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California Taps French Firm for Its First Courthouse P3

ALAMEDA, Calif. — California this week selected a group led by Meridiam Infrastructure to be its preferred partner for the state’s first public-private partnership for a courthouse.

The state Administrative Office of the Courts Monday announced that it has chosen Paris-based Meridiam as the best of the three P3 proposals it evaluated for the project, which will build a new courthouse in Long Beach.

The Meridiam team beat proposals led by Lankford & Associates and Balfour Beatty.

“Now we’re going to be conducting exclusive negotiations with the consortium,” said Philip Carrizosa, spokesman for the courts office. “We’ll attempt to finalize a project agreement which will include the financing.”

The state Department of Finance must then sign off on the final agreement.

Details on the winning proposal were not released — just the parameters of the transaction, which calls for the state’s private partner to design, build, operate and maintain the courthouse for 35 years. The state will pay an annual rent after it assumes occupancy.

In its announcement this week, California said that the Meridiam consortium — Long Beach Judicial Partners — would raise 100% of the financing.

The Meridiam-led consortium’s financial advisers include KPMG and BNP Paribas. Fulbright & Jaworski LLP provides legal counsel.

In a 2006 report on the Long Beach project, the state estimated the cost of building what was then expected to be a 300,000-square-foot building at $296 million, using a traditional design-bid-build procurement. The project has since grown to 500,000 square feet.

In 2009, when California announced the three finalists, it said that both tax-exempt bond financing and bank-funded financing alternatives were represented among the proposals. According to the original request for proposals, the state would not consider any plans that involve direct issuance of tax-exempt bonds or certificates of participation by a state entity, or that depend on any state entity to be a direct borrower.

The Long Beach P3 project — or as the state terms it, “performance-based infrastructure” — was initiated at the urging of Gov. Arnold Schwarzenegger, according to Carrizosa.

“We agreed to try it in a courthouse and see how it works,” he said. “The Long Beach court building is something of a pilot project. We’ll evaluate it as we go along.”

California officials say the Long Beach project is the first such courthouse public-private partnership in the United States, though they say similar projects have been carried out in Australia, Canada, and the United Kingdom.

Most of the state’s capital-investment needs for courts — which are considerable — are still being met through the issuance of municipal bonds.

State lawmakers in 2008 adopted SB 1407, a package of legal- and court-related fine and fee increases, to be used to back $5 billion of revenue bonds for courthouse projects around the state.

So far, the California Public Works Board, which issues the bonds backed by SB 1407 revenues, has approved 37 projects, according to the Administrative Office of the Courts, which expects to seek authorization this month for the remaining four projects that will be funded by the measure.

There will still be plenty of work to do. Since 2002, when the state government assumed responsibility for most local court facilities from counties, the state Judicial Council and the courts office have assumed control over more than 500 court facilities.

Despite the $5 billion bond authorization, the capital plan for trial courts around California includes 112 projects for which financing has not been secured, according to a fact sheet released by the Administrative Office of the Courts in 2009.

In Long Beach, the new courthouse will provide 31 courtrooms in a building with more than 500,000 square feet.

That will more than double the space available in the existing, 51-year-old courthouse, which, according to a document produced by the state courts office, “suffers from functional flaws, is undersized and dilapidated, and has accessibility issues.”

The court will occupy roughly three-fourths of the building’s overall space. The additional space will be used for offices of county justice agencies and for commercial office and retail space compatible with court uses.

The project also includes renovation of the nearby existing parking structure, expanding its capacity to more than 900 spaces.

The new court building will be built on land that currently serves as a parking lot. The state secured the land as part of a swap with Long Beach city agencies, which in return will get the old courthouse when the new one is ready.

Assuming the Department of Finance approves the Long Beach P3 project agreement, construction is expected to begin by the end of the year, with the building ready for occupancy in mid-2013.

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