'California was a leader’

FRESH OUT OF law school, Dale Bonner was working in state government. It was 1992. It was California, his adopted home state. And Bonner had arrived.

“A job in government,” an unflinching Bonner, a 1990 Georgetown Law graduate, would answer whenever he had been questioned about his ideal walk of life.

As an undergraduate, Bonner had foregone the glorious Golden State summer for sweltering Washington, D.C., where, amid marble-and-monument grandeur, he toiled in the Capitol Hill Internship Program. He had been a diligent student, a hard worker and, as it would turn out, a heck of a networker and trusted friend to the powerful. Now here he was: a man on the rise. There was just one slight hitch.

It was 1992. It was California. And Bonner was working in state government.

In 1992, a summer budget crisis was threatening to send California plummeting into a fiscal void. The state could not afford to compensate its municipal workforce. The state suffered a credit downgrade, and recorded a $14 billion deficit. Meanwhile, a budget battle pitting then-governor Pete Wilson, a Republican, against speaker of the state assembly, Democrat Willie Brown, had reached a stalemate – with each side refusing to give in.

Bonner, himself a Republican, Wilson associate, and a trusted aide to the governor, had his work cut out.

“A government job had been the plan for a while,” Bonner, who is today based in Los Angeles, admits.

That September, an 11th hour compromise was achieved. Wilson cut spending and instituted a tax hike that he had been clamoring for.

As for Bonner, he would come to recognize the budget crisis as a watershed moment: “privatisation” and “infrastructure” had become part of the political rhetoric in Sacramento.

THE WILSON CONNECTION

In addition to his newly minted $57 billion fiscal budget, Wilson also pressed for legislation that would facilitate private investment in public infrastructure.

“Privatisation came as part of an effort to find an economic solution,” Bonner explains. “We were focusing on state fiscal condition”.

Wilson, a longtime California politician, became governor in 1991. Bonner had met Wilson as a college intern, forging an effective working relationship with the Republican stalwart. Ivy League educated, former Marine Wilson was an office holder who had been around the block.

“Pete Wilson was an interesting leader for California,” explains Bonner, “because when he became governor, he had various across-government experience”.

By the time he became governor, Wilson had served in the California state assembly. He was elected mayor of San Diego in 1971, remaining in office until 1982, when he was elected to the US Senate.

After winning his first term as governor, Wilson would be re-elected to the position in 1994.

In Washington, says Bonner, Wilson had observed “how people in government from around the world had begun working in the private sector”.

This period saw the advent of the so called Private Finance Initiative, or PFI, a method of obtaining private sector capital for the contracting and management of public infrastructure. In particular, Margaret Thatcher, UK Prime Minister, had emerged as a leading proponent of privatisation. And in Australia, a centralised public-private partnership (PPP) process would help establish that country as a global expert in private investment in infrastructure.

Wilson, over the course of a long and wide-ranging career in public service, had taken note.

“All of this was informing his thinking,” Bonner recalls.

“It was a time of great experimentation” [in PPP implementation], Bonner remembers, crediting Wilson as a pioneer, even though, he jokes, “I wish I could say that it was my idea”.

SR-91

No conversation about the history of American toll roads can be complete without reference to the SR-91, or State Route 91, express lane project.

SR-91 was a flagship PPP for California as well as America, and Bonner was there from start to finish.

“It is a unique experience to take part in a project from conception to close,” Bonner says. “From financial review, legislative process, construction to management; it gave me a unique perspective”.

SR-91 was financed with private capital. It was a 10-mile, four-lane toll project that replaced the median of an existing eight lane-thoroughfare between State Route 55 (“a greenfield project on a brownfield,” according to Bonner) in Orange County and Riverside County, home to a fast growing residential real estate market.

The task was awarded to the California Private Transportation Co. (CPTC), a top flight consortium including Compagnie Financière et Industrielle des Autoroutes (Cofroute), the largest toll road operator, from France, and Granite Construction, the California construction firm.

Not that SR-91 was a project with a smooth process or linear timeline. The toll road, opened in 1995, was leased back to California, which then leased the state route to CPTC for a 35-year concession. In 2002, CPTC sold SR-91 to the Orange County Transportation Authority (OCTA) for $207 million.

But polemic surrounded SR-91. A noncompete clause barred improvement on the non-express segment of the state route, prompting a CPTC lawsuit against the state, and the sale of the toll road to OCTA. The deal meant California assumed $135 million in debt for the toll road and paid CPTC $72 million in cash.

Criticism alleged the imbursement to CPTC happened because the cost of the design-build increased from $57 million to $130 million. Detractors also labeled the ‘per toll’ price high.

Bonner is a staunch defender of the project.

“It can depend on who is talking, and on which day of the week,” Bonner stresses. “I certainly acknowledge the difficulty we faced. The private investor would see a lot of risk. On the public side, I could pretty clearly see the case that SR-91 was a success”.

But then again, sharing risk and reward between the private investor and public side is an acknowledged challenge. And there is always space for counter-argument.

Public financing alone would have taken longer. The toll road is also well maintained; Bonner says the road is shut each Sunday, “inch by inch, to seal every crack…a rigorous maintenance schedule”.

Congestion has emerged as a complaint, but the corridor is slated for improvement.

“I think we learned in hindsight,” Bonner reasons.

PUBLIC AND PRIVATE

In 2011 Bonner, after serving as Secretary of Business, Transportation and Housing, went into business for himself, launching advisory firm Cal-Infra Advisors.

“The goal [of Cal-Infra] is to help people think about the California market,” he declares.

Cal-Infra followed a career divided between private practice and California government.

In addition to working with Wilson as Deputy Secretary and General Counsel of Business, Transportation and Housing, he has also worked with the Schwarzenegger administration, as well as with previous governor Gray Davis.

Bonner is focused on advancing an infrastructure agenda in his home state. His outlook is positive: California Public Employees Retirement System (CalPERS) is allocating $800 million to infrastructure in the state; and there is a potential project pipeline.

Industry frustration about the lack of PPP acceptance in the US, he says, is understandable, but “in an ideal world, we would have been building a programme in a better time, of political and economic strength,” and, as far as his home state is concerned, “people forget California was a leader”.

Not investing in infrastructure is like having a human being without a skeletal structure, Bonner says. “Infrastructure is a critical part of our market”.