Presidio Parkway, once called a ‘shining example’, is over budget, overdue
Former Gov. Arnold Schwarzenegger celebrated when the California Transportation Commission voted, despite a host of warnings, to pay a contractor more than $1 billion to build two tunnels and a stretch of road outside San Francisco nine years ago.
Schwarzenegger said the project’s new approach, which aimed to cap public expenses and shift responsibility to the private sector, would serve as a “shining example” of an innovative way to improve the state’s highways while saving taxpayer dollars.
Now the project, known as the Presidio Parkway, is more than two years late and $208 million over budget. When the commission approved another $34 million in delay-related spending last month, two commissioners who originally opposed the project lamented their predictions had come true.
“This has been a fiasco from the beginning,” Commissioner Bob Alvarado said at the March 14 meeting.
Before Schwarzenegger got involved, the project had an estimated cost of $473 million to $499 million. It would replace a 1.6-mile section of U.S. Highway 101 south of the Golden Gate Bridge that had deteriorated since it was built in 1936 and no longer met earthquake standards.
The project was moving forward during the recession, when the price of materials fell and contractors were hungry for work.
Schwarzenegger wanted to try something different, calling for a public-private partnership. Unlike other state highway projects, which Caltrans would design, put out for bid and then pay a contractor to build, the partnership approach would select a contractor at a lower upfront cost to design, build and maintain the project for more than 30 years.
Proponents of Schwarzenegger’s approach, including Caltrans leaders, said it would give the project a better chance of being completed on time and on budget than the state’s traditional approach while shifting risks of delays and future problems to a contractor.
Caltrans selected San Francisco-based contractor Golden Link Concessionaire to do the project for $1.1 billion, and then asked the Transportation Commission and the Legislature to approve the agreement.
The project became the first public-private partnership following 2009 legislation that authorized the partnerships. The best fits for the partnerships, analysts said, were projects that included upfront contributions from contractors and continuous revenue streams, such as tolls. The Presidio Parkway is near the Golden Gate Bridge toll, but the parkway is not funded by ongoing fees.
“We do not think the Presidio project is a good fit for a ( partnership) 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,” the Legislative Analyst’s Office said in its analysis.
Now the state is paying for the Parkway through 2043 from its general highway account.