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Financing the Future: Rebuilding California’s Infrastructure

This study by David E. Dowall from the University of California, Berkeley, examines the challenges and opportunities for financing infrastructure in California. It delves into the state's population growth trends, capital outlays, water storage capacities, and more to identify key issues such as unpredictable funding, imbalanced state-local financing shares, and poor project execution. The study suggests aligning tariffs with costs and benefits, using tiered pricing models, and making infrastructure funding more predictable. It emphasizes the need for a long-term financing plan and lifecycle costing for infrastructure investments to support California's future growth.

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Financing the Future: Rebuilding California’s Infrastructure

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  1. Financing the Future: Rebuilding California’s Infrastructure David E. Dowall University of California, Berkeley

  2. Persistent Population Growth California’s Population 1930-1996, (thousands)

  3. Capital Outlay Trails Off Real State Capital Outlays 1930-1996 (per capita in 1996 dollars)

  4. VMT and State Lane Mile Trends, 1957-1970, Indexed 1957=100

  5. VMT and State Lane Mile Trends, 1970-2000, Indexed 1970=100

  6. Water Storage Capacity (Acre feet) and Population Trends, 1950-1970, Indexed 1950=100

  7. Water Storage Capacity (Acre feet) and Population Trends, 1970-2000, Indexed 1970=100

  8. California’s biggest infrastructure challenges • Failure to link strategic and capital planning • No multi-sectoral vision for investment planning • Lack of interest in demand management • Declining real user fee-base for many services • Unpredictable funding • Imbalanced state-local funding shares • Poor project execution • Failure to maintain investments

  9. Aligning tariffs with costs and benefits • Conventional wisdom • Foster consumption of merit goods • Redistribute income • Revisit the role of prices • Generate revenues to pay for services • Balance tariffs with consumption benefits

  10. Real Resident Undergraduate Student Fees (1999-2000 dollars) Indexed 1965=100 for UC and CSU and 1984=100 for CCC

  11. California State Gasoline Tax in Real 1997 dollars Indexed 1950=100

  12. Real Wholesale Water Prices from the State Water Project ($/AF), Indexed 1963=100

  13. Tariffs Should Match Costs • Use tiered pricing to reflect incremental costs • Price road use for peak and off-peak travel • Price educational services according to means • Tariffs should cover life cycle maintenance

  14. Tariff Setting Ideas • Water supply increasing block rates to reflect the incremental cost of providing water • Road Pricing should reflect full financial and social costs of travel • Pricing of educational services should promote access but there should be more emphasis on means testing • Life cycle costing and maintenance requirements should be used to determine tariffs • Equity concerns are best addressed through income transfers, not infrastructure pricing

  15. Financing Infrastructure • Infrastructure programs need to be based on sound long-term financing plans • Make funding more predictable • Rebalance state-local financing responsibilities • Make greater use of user and beneficiary fees

  16. Higher Education FTE Enrollment and Real Capital Outlay, 1970 to 2000 Indexed 1970=100

  17. What Should the State do? • Define California’s vision for the future use it to plan infrastructure investments • Introduce demand management • Review and adjust user fees and charges, develop ability to pay offsets • Make capital funding more predictable • Introduce accountability to project delivery • Introduce lifecycle costing and management

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