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Caltrans, SFCTA Picks European Consortium as P3 Builder of Presidio Parkway Phase Two

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The State of California, Department of Transportation and the San Francisco County Transportation Authority issued a notice of intent to award a public-private partnership project worth $1 billion to a consortium around Essen, Germany-based HOCHTIEF Concessions for the design, construction, finance, operation and maintenance for 33 years of San Francisco’s Presidio Parkway project.

Caltrans, SFCTA Picks European Consortium as P3 Builder of Presidio Parkway Phase Two.
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HOCHTIEF’s 50% partner on the Golden Gate Bridge southern access project is Meridiam Infrastructure, based in Luxemburg. The consortium‘s construction team is led by HOCHTIEF subsidiary Flatiron.

The German firm set up HOCHTIEF PPP Solutions North America in 2009 to bid on PPP projects in Canada. It is now under construction on two major projects -- 10 schools in Canada’s Alberta province and 18 provincial police facilities Ontario province. HOCHTIEF says that at the beginning of October, Gov. Arnold Schwarzenegger already approved the fiscal appropriations necessary for remunerating the private partner. The contract is planned to be awarded to the consortium around the HOCHTIEF subsidiary in December at the latest. The other teams shortlisted for the project included, among others, the Golden Gate Access Group around the Spanish construction group ACS.

In a May 21 board hearing, the California Transportation Commission approved a request from Caltrans and the SFCTA to use a public-private partnership on phase two of the Presidio Parkway project.

The $1-billion project, which will demolish the current Doyle Drive southern approach to the Golden Gate Bridge and construct a six-lane replacement facility through the Presidio park, is currently in the first phase, which includes the first four contracts; contracts five through eight would now be financed through a private developer.

The CTC approval was applauded by the governor and the American Council of Engineering Cos. California and the P3 sponsors Caltrans and the SFCTA, while the public engineers union Professional Engineers in California Government called the decision “an illegal waste of hundreds of millions of taxpayer dollars.”

The P3 proposal came about after last year’s passage of Senate Bill XX4, an amendment to the state Streets and Highways Code. It allowed the use of P3s to deliver some projects in California and Gov. Schwarzenegger lauded the legislation as a way to build transportation projects “more efficiently and achieve faster delivery while transferring risk to the private sector and reducing overall project costs.”

Presidio Parkway is the first project to be brought before the CTC for P3 approval. Initially, the CTC staff under executive director Bimla Rhinehart did not recommend a P3 for the project due to questions about State Transportation Improvement Program (STIP) funding or if P3 projects are required to include tolls or user fees.

“Presidio Parkway is a badly needed project to improve traffic mobility and public safety in the San Francisco approach to the Golden Gate Bridge and it can now move forward expeditiously,” says Paul Meyer, executive director of ACEC California, after the May board decision. “The project is a high standard solution for meeting tomorrow’s traffic needs and safety standards.

“Thanks to SB XX4, California is now able to utilize –albeit it on a limited basis -- what has become a valued and accepted project delivery system throughout the world. Not every project is appropriate for a P3 delivery, but public agencies now have a valuable tool for speeding up the delivery of needed projects without having to take on all the risk and that is a very positive development for California taxpayers.”

Jose Luis Moscovich, executive director of the SFCTA, says that SB XX4 does not require tolls or user fees, but that the state legislature needs to work through some issues about specific funding.

“It is disappointing that the California Transportation Commission chose to ignore its own staff and legal counsel recommendation and approve this proposal despite opposition from every local and regional transportation agency which testified,” says Bruce Blanning, PECG executive director. “Eliminating competitive bidding to put a fully funded project in debt for the next 30 years will cost the Bay Area jobs, increase traffic congestion, and waste more than half a billion taxpayer dollars. That is irresponsible and inexcusable.”

Prior to the vote, PECG ran one-minute radio ads in the state refuting the benefits of P3s.

Under the P3 proposal, a private developer would now be engaged to design, build, finance, operate and maintain the Presidio Parkway projects over 33 years. The developer would be paid a $173.43 million milestone payment at the end of construction, with availability payments estimated by the CTC to be between $1.131 billion and $1.383 billion over a 30-year period. Users would not be assessed tolls, the proposal says, and availability payments would be made primarily from the State Highway Account.

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