Court green lights Presidio Parkway PPP

An appeals court has dismissed a legal challenge brought by an engineers’ union to stop a public-private partnership to construct a road leading up to San Francisco’s Golden Gate Bridge. However, the union may still bring the case before California’s Supreme Court.

The Presidio Parkway public-private partnership (PPP), which includes the construction of a road leading up to San Francisco’s Golden Gate Bridge, may be free to proceed now that an appeals court has dismissed a legal challenge brought by an engineers’ union.

A California appellate court has upheld a lower court's decision that the project agreement for the Presidio PPP, which was awarded to consortium comprised of French infrastructure fund manager Meridiam and German developer Hochtief, is legal.

Professional Engineers in California Government (PECG), the engineers' union which brought the appeal, may still bring the case before the California Supreme Court, but PECG executive director Bruce Blanning said that PECG has not yet decided whether to appeal the case further.

The appellate court's decision is a victory for California’s department of transportation, CalTrans, as well as the San Francisco County Transportation Authority, and could conclude a lengthy legal dispute that has blocked the Presidio PPP from reaching financial close.

“We're pleased that the California Court of Appeals for the First District ruled in our favor by confirming the lower court's decision. We look forward to moving forward and delivering this very important transportation project,” Caltrans acting director Malcolm Dougherty said in an emailed statement.

Earlier this year, an Alameda County Superior Court judge upheld the legality of the project agreement, but PECG appealed the decision. The case was argued on August 3, according to court filings. The appellate court had up to 90 days to decide on the case, according to PECG spokesperson Lisa Marie Burcar, but the decision came within a week.

In its lawsuit, PECG argued, among other concerns, that the PPP’s funding structure violated rules about how private operators could be paid.

Blanning described the Presidio Parkway PPP as “a huge waste of money”, and said the terms of the agreement with the Hochtief- and Meridiam-backed consortium ran contrary to the intentions of the 2009 legislative statute permitting such partnerships.

Blanning particularly took issue with the PPP’s funding structure, which includes a $173 million “milestone” payment to the private developers and quarterly availability payments that total $28.5 million annually. PECG has argued that private developers could only be paid through tolls or user fees.

“The whole idea if you have [PPPs] is to find a new source of money. And there if there are no tolls in this project, there is no new source of money,” Blanning said.

Blanning said he hopes that California will enact policy changes to prevent other PPP deals similar to Presidio from occurring, but said he thought it was unlikely that any future legislative changes could overturn the Presidio agreement. 

“Unless the courts say something, it’s pretty far down the road,” Blanning said.