Schwarzenegger calls for public-private tie-ups

California Governor Arnold Schwarzenegger speaks to members of the media at the Los Angeles Auto Show in Los Angeles November 15, 2007. Schwarzenegger called on lawmakers on Wednesday to pass legislation to allow the private sector a bigger role in building, operating and maintaining the state's public works.

SAN FRANCISCO (Reuters) - California Gov. Arnold Schwarzenegger called on lawmakers on Wednesday to pass legislation to allow the private sector to have a bigger role in building, operating and maintaining the state's public works.

The Republican governor, who has often spoken in favor of public-private partnerships to improve and expand state infrastructure, urged the state's Democrat-led legislature to approve bills that would expand the types of projects, services and government entities that could enter into such tie-ups.

Schwarzenegger and top lawmakers rallied voters last year to support ballot measures authorizing more than $40 billion in general obligation debt to finance various public works projects. But he has maintained those funds represent a fraction of the investment the country's most populous state must make in its infrastructure.

His administration estimates California requires $500 billion in public works investment over the next two decades, an effort he expects the private sector to join if lawmakers allow.

"The bonds approved by voters last year marked the first major investment in California's infrastructure in decades, but the job is far from finished," Schwarzenegger said in a statement.

Earlier this year, Schwarzenegger proposed that lawmakers allow the private sector to lease and operate California's lottery. The state-run program's revenues have been disappointing and many officials in Sacramento, the state capital, think it could be operated more effectively for the state by a private company.

Democratic lawmakers who control the legislature have traditionally opposed proposals that may cut public payrolls through privatization, but they did not rule out Schwarzenegger's lottery proposal.

In his statement, Schwarzenegger stressed that public-private partnerships -- or "Performance Based Infrastructure" -- would not make public works private.

Instead, according to the statement, they would "improve the value citizens get from their infrastructure. ... That value can take many forms, including lower upfront or all-in costs, better service, greater efficiency, faster delivery, full cost accounting or lower risk."

California would not contract with a private company to build and manage a public works project if it does not save money for the state, Schwarzenegger adviser David Crane told reporters during a telephone conference call.

"You only enter into this when the terms make sense," said Crane, an advisor for matters of jobs and economic growth.

Schwarzenegger's statement noted that public-private infrastructure partnerships operate successfully in Canada, Australia, Europe and some other U.S. states.

Crane said the governor's office is studying the range of partnerships elsewhere to see how they could be applied to California.

The list of U.S. states interested in the tie-ups is growing as revenues decline amid an economic slowdown, raising the prospect of projects such as toll roads financed and operated by private companies in place of traditional highways and freeways.

California faces a budget shortfall estimated at $14 billion over its current and next fiscal year as the housing slump slows its revenue growth. Schwarzenegger and lawmakers may be forced to tighten spending from the state's general fund on public works.

(Reporting by Jim Christie; Editing by Gary Crosse)