French infrastructure fund manager Meridiam and a group of engineering firms and developers, as well as the US state of California, have edged closer to replacing Doyle Drive – a 75-year old, 1.6-mile stretch of road that runs along Highway 101 and connects the city of San Francisco and the Golden Gate Bridge with a parkway.
The group is finally nearing financial close for the endeavour now that the state of California’s Supreme Court has dismissed a lawsuit filed by an engineering union meant to stall the construction of the $360 million Presidio Parkway. As a result, phase II of the project – which includes construction and is the stage where financing is obtained – can begin soon.
The California Department of Transportation and the San Francisco County Transportation Authority previously awarded the deal to a consortium of participants, comprised of the Merdiam Infrastructure North American Fund II, Hochtief, HNTB Corporation and contractors Flatiron West and Kiewit Infrastructure West.
Under the public-private partnership (PPP) agreement, the private consortium is given 30-year operation and maintenance rights for the project in exchange for a $173 million 'milestone' payment and availability payments totalling $28.5 million annually. Availability payments are public contributions made in exchange for keeping the road in good condition.
The latter structure drew fire from the Professional Engineers in California Government (PECG), an engineering union of some 13,000 state-employed professionals, which led to the complaint with the California State Supreme Court for support.
For the engineering union, the PPP structure adopted by the state increased the cost of the project from a $473 million competitive-bidding process to a no-bid deal worth $1.4 billion. The Supreme Court decided to reject the lawsuit.