Update – Wednesday, 11:30 a.m. – The state Board of Public Works unanimously approved the Purple Line contract Wednesday morning in Annapolis.
Comptroller Peter Franchot said the light-rail project will be “nationally recognized” and that millennials are “going to flock” to the Maryland suburbs as a result of the economic opportunities and improved transportation network the project will create.
Republic Gov. Larry Hogan said the Purple Line “will act as an economic development catalyst across one of the state’s most dynamic economic corridors.”
Franchot added that he has supported the project for decades and that when it’s constructed and open for service, “people will understand why transit is so important because this will do everything transit is supposed to do.” He said use of the Purple Line will take cars off the road and make established communities more livable and vibrant.
Treasurer Nancy Kopp said she can’t wait to ride the light-rail line. Maryland Transportation Secretary Pete Rahn said riders will be able to do so after construction is completed no later than the spring of 2022.
Rahn also told Hogan, “I truly believe this will be a legacy project for your governship.”
Hogan, Franchot and Kopp make up the board that approved the lengthy and complicated Purple Line agreement.
The $5.6 billion, 36-year agreement is more than 800 pages, with an additional 1,200 pages of technical provisions and design plans. It lays out the agreement between how the state will pay back Purple Line Transit Partners—a team of developers and construction companies—to design, build, finance, operate and maintain the 16.2 mile light-rail line and 21 stations that will connect Bethesda with New Carrollton in Prince George’s County.
The agenda for the meeting noted that Purple Line Transit Partners was chosen from a pool of four teams vying to build the rail line because it put forth the least expensive bid, and received the second-highest technical ranking in a review by state transit officials. A memo to the board says the team “met or exceeded all requirements” the state requested and the bid came in $490 million less than the second cheapest proposal.
The approval by the board sets in motion the final steps before the private partner can begin construction. Now that the agreement is approved, Purple Line Transit Partners will start the process of securing the loans it needs to finance its $1 billion share of construction costs, which is expected to be completed in June. Then the MTA is expected to close on the Full Funding Grant Agreement with the federal government, which will enable the state to access the $900 million budgeted for the project from the federal New Starts transportation program. The private team plans to begin construction late this year and complete the line in 2022.
Purple Line map, click to expand. MTA
The unique arrangement of the project will make it one of the most expensive Public Private Partnerships (P3) in the U.S. The U.S. Treasury Department reports that from April 2012 to April 2015, 20 P3 projects closed in the U.S., with the most expensive being the Interstate 4 highway improvement project in Central Florida that cost $2.3 billion.
A 2014 Brookings Institution report found that P3 agreements are “rarely the lowest cost” option to build and operate infrastructure due to private sector borrowing costs generally being higher than the government’s costs on municipal bonds. However, the public can often realize benefits from the private-sector companies being responsible for cost overruns or underperformance, the report notes.
The Purple Line agreement lays out financial and other penalties in case the private partner fails to deliver the project on a contracted schedule or fails to meet operational facets such as safety guidelines and required maintenance. Under the agreement, the state can deduct these penalties from the estimated $150 million annual availability payments it will make to Purple Line Transit Partners during the 36-year term of the agreement. The Purple Line is seen by supporters as a needed east-west transportation option that can help reduce traffic congestion in the region.
However, significant questions still remain. Last week, four delegates from Montgomery and Prince George’s counties sent state officials a series of questions concerning the agreement, such as how the Purple Line will mesh with Metro, how affected neighborhoods will be notified about construction and how fares will be set. MTA officials responded to their questions in a letter sent Tuesday. The County Council on Monday also questioned state transit officials about why the state seems to be unwilling to share cost savings from the project with the county, which is now on the hook for about $210 million in Purple Line costs.
Also, transit activists Monday questioned a plan to use MARC fare revenues to help pay off the debt required to build the light-rail line. The MARC revenue is being used to show bond ratings agencies a reliable revenue stream, transit officials said, but Rafi Guroian, a member of the MARC Riders Advisory Council, told The Washington Post that MARC fares only cover about 40 percent of the commuter line’s costs. Guroian also pointed out the MARC system itself is in need of an upgrade and wondered how it could undergo improvements if its fare revenue was being used to supplement the Purple Line’s costs.
Rahn addressed those concerns Wednesday saying every transit system in Maryland is subsidized by taxpayers. He said the MARC fares could be used to supplement availability payments, if necessary, and that the MARC train system will continue to be subsidized by the state’s Transportation Trust Fund.