaker, addressing the central question of Opportunities and Challenges of P3 Delivery in California, the second panel discussion at the Squire Sanders March 2014 P3 Summit in San Francisco.

California is the eighth-largest economy in the world with an annual GDP of $2 trillion. But with an estimated infrastructure gap of $765 billion, according to the Berggruen Institute on Governance, and no way to come up with the funds in the state budget, many are amazed that it has had such a low volume of public-private partnerships.

Facilitating more P3s in the state was the focus of the panel, which included R. Sean Randolph, president and CEO of the Bay Area Council Economic Institute; James W. Martling, partner with Sperry Capital; Mark Whitely, of the Royal Institute of British Architects and principal with CannonDesign; Stefan Parche, president of Amber Infrastructure North America; and Peter Luchetti, board member of the California Infrastructure and Economic Development Bank and founder and managing partner of Table Rock Capital.

The panel members drew on experience they have gained in the private sector, as well as through P3s in Canada and the United Kingdom, to try and identify the roadblocks to jumpstarting more P3s in California. A topic that was brought up multiple times was the lengthy procurement process that drastically slows down the bid and investment process and limits the supply of new projects.

“We need to streamline the process to enhance the pipeline of projects in California,” one panelist said.

Another panelist pointed to the pursuit costs associated with investing a lot of time and effort into projects that eventually get shelved and how it is a factor keeping private sector money out of the state: “There is a need for a sufficient pipeline of projects, but I believe it is also important for our confidence level as bidders that once a project comes to market it will actually be closed within a reasonable timeline. … That is, from a private sector perspective, a huge concern. And that contributes, in my eyes, to the fact that there aren’t as many investors, developers, and private sector companies pursing this market as there could be.”

There was also discussion of the California I-Bank and what can be done to facilitate more financing from the bank, as well as how to increase the size of projects it finances.

"There's no breakthrough in mid- to large-cap infrastructure at the I-Bank, so we need to change that," Luchetti explained. “We've got a $38 billion bank looking at a $750 billion gap. So how do we take this I-Bank in California and get it up to $100 billion, or $250 billion? Let's get it up to $150 billion, and let’s not do it in 5,000 transactions, let’s start picking mid- to large-cap transactions, $250 million and up."

With the American Society of Civil Engineers estimating that California has nearly 3,000 structurally deficient bridges, more than 800 high hazard dams and nearly 70 percent of major roads in poor to mediocre quality, P3 Summits such as Squire Sanders’ are desperately needed to help bridge the private-public gap. Squire Sanders has facilitated infrastructure financing in the United States for more than 100 years and has been actively involved in P3s since the sector’s earliest days in Europe. 

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