Maryland Treasurer Nancy K. Kopp said her staff is evaluating the details of the initial proposal, including whether bond rating agencies would consider the state’s payments toward the private sector’s borrowing costs to be government debt.
Kopp said she sees the benefits of sharing risks with the private sector and gaining companies’ expertise, but she shares concerns about the state’s lack of experience with such a far-reaching private partnership.
“It should cause everyone concern and make us complete our due diligence very thoroughly,” Kopp said. “We want to make sure that if we do it, we do it well. . . . We want to make sure we have ferreted out all potential problems.”
Several state lawmakers briefed on the proposal said it sounds good in theory, but they still have questions: What if the private company goes bankrupt? Should the state lock into one contract worth billions of dollars for more than three decades? How much of a funding crunch could the state face if Purple Line ridership falls short of projections?
“Will the revenues be there to cover it down the line?” said Sen. James E. DeGrange Sr. (D-Anne Arundel), who chairs the Senate Budget and Taxation Committee’s transportation subcommittee.
Several lawmakers said they worry that even with private investment, the Purple Line would siphon off money from roads and other transit projects, including the $2.6 billion light-rail Red Line proposed for Baltimore and the $545 million Corridor Cities Transitway bus line planned for upper Montgomery.
“The concern is what projects might be delayed — and be delayed for years — because of one project,” DeGrange said.
If the Board of Public Works approves the initial proposal, the Maryland Department of Transportation plans to issue a “request for qualifications” to companies by Oct. 31. State officials said they hope to announce a preferred private partner in fall 2014, begin construction in summer 2015 and open the line in mid-2020.
The state must move quickly, Dormsjo said, because the Federal Transit Administration is expected to announce in February whether it will recommend the Purple Line for $900 million in highly competitive federal funding.
“We need to demonstrate that we have our act together . . . so they see we’re ready for a federal grant and we have a good financial plan,” Dormsjo said. “We’re in a make-or-break period for the project.”
Traditionally, transit agencies plan and design new rail lines with government funds. To build them, the agency uses more public money or finances the project by issuing new debt. The agency then operates and maintains the line using fare revenue and public subsidies.