Efforts to replace a dilapidated thoroughfare in San Francisco are poised to be shifted from the government to the private sector through a controversial plan that is drawing fire in the courts.
The agreement, known in the Capitol as a public-private partnership, or P3, is between Caltrans, the San Francisco County Transportation Authority, and Golden Link Concessionaire, LLC, a private company.
The project, known as the Presidio Parkway, is envisioned by Caltrans as a state-of-the-art, 1.6-mile stretch of road that cuts through Presidio National Park and its wetlands, all the while abiding by the strict environmental provisions created by the U.S. National Park Service and Presidio Trust.
The plan includes lush landscaping, ushering cars into a grass-covered tunnel and restoring some of the dejected flora overtaken by weeds and the concrete of the nearly 80-year-old Doyle Drive in San Francisco.
But the transfer from public to private sector isn’t taking place without a fight.
After filing a lawsuit against Caltrans and the SFCTA for entering into the P3, a state employee union representing 13,000 California engineers sought a temporary restraining order against Caltrans and the SFCTA this week. The court agreed, at least temporarily, approving the TRO through Dec. 30.
The group hopes to stop the two organizations from going through with their P3 plans. The partnership would contract with Golden Link to finish the second half of the project’s construction and maintain the finished product for 30 years thereafter.
But the Presidio Parkway cannot legally be transformed into a P3, according the Professional Engineers in California Government, which cited the state Streets and Highways Code in its Nov. 2 suit against Caltrans and SFCTA.
“These taxpayers and public servants have a right to be protected from the illegal and wasteful actions of the…public officials who have been and plan to continue expending public money in violation of the law,” PECG contended
Earlier, Caltrans and the SFCTA were required to write out a financial plan since over $120 million of the allotted funds came from the federal government. The 2009 plan reported that the entire project was fully funded by a variety of grants and other local, state, and federal dollars.
“With 90 percent confidence the total YOE (year of expenditure) cost of the project was found to be $846.2 million. The total committed funding for the project, $878.8 million, exceeds the 90 percent confidence level cost estimate by $32.6 million.” read the plan.
Even though the project had more than enough funds to continue with the traditional bid-and-build process throughout the second phase at an estimated cost of $473 million, Caltrans district director and project manager Kome Ajise said switching to a P3 would save the state money over time. The P3 will cost an estimated $1.7 billion.
Sen. Alan Lowenthal, D-Long Beach, was skeptical of the P3 from the beginning, said Lowenthal’s chief of staff, John Casey.
“He’s not opposed to P3’s in general he just doesn’t like the way this particular plan has been put together,” said Casey.
P3 agreements have been a cause of contention in past politics. While a bill passed in the Senate, SB 4, allows the government to pursue P3 agreements as a means of sharing cost and manpower with private companies, it also requires the P3 to include an independent revenue source. This usually results in toll roads, where the cost of construction and maintenance are passed on to motorists. As a result, P3’s aren’t widely popular, especially in California where there is only one toll road in the state.
But Presidio Parkway imposes no such toll. Instead, Caltrans and SFCTA will pay Golden Link $28.5 million a year for thirty years after the road is built, in what Caltrans calls “availability payments.” Those payments will come from the same State Highway Operation and Protection Program fund that paid $400 million into the original project plans. Golden Link will also receive a milestone payment of $173 million once they’ve built the road by the 2014 deadline.
The milestone payment will come from the allotted $473 million left over for the project’s second phase budget.
“This will result in a total savings of 24 percent over the course of thirty years,” said Ajise, who noted that the road will need significantly upkeep during that time.
But the non-partisan Legislative Analyst’s Office isn’t buying it. In it’s December 9th report, the LAO concluded,
“We do not think the Presidio project is a good fit for a P3 procurement approach because the project is already very far along in its schedule and it does not rely on a toll or user fee to fund the work…our analysis finds that the Golden Link agreement does not meet all the goals Caltrans intended and is not likely to be a good fiscal deal for the state.”
The LAO also noted, “Caltrans selected Golden Link from among two bidders on this agreement.”
The report, written as per Lowenthal’s request, also concluded:
“We think that the state should consider not signing the contract with Golden Link, and instead build the project with a more traditional approach.”
But the California Transportation Commission has already signed off on the P3 plan. PECG sharply criticized CTC for the move.
“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,” said PECG executive director Bruce Blanning in a statement.
CTC refused to comment due to the pending allegations brought on by PECG regarding the Presidio P3.
The delicate landscape of the project complicates matters.
“The setting of the project is one of the reasons we were compelled to consider a P3,” said Ajise.
“Presidio Trust and the National Park Service are very, very jealous land owners. They don’t want us in there,” said Ajise. Building the road through Presidio means the contractors, and the state, are liable to incur risks. If chemicals are spilt, a new species or environmental artifact discovered in the midst of construction, it could cost the developer time and money.
“The one big risk we have on this is getting through construction within the park environment,” said Ajise. Ajise said the P3 agreement puts that risk on Golden Link, who has to make up the different in additional costs themselves.
The LAO report also acknowledged the risks involved in environmental conditions of the construction site but said the P3 does not sufficiently shield the state from assuming many of those risks, as suggested by Caltrans.
“The state will retain some potentially significant construction risks such as costs or other problems that could result from the discovery of hazardous materials, endangered species, and archeological or cultural artifacts,” read the report.
Fully 100 percent of the costs associated with those risks are still maintained by the state, said the report.
“I don’t know why they would say that,” responded Ajise, who maintains that the P3 contract holds Golden Link responsible for following the environmental guidelines.