Hochtief, Meridiam sign Presidio PPP agreement

The California Department of Transportation has entered an agreement with Golden Link Partners for construction of the Presidio Parkway project. A public workers’ union filed a temporary injunction against the partnership last month, but it has been lifted by a California judge.

The California Department of Transportation (Caltrans) and the San Francisco County Transportation Authority have signed an agreement with Golden Link Partners, a joint venture backed by German infrastructure developer Hochtief and French infrastructure fund manager Meridiam Infrastructure, for construction of the next phase of California’s Presidio Parkway project.

The agreement gives the consortium design-build rights as well as 30-year operation and maintenance rights for the project, which includes rebuilding a stretch of road that leads to the Golden Gate Bridge.  It also includes construction of new tunnels and a new northbound bridge, according to a Presidio Park Project statement. The project is backed by both a $173 million “milestone” payment and quarterly availability payments. Availability payments are paid to the private partner in exchange for making the asset available in good condition.

The Presidio Parkway project is the first to make use of a 2009 law that allowed Caltrans and regional transportation authorities to conduct public-private partnerships (PPPs). But the Presidio partnership has been contested, and could still face legal challenges.

 

Professional Engineers in California Government (PECG), a union that represents about 13,000 state-employed workers, including around 9,000 Caltrans workers, filed a suit against the partnership in November, arguing that availability payments were not legally authorised, among other challenges.  About two weeks ago, PECG successfully filed for a temporary restraining order, but a California judge has lifted the order.

 

But PECG can still argue the original suit. According to Lisa Marie Burcar, a spokesperson for PECG, the lawsuit will be decided on January 21. The injunction prevented Golden Link Partners from signing an agreement with Caltrans and the San Francisco County Transportation Authority, but the lifting of the injunction does not guarantee that that the suit will be decided in favour of the PPP, Burcar said. 

Burcar said she did not know whether PECG would appeal the decision if the union loses the suit later this month.

The judge’s comments indicated the “petitioners are unlikely to prevail” in their argument that the PPP violated the law by relying on availability payments rather than user or toll fees.  The judge stated that the provisions of the law that PECG cited “fall short of requiring the use of tolls and user fees as a necessary funding element or the sole funding source in every PPP.”

 

 

 

Construction is set to cost $358 million, according to the California Public Infrastructure Advisory Commission’s comments on the agreement. In an October financing plan, the Golden Link consortium said it would fund the project primarily through a $150 million loan from the federal government, $150 million in private activity bonds, and $45 million in equity from Hochtief and Meridiam.

The consortium will receive a $173 million “milestone” payment when it completes the second phase of construction and opens the road to traffic.  After that, California has agreed to $28.5 million annually in availability payments, according to the advisory commission’s report. The availability payments are capped at $35 million yearly. 

Presidio Parkway is intended to replace Doyle Drive, the 73-year-old access to the Golden Gate Bridge that is “structurally deficient,” according to the advisory commission’s comments.

Financial close is expected in the summer and construction should begin later this year, according to a Presidio Parkway statement.