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California Supreme Court Allows Presidio Parkway to Proceed as P3

Posted in PPPs

On November 16, challenges to the legality of the Presidio Parkway public-private partnership (P3) contract ended with a one sentence order from the California Supreme Court: “The petition for review is denied.”  Professional Engineers in California Government (PECG), the union representing Caltrans engineers, had asked the Supreme Court to review the Aug. 8, 2011, decision of the California Court of Appeal in San Francisco (First District), which unanimously held that Phase 2 of the Presidio Parkway project can move forward as a P3.  As a result, the California Department of Transportation (Caltrans) and the San Francisco County Transportation Authority (SFCTA) will continue with Phase 2.  The project will replace the old and outmoded approach to the Golden Gate Bridge in San Francisco.  The Supreme Court’s action denying the petition comes a year after PECG filed the lawsuit in the trial court.

When the California Transportation Commission considered whether to approve use of a P3 for the project under Streets and Highways Code section 143, the California Legislative Analyst Office (LAO), and the California Attorney General’s office (AG) as counsel to the Commission, gave written opinions concluding that the project was not authorized.  Caltrans’ general counsel, along with Nossaman acting as P3 legal advisor to Caltrans, took a contrary position.  Section 143, adopted in 2009, broadens the types of P3 projects authorized in California.  The Commission approved the project for a P3, while noting the unresolved legal issue.

PECG sued Caltrans and the SFCTA to stop Phase 2 of the project, arguing, like the LAO and AG had earlier, that the project was not authorized by section 143.  The courts rejected PECG’s argument that, under section 143, Caltrans’ internal personnel must perform all the preliminary planning and design services, as opposed to being responsible only for seeing them done correctly.  The courts also rejected the argument that P3 efforts under California law must be confined to toll projects, holding that the legislation authorized much broader use of innovative financing, in this case an availability payment.  Finally, the courts also held that the project was properly characterized as supplemental to existing facilities, as required by section 143.

The Presidio Parkway Project is the first project to reach award under California’s new P3 statute.  The decision of the courts—and now the finality—is important beyond the Presidio Parkway Project.  This should ease the way to use P3s under section 143 for other projects, and also provide helpful precedent for design build projects authorized under parallel legislation passed at the same time.

At the beginning of 2011, Caltrans, in cooperation with SFCTA, signed a contract for the project to Golden Link Concessionaire, LLC, a consortium led by Hochtief  PPP Solutions North America and Meridiam Infrastructure North America.

Nossaman represented SFCTA in the litigation and advised Caltrans during the P3 procurement.  Caltrans was represented in the litigation by its own department counsel.

For more about the Presidio Parkway Project and section 143, see Appeals Court Rules Presidio Parkway Can Move Forward as P3, Presidio Parkway Project Awarded, Preferred Proposer Selected for Presidio Parkway Project, Final RFP for the Presidio Parkway Project Released, Presidio Parkway Reaches Two Important Milestones, and Presidio Parkway Project RFQ Issued.