Deals

Presidio may face state Supreme Court

A California engineers’ union has launched the last legal challenge that could prevent the Hochtief- and Meridiam-backed Presidio Parkway from reaching financial close. The union’s previous lawsuit was dismissed in a county court earlier this year, and an appellate court upheld the dismissal.

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An engineers’ union has decided to take its case against California’s Presidio Parkway public-private partnership (PPP) to the California State Supreme Court, marking the latest twist in a battle over the legality of the PPP agreement.

The Presidio Parkway PPP, which the California Department of Transportation (CalTrans) and the San Francisco County Transportation Authority awarded last year to a consortium comprised of German developer Hochtief and French fund manager Meridiam, is contested in part because of its funding structure.

The PPP agreement for the project, which involves rebuilding the southern access road to San Francisco’s Golden Gate Bridge, gives the private developers 30-year operation and maintenance rights in exchange for a $173 million “milestone” payment and quarterly availability payments totalling $28.5 million annually. Availability payments are public contributions made in exchange for keeping the road in good condition.

Professional Engineers in California Government (PECG), a union of 13,000 state-employed engineers and related professionals, has challenged the Presidio Parkway PPP on several grounds, and has argued that the availability payment structure is not what was intended under California’s PPP-enabling legislation, which was enacted in 2009.

PECG pressed the case in the Alameda County Superior Court earlier this year, but the case was dismissed. An appellate court upheld the dismissal in August. The California State Supreme Court is expected to decide within a month whether it will consider the case, according to a statement from PECG.

In its petition to the Supreme Court, PECG said the outcome of the Presidio Parkway project would be crucial to deciding the fate of future PPPs, as it would “determine the types of projects that qualify as [PPPs] going forward and how those [PPP] projects will be funded”.

While the project reached commercial close in January, the legal challenges from PECG have prevented the project from reaching financial close. A CalTrans spokesperson previously told Infrastructure Investor that the deadline for financial close has been extended until early 2012. The PPP agreement is facing no other litigation that could prevent financial close, the spokesperson said.