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Maryland board approves $5.6-billion Purple Line contract Maryland board approves $5.6 billion Purple Line contract
(about 9 hours later)
Maryland’s Board of Public Works approved a $5.6 billion contract Wednesday for a team of companies to build and operate a light-rail Purple Line in the Washington suburbs. A Maryland board approved a $5.6 billion contract Wednesday for a team of companies to build and operate a light-rail Purple Line that state officials say will rejuvenate older communities and transform a 16-mile swath of the Washington suburbs.
The board voted 3-0 after a 30-minute discussion. The 876-page agreement — believed to be the most expensive government contract ever in Maryland — forms one of the largest public-private partnerships on a U.S. transportation project and will result in the first major light-rail line in the nation’s capital in years.
“This is going to be a nationally recognized project,” said state comptroller Peter Franchot (D). “The Millennials around the country who have so many economic dreams are going to flock to the Maryland suburbs because of this project. This is an absolute game changer.” The Purple Line also will be the first direct suburb-to-suburb rail link in a regional subway system built 40 years ago to ferry federal workers between the suburbs and the city. Although the line will connect Maryland’s spokes of the Metro system, it will be owned and operated separately by the Maryland Department of Transportation (MDOT).
Maryland transportation secretary Pete Rahn said the 16-mile line between Montgomery and Prince George’s counties will provide a missing link in the region’s transit system. The Board of Public Works — made up of Maryland Gov. Larry Hogan (R), state treasurer Nancy K. Kopp (D) and comptroller Peter Franchot (D) — approved the 36-year contract unanimously after 40 minutes of discussion.
In praising Gov. Larry Hogan (R) for his support of the rail plan, Rahn said, “I truly believe this is going to be a legacy project for your administration.” “This is going to be a nationally recognized project,” Franchot, a longtime Purple Line champion, told the packed State House meeting room in Annapolis.
Some state lawmakers had questioned whether such a large and complex contract — it would span 36 years and be one of the most expensive government contracts ever in Maryland — can be adequately scrutinized in a single meeting among the governor, state treasurer and comptroller. “The millennials around the country who have so many economic dreams are going to flock to the Maryland suburbs because of this project. This is an absolute game-changer.”
However, Maryland transportation officials said the contract needed approval Wednesday to keep the deal on schedule to reach financial close June 2. A later vote, they said, could jeopardize the 180-day financing approvals that a team of companies received to help pay for the line’s construction, state officials say. Compared with Metro trains, Purple Line light-rail trains will be shorter, carry a maximum of 300 passengers and travel more slowly. They will be powered by overhead electrical lines and run aboveground, mostly in their own lanes on local streets between Montgomery and Prince George’s counties.
With the board’s approval of the contract with the private team Purple Line Transit Partners, the Maryland Department of Transportation (MDOT) will now seek to finalize a “full funding grant agreement” with the Federal Transit Administration. That would secure $900 million in recommended federal construction grants and would allow construction to begin later this year. The light-rail line would open to passengers by March 2022, according to the contract. As Virginia officials envisioned for Metro’s Silver Line, recently built through auto-centric Tysons Corner, leaders in Montgomery and Prince George’s are counting on the Purple Line to focus growth and attract economic development around 21 stations between Silver Spring and New Carrollton.
Maryland planners see new apartments, stores and offices clustered around light-rail stations in such communities as Langley Park and New Carrollton, now full of tired strip malls and bus stops where transit-dependent workers line up to get to jobs elsewhere. Students and faculty will ride for free among five stations serving the University of Maryland’s flagship College Park campus. The line will connect to Metro’s Red, Green and Orange lines as well as to the MARC commuter rail and Amtrak lines.
“This is a landmark day,” Maryland Transit Administrator Paul Comfort said after the vote. “A key aspect of transit is as an economic-development booster.”
Charles Lattuca, head of new projects for the Maryland Transit Administration, said developers “have been calling us left and right to see when it’s going to be done.”
Unlike the Metro system, Purple Line stations won’t have parking. Stations will be much smaller than Metro stations and consist largely of outdoor platforms with benches, coverings and fare machines. Fares, expected to start at $2, will be integrated with Metro’s payment system, likely via a smartphone app.
Construction is scheduled to begin later this year, with trains carrying passengers by spring 2022.
[10 facts about the Purple Line contract]
After the vote, Maryland Transportation Secretary Pete K. Rahn said that money slated for the Purple Line will not come at the cost of Maryland helping to pay to rehabilitate the region’s aging Metro system.
“We’ve concluded that we can afford the Purple Line and still meet the transportation needs of Maryland,” Rahn said. “If I didn’t believe that, I wouldn’t be supporting this.”
But critics have called the rail project too expensive and have questioned state ridership forecasts of 59,500 daily trips in the line’s opening year. Some environmental activists say the line will destroy the wooded Georgetown Branch recreational trail between Bethesda and Silver Spring, while other opponents say it will bring too much development and new vehicular traffic to neighborhoods.
Several opponents said they were disappointed that the board didn’t let them testify before the vote.
The contract’s approval “looked like a slam-dunk,” said Len Scensny, a Takoma Park resident and Purple Line opponent who attended Wednesday’s board meeting.
The contract’s approval means MDOT now can finalize a $900 million grant agreement with the Federal Transit Administration. That agreement, which is expected in mid-July, is almost assured, as the FTA has already recommended the funding. It would be the final hurdle before construction can begin.
The contract, which is expected to reach financial close June 2, has attracted national attention because it makes the Purple Line one of the first U.S. transit projects to include private financing. A similarly-financed commuter rail line in Denver is set to open this month.
The team of companies, called Purple Line Transit Partners, agreed to finance $1 billion of the line’s construction costs and build it over six years in exchange for a 30-year deal to operate and maintain the line at an average preset fee of $150 million annually. State officials said they’ll use federal and local funds to pay for an additional $990 million in construction costs.
The contract’s approval was all but assured, as Maryland transportation officials had publicly warned that such a complex partnership takes years and costs companies millions of dollars to put together. If Maryland backed out at such a late point, they said, it would spook the private sector. That could lead to less competitive bidding — and higher prices — on future state projects.
Even so, the speed at which such a highly complex and relatively unusual financial deal sailed through approval just a month after it was publicly released drew attention.
Some lawmakers said they’d had little time to scrutinize the details. Under Maryland’s 2013 law governing public-private partnerships, the General Assembly was allowed to comment on the MDOT contract during a 30-day review but not make any changes.
[Poll: Purple Line narrowly supported]
Kopp, the state treasurer, told a state Senate committee earlier this week that lawmakers might want to change the law to allow for a longer contract-review period. Kopp’s office determined that the state’s payments on the Purple Line’s private financing, which would come from Purple Line and other state transit revenues, would allow those payments to fall outside limits on tax-supported state debt.
“Thirty days,” Kopp told the panel, “may not really give everybody enough time.”
Maryland transportation officials had pushed for the contract’s approval this week, saying a later vote would have jeopardized the companies’ 180-day financing approvals.
One of the financial details that has generated some controversy is the state’s plan to pay off the companies’ debt service with fare revenues from the MARC commuter rail service. The Purple Line’s own fare revenues aren’t expected to fully cover the private financing costs for about 15 years, state officials have said. Rahn said MARC will be funded with other revenue, such as the state gas tax.
[Why Md. plans to use MARC revenues to pay off Purple Line debt]
Like other states, including Virginia, Maryland has begun to look to public-private partnerships as a way to build expensive infrastructure at less government cost upfront, helping to stretch tight budgets and avoid looming debt limits. Experts say public-private partnerships can be more expensive but, if structured correctly, can provide better value by allotting to the government and private sector the risks that each can best handle.
In the Purple Line case, for example, the private team assumes the risks of most cost overruns, both during construction and operation, while the state has taken the financial risk for how many people actually ride the line.
[Determining if the Purple Line contract is a good deal isn’t easy][Determining if the Purple Line contract is a good deal isn’t easy]
The public-private partnership has attracted national attention because it would make the Purple Line only the second U.S. transit project to involve private financing. The first, a commuter rail line in Denver, is set to open later this month. The project faced an uncertain future just a year ago, when the newly-elected Hogan expressed skepticism at its costs. The governor noted Wednesday that the contract’s total cost came in $550 million below what was anticipated and that Montgomery and Prince George’s had agreed to contribute more money, for a total local contribution of $330 million.
The 16-mile Purple Line would run single-vehicle trains powered by overhead electrical wires east-west inside the Capital Beltway, between Prince George’s and Montgomery counties. The 21 stations would include Bethesda, Silver Spring, Langley Park, the University of Maryland’s College Park campus, and New Carrollton. Hogan called Purple Line Transit Partners “a world-class team that has delivered a strong design and innovative ideas and provided the state with a competitive price and maximum value.”
The line would provide the first direct rail link between Washington suburbs and would connect Maryland’s spokes of the Metro system, which was built 40 years ago to carry federal workers into and out of the District. State transit planners say the line would be faster and more reliable than buses and would focus growth and attract new development around stations. Purple Line Transit Partners is led by Texas-based Fluor Corporation, the French investment firm Meridiam and Star America, a New York firm that invests in public infrastructure projects.
Critics have called the rail project too expensive and say it would disrupt communities along the alignment and destroy the wooded Georgetown Branch recreational trail along its path between Bethesda and Silver Spring. [Purple Line firm made Metro’s ‘least reliable’ rail cars]
[10 facts about the proposed Purple Line contract]
The board’s approval was considered a near certainty. The panel consists of three members — the governor, the state treasurer and the comptroller — and none had publicly expressed any significant reservations during the 30-day review period since MDOT announced the contract March 2.
State treasurer Nancy K. Kopp (D) told a Senate committee Monday that her office had “very extensive and deep conversations” with MDOT staff over the past month. Kopp’s office was charged with determining whether the state’s payments on the companies’ construction debt would count against the state’s capital debt affordability limits. Kopp told the Senate panel that the payments were structured in a way that wouldn’t add to tax-supported state debt, and she didn’t express any reservations about the contract.
Hogan also was expected to endorse a contract negotiated by his own transportation department. Franchot has long supported the light-rail project.
Maryland transportation officials also have publicly warned that such a complex partnership takes years and costs companies millions of dollars to put together. If Maryland backed out at such a late point, it would spook the private sector. That could lead to less competitive bidding — and higher prices — on future state construction projects.
Even so, some state officials have questioned the relatively brief amount of scrutiny the contract has received. The 876-page agreement is full of legalese and highly technical engineering plans, in addition to hundreds of pages of supporting documents.
Sen. Richard S. Madaleno Jr. (D-Montgomery), a Purple Line opponent who is also vice-chair of the Senate Budget and Taxation Committee, questioned the ability of the board to approve the contract in one meeting, only 30 days after it was made public.
Charles Lattuca, of the Maryland Transit Administration, responded to Madaleno at the committee hearing Monday that it was “preferable” for the board to approve the contract Wednesday so as not to jeopardize the companies’ private financing commitments.
Sen. Edward J. Kasemeyer (D-Howard), chairman of the Senate budget committee, noted that the panel received Kopp’s four-page analysis of the contract’s potential debt impacts just as its meeting to review the deal started Monday.
Kopp responded that she and her staff had just finished the review, something they had had only 30 days to complete.
Kopp told the committee the General Assembly might want to consider making changes to the state’s public-private partnership law to allow a longer contract review period. “Thirty days,” Kopp told the panel, “may not really give everybody enough time.”
Experts say public-private partnerships can be more expensive but, if structured correctly, can provide better value by allotting to the government and private sector the risks that each can best handle.
[Purple Line team includes firm that made Metro’s ‘least reliable’ rail cars]
Under the contract, the private team would finance about $1 billion of the project’s construction costs through about $140 million of its own equity, a low-interest federal loan and tax-exempt private activity bonds. MDOT officials have said the state would use federal and local funding to reimburse the private team for about $990 million in construction costs via monthly payments throughout the building phase.
After trains began carrying passengers, MDOT would pay the companies a monthly payment that would cover the line’s operating and maintenance costs, as well as debt service on the private construction financing. The monthly payments would total an average $150 million annually, MDOT officials have said.
MDOT officials have said they plan to pay for the private debt service using Purple Line fare revenues, with revenues from the MARC commuter rail system making up any shortfall. The Purple Line’s operating and maintenance costs would come from the state’s Transportation Trust Fund, which funds airports, transit systems and roadwork statewide.