Presidio Parkway, San Francisco, CA
The $852 million Presidio Parkway project is replacing Doyle Drive, a 1.6-mile segment of Route 101 that serves as the southern access point to the Golden Gate Bridge. Doyle Drive, built in 1936, did not meet current highway standards and was structurally and seismically deficient.
Beginning in the early 1970s, the California Department of Transportation (Caltrans) undertook several studies to examine improvements to Doyle Drive. While the public supported improving safety conditions on Doyle Drive, it did not want capacity to be increased. By 1991, the San Francisco Board of Supervisors had established the Doyle Drive Task Force in 1991 to review various proposals developed by Caltrans. In early 1993 the Task Force identified a preferred replacement alternative that balanced Caltrans’ requirements with environmental and community concerns.
Later in 1993 Caltrans completed a Project Study Report identifying several alternatives based on the task force recommendations. Then in 1994, the National Park Service assumed responsibility for the Presidio as a newly established National Park. It incorporated its main objectives for the Doyle Drive improvements into its general management plan, focusing on maintaining the surrounding area’s historical value, minimizing noise pollution impacts, and enhancing access and circulation.
In 1996, the San Francisco County Transportation Authority (SFCTA), which is responsible for transportation planning, design and funding in San Francisco County, completed the Doyle Drive Intermodal Study. It supported the task force and National Park Service recommendations emphasizing median separation to improve safety, multimodal access to the Presidio, and design aesthetics.
SFCTA and Caltrans submitted an Initial Finance Plan to the Federal Highway Administration in May 2009 and the construction schedule was accelerated to take advantage of Federal Recovery Act funding and gain seismic safety conditions as soon as possible. Construction of a portion of the new roadway and a temporary detour (Phase I) began in late 2009 and reached substantial completion in April 2012. The $496 million Phase I was implemented via a traditional design-bid-build procurement.
To lower project costs, meet key deadlines, and meet maintenance needs for the next several decades, the project sponsors selected a Design, Build, Finance, Operate, and Maintain (DBFOM) Public-Private Partnership (P3) approach for the remaining project components (tunnel, roadway, viaduct, interchange, and landscaping). This approach was decided after assessing potential outcomes using traditional procurement approaches.
The P3 is advancing as an availability payment concession, as tolling was strongly opposed by commuters in Marin County north of the city. Over the life of the concession, Caltrans will pay the concessionaire quarterly availability payments as the company “makes available” the facility at a pre-defined level of condition and performance.
Presidio Parkway is the first transportation P3 project in California following the passage of the State’s new enabling legislation in 2009.
Project Financing and Delivery
In January 2011, after a competitive bidding process, Caltrans, in cooperation with the SFCTA, entered into a P3 agreement with Golden Link Concessionaire (GLC), LLC whereby GLC would deliver the project’s $365 million Phase II and then operate and maintain the entire parkway under a 30-year lease.
GLC is a special purpose entity established by Hochtief Presidio Holding, LLC and Meridiam Infrastructure North America II to execute the concession. Hochtief, with a 50 percent share in the concession company, is a leading international provider of construction-related services. Meridiam, also holds a 50 percent share in GLC. Meridiam is based in France and is one of the largest investors in and developers of public infrastructure facilities in the world. For construction of the $365 million Phase II, GLC entered into a fixed-price, date certain, design-build agreement with a design-build joint venture, comprised of Flatiron West, Inc. (65%) and Kiewit Infrastructure West Co. (35%).
GLC’s financing includes $45.6 million in equity from partners in the concession, $167 million in short-term commercial bank debt (from five banks), and $150 million in credit support from the U. S. Department of Transportation’s TIFIA loan program.
The flexibility offered by TIFIA was key to the successful financing of the project. In particular, TIFIA credit support was provided to the concessionaire in two loans. One is a short-term loan ($908 million) that the company will repay upon final delivery of the project. The second is a long-term loan ($60 million) that will be repaid over the life of the project via the non-Federal portion of the availability payments. This precedent-setting financing structure reduced interest costs and aligned repayments with available non-federal funding sources.
Another essential component in making the Presidio Parkway a viable project was a new Federal Highway Administration (FHWA) policy allowing State DOTs to apply their Federal-aid funds to availability payments. FHWA determined that the P3 Concession Agreement defines the P3 project in a way that allows it to be treated, for purposes of determining Federal-aid eligibility, in a manner similar to that of a traditional public works project.
Under the P3 Agreement, GLC will receive milestone payments (funded with State and local transportation funds) from Caltrans upon substantial completion of the project. These payments will pay off the bank debt as well as the short-term TIFIA loan. The availability payments, received over the life of the concession, will be used to compensate GLC for routine operations and maintenance, lifecycle maintenance, and provide a return to equity. Additionally, these funds will be used to repay the long-term TIFIA loan.
Caltrans retains ownership of the land and improvements. At the end of the concession period, the concessionaire will turn back the facility to California.
Phase II work started in 2012 and is scheduled to be complete in 2015.