The celebration after Maryland Gov. Larry Hogan’s approval last month of a light-rail Purple Line for the Washington suburbs has given way to hand-wringing over whether his financial conditions can be met.
New figures provided by the Maryland Department of Transportation show a $170 million gap between its latest estimated construction cost — $2.16 billion, down from $2.45 billion — and the amount of funding lined up. MDOT officials emphasized that the dollar figures are “working numbers” that will change by the time a contract is awarded, but the question of who will cover any shortfall — and how — has added a layer of uncertainty.
“This is not a done deal,” said state Sen. Brian J. Feldman (D-Montgomery), chairman of the Senate Finance Committee’s transportation subcommittee. “The fact that the governor said we’re moving forward doesn’t make it so until all the other pieces of the puzzle fit together. . . . There’s still a multitude of questions that need to be answered to be able to say definitively this project will be built in the near future.”
Negotiations are underway between MDOT and Montgomery and Prince George’s counties, both of which must cough up more money for the rail line’s construction, the governor said. The likely sticking point: How much cash the state will demand in addition to the counties’ “in-kind” contributions, such as county-owned land along the 16-mile alignment between Bethesda and New Carrollton.
Meanwhile, Purple Line supporters are keeping a wary eye on Congress because Hogan (R) also tied his approval to the state securing $900 million in federal aid that the Obama administration has recommended for Purple Line construction.
The state’s revised financial plan won’t come in time for the project to receive the first $100 million in federal grants appropriated to it in this fiscal year, which ends Sept. 30.
That will leave the Purple Line competing against about five other U.S. transit projects for federal money in the next fiscal year, starting Oct. 1, and that money could be relatively scarce. So far, both the House and Senate transportation appropriations bills include $542 million to $582 million less in federal construction funds than the Obama administration requested for new transit projects, like the Purple Line.
The state has bought some time to figure out how to close that gap. MDOT recently announced that it has pushed back the project’s bid deadline from mid-August to Nov. 17, and the state expects that a contract won’t be finalized until next spring.
“The governor’s numbers don’t preclude everyone coming together — as long as we’re assuming the governor really meant it that the Purple Line will be going forward,” said Gregory Sanders, vice president of the advocacy group Purple Line Now. “It’s a big lift, but it all seems in the realm of possibility if everyone is negotiating in good faith.”
Hogan, a vocal highway supporter, had criticized the Purple Line as too expensive but said last month that the state plans to build a streamlined version and drop its cash contribution from $700 million to $168 million.
Although the project remains alive, the significant cut in state funds means that substantial and complex parts of the project — its financial plan and what a scaled-back rail line would look like — must be reworked. MDOT released a 2,075-page revised bid solicitation last week.
The project, previously on pace to have construction start this year and trains running in 2020, is now almost a year behind schedule.
Timing is critical. The project won’t receive any federal construction money until the state signs a funding agreement with the Federal Transit Administration. But the FTA won’t sign an agreement until Maryland has a final plan detailing the project’s costs and who will pay for what.
Many of the details will be hashed out behind closed doors over the next four months as the four teams of private companies competing for a 35-year contract to design, build, operate and maintain the Purple Line incorporate Hogan’s cost-cutting changes into their bids.
The proposals will reveal how much a slimmed-down project would cost to build and operate and how much of the construction expenses the private sector is willing to finance. But the public likely won’t hear much until the state selects a winning proposal early next year. Bid documents, MDOT officials say, are exempt from the state public records law.
Maryland Transportation Secretary Pete K. Rahn said the state will require the private teams to finance more of the construction, beyond the $670 million the state previously planned on. The state would cover the private contractor’s debt-service payments over time. Having the private sector finance more won’t add much to the state’s costs, Rahn said, because a “significant” portion of the private financing probably will come via a low-interest federal loan that is “cheap” compared with other kinds of borrowing.
Montgomery officials have said that Rahn also has mentioned the possibility of Montgomery and Prince George’s counties each contributing an additional $50 million. Montgomery County Executive Isiah Leggett (D) has said he is “very positive” a deal can be reached, but Prince George’s County Executive Rushern L. Baker III (D) has been more guarded, saying the county has already “committed an extraordinary amount” to the project.
Rahn said the dollar amount remains part of the negotiations.
“I’m not prepared to use a $100 million figure” for both counties’ additional contributions, he said.
MDOT spokeswoman Erin Henson said the state hopes to reach an agreement “in concept” with the counties in the next several weeks and a “firm commitment” this fall.
Feldman, the state senator, said he is concerned that Hogan’s requirement that the counties pitch in more will threaten the Purple Line’s financial viability. He noted that the governor has not required local governments to help fund state highway projects.
“Does the governor really want to build the [Purple Line] project, or did he set this up as a mechanism that’s very difficult to make work?” Feldman said. “Then the governor could say he supported the project, but if the locals can’t come up with the money, [he could say] they lacked the political will.”
Rahn said he is “confident” that the state can reach a deal with the counties.
“We’re going to make it work,” he said.
Purple Line advocates say they, too, think the counties will find the money. But where?
“Do you mean, where’s the pot of gold at the end of the rainbow?” said Nick Brand, president of the Action Committee for Transit. “Like a lot of these things, it won’t be one solution. There will be little shortcuts found and compromises made.”
How much will come from the federal government — a crucial source of construction money — remains uncertain. Although the FTA has recommended the Purple Line for $900 million in total federal aid, Congress would have to appropriate that in annual payments of $100 million.
An FTA spokesman said the $100 million in grants appropriated to Purple Line construction this fiscal year will remain available for five years. The project would receive that money only after it reaches a financial agreement with the FTA.
FTA officials also have said that Congress traditionally honors the agency’s annual funding commitments made in such agreements. But because the Purple Line doesn’t yet have a federal funding deal, it must still compete for money against other transit projects at the same stage in the funding quest.
The Senate version of the transportation appropriations bill includes language inserted by Sen. Barbara A. Mikulski (D-Md.) that would make the Purple Line’s first $100 million installment a priority for whatever new transit construction aid Congress allots. The House bill does not direct the money to any particular projects. The question is whether Mikulski’s language will remain in the final bill.
Rahn said he is not concerned.
“I believe the $900 million is going to be there,” he said.