Maryland’s proposal has drawn criticism for its potential effects on the environment and adjacent communities in the densely developed suburbs. It also has attracted scrutiny after problems with another Maryland public-private partnership to build the delayed light-rail Purple Line.
Project foes also have pointed to what they say has been a cozy relationship between Transurban and Maryland Gov. Larry Hogan (R), although state officials say the governor’s office had no involvement in the selection.
If approved, the “predevelopment agreement” — the first contract on the highway expansion proposal aimed at relieving chronic traffic congestion — would be limited to a year’s worth of early design work and other planning. However, the awarding of the contract is significant because that team would become the only one competing for the decades-long deal worth billions.
Transurban chief executive Scott Charlton told analysts in a company earnings call last year that Maryland’s first phase, which includes building a wider American Legion Bridge and expanding I-270, would amount to about $4 billion.
Maryland Department of Transportation officials cited the team’s “track record of success” in delivering HOT lanes via public-private partnerships, as Transurban has done on the Beltway, I-95 and I-395 in Northern Virginia. The companies said they would spend up to $54.3 million to design the Maryland lanes and work out details of a longer-term partnership.
Transurban and Macquarie’s predevelopment pitch “provided the best value,” with the highest-ranked financial proposal among the three bids, MDOT said. On technical merits, the team ranked among the top two, which were “very close,” said MDOT spokeswoman Erin Henson.
As part of its bid, the consortium agreed to pay the state a $145 million “development rights fee” for the right of first refusal on the longer-term partnership. It also estimated it could spend $5 million during the lanes’ construction in Montgomery County to protect pedestrians and cyclists and at least $300 million over the 50 years to improve mass transit in the county, state officials said.
Maryland Transportation Secretary Gregory Slater said the winning proposal included the most private money for mass transit, pedestrians and cyclists.
“It was really clear that this team thought through the whole [transportation] system and how it was all going to work,” he said.
The private team, known as Accelerate Maryland Partners, said it would provide $50 million in grants to businesses and community groups for local projects, such as tree plantings. The companies estimated providing an additional $25 million over the long term to support new technologies, such as university research into autonomous vehicles, MDOT said.
Under a predevelopment agreement, the companies would work with the state, local governments, property owners, utilities and residents on potential design challenges while working toward a longer-term contract to build and operate the lanes.
The state is seeking four HOT lanes — two in each direction — on the Beltway between the Virginia side of the American Legion Bridge and the I-270 spur and then up I-270 to I-70 in Frederick. On I-270, one of the HOT lanes would come from converting the existing carpool lane south of I-370. The potential lane configuration north of I-370 is part of a future study. The project would start with replacing and expanding the 60-year-old American Legion Bridge.
Maryland, Virginia and other states have turned to public-private partnerships as a way to build and improve expensive infrastructure with limited government funds and debt capacity. Companies generally assume some of the construction and operating cost risks in exchange for keeping most of the toll revenue. However, the long-term viability of such deals has drawn more scrutiny since the pandemic because of uncertainty about how much people will drive if many continue to work more from home.
The Maryland lanes would be free for buses and vehicles with three or more people, while other motorists would pay a toll that would adjust with traffic congestion to keep the lanes free-flowing. The regular lanes would be rebuilt and remain free.
Slater said MDOT will release the winning predevelopment proposal if the board of the Maryland Transportation Authority approves it in March. The contract would then go to the General Assembly for review in April and to the Board of Public Works — composed of the governor, state comptroller and treasurer — for final approval in May.
MDOT won’t seek the board’s approval for a 50-year contract until at least mid-2022, after the final environmental study is scheduled to be completed this fall, officials said.
Critics argue MDOT shouldn’t pursue any private partner until it addresses what they say are potentially serious environmental effects.
“Rushing is the opposite of what is needed on such a risky, complex and enormous project surrounding our nation’s capital that is going to be led by and concessioned to a private company for 50 years,” said Josh Tulkin, director of Maryland Sierra Club.
Melbourne-based Transurban was considered the leading contender because of its dominancy in Northern Virginia, particularly on the Beltway, where Maryland’s tolling system would have to join the Virginia lanes seamlessly near the American Legion Bridge.
Transurban recently reached a deal with the Virginia Department of Transportation to extend its Beltway HOT lanes two miles north to the George Washington Memorial Parkway, near the bridge at the Maryland border.
Transurban also has begun discussions with VDOT about how the company might operate Virginia’s northbound HOT lanes across a new American Legion Bridge, a VDOT official said.
Pierce Coffee, president of Transurban North America, called the Maryland project “an important step forward in bolstering the region’s infrastructure.”
“With much work ahead, we are committed to a collaborative approach that puts communities first and realizes shared objectives for the state,” Coffee said in a statement.
Transurban announced in December that it had reached a deal to sell half of its stake in its Northern Virginia HOT lanes for $2.1 billion to three pension funds — two in Australia and one in Canada. The company plans to continue operating the Virginia toll lanes.
In addition to the Virginia highways, Transurban operates 17 toll facilities in Australia and one in Montreal.
The company recently has attracted attention for a $6.7 billion toll road tunneling project in Melbourne that company officials say is two years behind its original schedule because of problems finding disposal sites for contaminated soil. The project’s costs are estimated to have ballooned by $3 billion, or 45 percent, according to news media reports.
Asked about those delays and cost overruns, Slater said they were the kind that a predevelopment agreement is designed to prevent by working through potential problems early in the design process.
Opponents of the project point to a close relationship between Transurban and the Hogan administration. That includes an “infrastructure and economic development” trip that Hogan and James F. Ports, head of the Maryland Transportation Authority, took with other state officials to Australia in 2019. The authority operates Maryland’s toll facilities and is one of the lead state agencies on the Beltway and I-270 expansion plan.
Hogan’s former scheduler and director of intergovernmental affairs also joined Transurban in January 2020 to work in government affairs.
Ben Ross, chairman of the Maryland Transit Opportunities Coalition and a toll lane critic, said the fact that Transurban and Macquarie were selected even though they hadn’t named a construction contractor showed that “clearly, this has been in the bag for them from the beginning.”
The consortium initially had listed Atlanta-based Archer Western Construction as its lead contractor, but the company was not part of the final proposal. A Transurban spokeswoman said the team plans to hire a construction contractor.
“How can you judge the qualifications of the people who are going to build the thing?” Ross said.
Slater said the state’s selection process, which involved 40 experts, was “completely walled off from outside influence. . . . No one in the governor’s office was involved in this procurement.”
Macquarie Capital is the investment bank for Sydney-based Macquarie Group, which has been part of public-private partnerships to replace the Goethals Bridge in New York, build a new tunnel in the Norfolk area and build a broadband network in Kentucky.
Macquarie has been involved in bankruptcies on toll roads in San Diego and Indiana, with the failures attributed to the Great Recession and unrealistic traffic and revenue forecasts.
The Kentucky broadband network’s installation was recently completed two years behind schedule and cost the government $93 million more than expected, according to the Kentucky Communications Network Authority.
A Macquarie spokesman declined to comment on the bankruptcies or any cost overruns or delays on the Kentucky project.
In a statement, Mark Bradshaw, Macquarie Capital’s head of Infrastructure Projects, Europe & Americas, touted the winning Maryland proposal’s commitment to local job training.
“This is a generational opportunity to advance Maryland’s transportation infrastructure and drive lasting economic impact for the local community,” Bradshaw said. “Our development plan is underpinned by local partnerships with the community and educational institutions to develop and train the workforce and create opportunity for local minority and disadvantaged businesses enterprises.”
A Macquarie spokesman said details would be released later.
The other two teams that competed were one led by Spanish firm Cintra and London-based John Laing Investments, and another led by Itinera Infrastructure & Concessions, a North American offshoot of Italian toll road operator ASTM.
Cintra is building 22 miles of HOT lanes on Interstate 66 outside the Beltway in a 50-year public-private partnership with VDOT.
Luz Lazo and Magda Jean-Louis contributed to this report.