Maryland is moving on from the legal feud and litigation over cost overruns and delays with the Purple Line light rail project with a settlement of $250 million.
The payment is part of the litigation settlement with the project’s contractors and will allow the state to pursue a new design-build contractor to continue the public-private partnership (P3).
Gov. Larry Hogan said the payment was worthwhile to keep the project moving, considering the contractor’s insistence on being paid $800 million to cover cost overruns.
The Maryland Board of Public Works unanimously approved the settlement on Wednesday, ending years of disputes between the contractors and state.
The Purple Line would stretch 16 miles, with 21 stations between Bethesda and New Carrollton.
Contractors walked off the job in September after initially indicating they would abandon the project in May.
Fluor, Meridiam and Star America worked under the project’s private partner, Purple Line Transit Partners. Fluor, which was in charge of the line’s construction, exited the project, but Meridiam and Star America will continue working with the state to complete the line.
The settlement will be split into two payments, starting with $100 million to be paid by Dec. 30. The other $150 million will follow when the new financing documents are executed — either within 12 months or as soon as a new design-build contractor is secured, if that happens sooner.
Hogan, one of the board’s three members, said during a Board of Public Works meeting on Wednesday that the project is at the “heart” of the state’s infrastructure.
“The Purple Line is a long time coming and we have certainly had to overcome some significant hurdles,” he said. “Opponents delayed it for two years, costing the taxpayers money and threatening to kill this critical project. But we kept pushing and working hard to keep it moving forward.”
Hogan said the state took “a lot of heat” in April when the project negotiations went into high gear.
“Some people just wanted us to pay the $800 million to keep things going,” he said. “I think we’re going to end up with a much better situation, deliver the product and save the taxpayers $500 million. … A lot of people worked day and night to get this done. It’s a great day for the state.”
The board, which also consists of Comptroller Peter Franchot and Treasurer Nancy Kopp, praised Transportation Secretary Greg Slater for the “very tough” negotiations.
Slater told the board that in the interim construction period, the state will continue to manage the project, complete the designs, obtain permits and complete utility relocations.
“During this time, PLTP and (the Maryland Department of Transportation) will share in the costs,” Slater said . “The cost-sharing is 50-50 initially, later becoming 80-20 with PLTP paying that larger 80% share as the selection of the new contractor continues. Expected costs during this period are about $100 million in PLTP’s shares, limited to $50 million during that time .”
The revised project costs are not “fully known” until a new design-build contractor is in place, Slater said, but PLTP will finance the additional project costs through debt and equity.
PLTP will also reduce its internal rate of return from the project by 20%, according to Slater.
The settlement “protects the state’s interests and citizens, and enables us to deliver a completed project in the shortest time frame possible,” he said.
Jane Garvey, chairwoman of Meridiam North America and PLTP’s board, said in an emailed statement on Wednesday that the settlement allows for the initiation of an “accelerated, open and transparent” process to find a design-build contractor replacement.
“Working hand in hand with the state, we will begin the effort without delay in order to deliver the Purple Line to the people of Maryland as soon and efficiently as possible,” she said. “The hard work invested by both sides in building a pathway forward is a strong illustration of the deepened mutual trust and strength of our partnership.”
Briana Adhikusuma can be reached at firstname.lastname@example.org.