Maryland transportation officials received state approval Wednesday to pursue private companies to design, build, operate and help pay for a $2.2 billion Purple Line in the Washington suburbs, marking a major milestone for the light-rail proposal.
The state’s Board of Public Works — Gov. Martin O’Malley, State Treasurer Nancy K. Kopp and Comptroller Peter Franchot — unanimously approved the Maryland Department of Transportation’s plan to seek a public-private partnership for a 16-mile Purple Line.
If a deal is approved in late 2014, it would become one of the broadest public-private partnerships of any U.S. transit project and the first for a Maryland transit line. The unusually long 35- to 40-year contract could be valued at more than $6 billion, which would make it one of the single biggest government contracts in Maryland.
“This is a project that’s a big deal, and it’s going to be a big deal for a long time,” Maryland Transportation Secretary James T. Smith Jr. told the board. “If this works . . . we want to make this a model” for some other large infrastructure projects, he added.
The board’s approval was critical to the state’s plan to improve east-west transit between Montgomery and Prince George’s counties.
Purple Line trains would run mostly on local streets between Bethesda and New Carrollton, with 21 stations in Silver Spring, Langley Park, the University of Maryland at College Park campus and other communities.
It would connect Maryland’s spokes of the Metrorail system with Amtrak and MARC commuter rail stations and allow passengers to ride trains directly between suburbs rather than go through downtown Washington, as they must do now on Metro.
Smith said the state will issue a “request for qualifications” seeking interested companies “almost immediately.” Three to four companies will be chosen to submit proposals, officials said. The Transportation Department then plans to choose a winning proposal in fall 2014 and submit it to the Board of Public Works for approval in December 2014, officials said.
If a private deal is approved and the state secures $900 million in highly competitive federal transit funding, construction would begin in 2015 and trains would begin running in 2020, officials said.
Traditionally, a transit agency plans and designs a new rail line with government funds. To build it, 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.
Under a public-private partnership, Maryland officials say, a team of private companies would contribute $500 million to $900 million toward the Purple Line.
The state would reimburse the private construction costs over five years as the project reached certain milestones, and the private sector would assume the financial risks of any construction delays or cost overruns.
The state would then pay the private team — known as the concessionaire — $100 million to $200 million annually to operate and maintain the line for 30 to 35 years.
The private companies’ profits would be built into both the construction and operating payments, officials said.
The state would own the line, set fares, buy rights-of-way and oversee the agreement.
Franchot noted the “enormous investment” a decades-long contract would entail for taxpayers and said the only other U.S. transit project with such a broad partnership is still under construction in Denver.
What would prevent the private companies from abandoning the project if profits didn’t pan out? “How do you protect taxpayers over a 30- or 35-year period?” Franchot asked Maryland transportation officials.
Henry Kay, who oversees project development for the Maryland Transit Administration, said the private sector’s own investment would provide the incentive to deliver and operate a good line.
The banks that provide the private financing and the federal government, which would be asked to provide a low-interest loan, also would be watching, he said.
“There will be a lot of eyes on this concessionaire, so if he’s not performing, he’ll take steps to correct it,” Kay said.
He said that Maryland Transit Administration employees would monitor the line. If the concessionaire doesn’t meet certain standards, such as maintaining clean trains and a reliable schedule, the annual payments could be reduced, Kay said.
“We will remain engaged,” Smith, the transportation secretary, told the board. “After all, our name will be on the trains.”
Kay said the concessionaire also would be required to abide by all commitments that the state makes as part of its final environmental study, which is under federal review. That would include any sound walls promised to communities along the tracks, he said.
Kay said the private entity also would rebuild the popular Georgetown Branch running and biking trail, which runs along the Purple Line alignment between Bethesda and Silver Spring. Montgomery would pay for the trail’s construction and then own and maintain it, he said. Some trail advocates say a train line would destroy the peaceful, parklike setting of the current wooded trail.
The Purple Line plan reflects a growing trend of governments turning to the private sector for help in building highly complex, expensive infrastructure projects with tight budgets and debt limits.
Private companies typically spend $10 million or more to put together detailed bids, state officials said.
The state could reimburse losing bidders up to $3 million each, particularly if it wants to use any ideas from those proposals, officials said.
A key question that will come before the Board of Public Works before it approves any final deal will be whether bond-rating agencies will count the state’s annual payments toward the private sector’s borrowing costs as government debt. That would limit funds for other state construction projects.
Maryland transit officials have said such payments shouldn’t count toward the state’s debt-affordability limit because they would be paid for with Purple Line fare revenue, not tax money.
Kopp said Wednesday that she agreed that such payments “most likely” wouldn’t count as state debt because Purple Line revenue would be held in trust separate from the tax revenue in the state’s Transportation Trust Fund.