Maryland board approves $5.6 billion Purple Line contract

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 from Bethesda to New Carrollton. According to the contract the line would be completed in March 2022. (Maryland Department of Transportation)

by Katherine Shaver

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 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.

The Purple Line also will be the first direct suburb-to-suburb link in a regional rail 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 Metrorail system, it will be owned and operated separately by the Maryland Department of Transportation (MDOT).

The Board of Public Works — made up of 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.

“This is going to be a nationally recognized project, and the millennials around the country who have so many great economic dreams are going to flock to the Maryland suburbs in part because of this light-rail project. It’s an absolute game-changer for our region,” Franchot, a longtime Purple Line champion, told the packed State House meeting room in Annapolis.

“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.”

Compared with Metro trains, Purple Line light-rail trains will be shorter, carry a maximum of 301 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.

As Virginia officials did with 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.
This is a rendering of what a light-rail Purple Line train would look like running through the University of Maryland campus in College Park. (Maryland Transit Administration)

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 money 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, and 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 fares and other state transit revenues, would not count toward 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.

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[Determining if the Purple Line contract is a good deal isn’t easy]

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.

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.”

Purple Line Transit Partners is led by Texas-based Fluor Corp., the French investment firm Meridiam and Star America, a New York firm that invests in public infrastructure projects.

Wednesday, April 6, 2016