California needs fast, investor friendly projects to win federal infrastructure money

14 December 2016 by Steve Blum

A new business model?

Money could start flowing into California infrastructure, if president-elect Donald Trump’s plan to spend a trillion dollars on construction projects continues on the course that it seems to be on. That was the cautious optimism expressed at the California Economic Summit yesterday during a briefing on infrastructure programs and progress.

The optimism was about the way Trump’s infrastructure priorities – at least as far as those have been articulated – broadly matches California’s make-up: big projects in major metropolitan areas that have a national impact and rural areas that are close to major economic drivers – like Silicon Valley – and to logistics hubs like major seaports, rail lines and highways.

The caution was the result of doubts about California’s ability to compete with other states for federal subsidies and its willingness to embrace private capital and participation – otherwise known as public-private partnerships.

There are states that don’t have California’s regulatory overhead – environmental clearances, work rules, set asides for particular purposes such as low income housing and the list goes on – and they might be able to put (I hate to say it, but it’s back in vogue) shovel ready projects on the table faster. Governor Brown’s plan to bore tunnels around the Sacramento-San Joaquin Delta and transport more water south was given as an example. It’s a high profile mega-project that will generate lots of jobs, but there’s a seemingly infinite number of only-in-California wrenches that can thrown into the works.

Trump is also said to favor supplementing private sector investment in public projects, rather than simply handing out grants to states. The California high speed rail project would likely have to be converted into some form of public-private partnership, rather than remain a purely public sector endeavor, in order to get federal funding, according to Michael Likosky, the head of the infrastructure practice at 32 Advisors, an east coast consultancy. Texas and Florida have competing, privately financed high speed rail projects that are a better match with Trump’s preferred business model, he said.

On the other hand, Likosky expects straight grants – as opposed to loans or partnership financing packages – will be available for public sector projects in rural areas.