If the state’s Board of Public Works approves the new construction contract and broader financial agreement Jan. 26, the private concessionaire would need to secure financing in February. Construction on Maryland’s largest transit project would then resume this spring, state officials said.
The soaring costs and mounting delays are hitting a project once viewed as a national model for how debt-strapped governments could partner with the private sector to build expensive infrastructure more efficiently and with fewer financial risks. The Purple Line was one of the first U.S. transit projects to rely on private financing as part of a public-private partnership.
“This is the right team and the right time,” said Maryland transit administrator Holly Arnold. “This project has been needed for such a long time. We’re going to get it across the finish line.”
The line initially was scheduled to begin carrying passengers in March.
Arnold said the original contractor’s claims didn’t reflect dramatic pandemic-era construction cost increases, such as for materials and insurance, or the pandemic’s severe effects on the labor pool and supply chain.
“Had we come to an agreement on the $850 million, I can guarantee it would have been higher given everything that we’ve seen with the pandemic,” Arnold said.
The original contractor’s departure left behind a 16-mile swath of abandoned construction sites, half-built rail bridges in midair, closed streets and bumpy, hastily patched roads where track was to be laid.
Meanwhile, some business owners along the alignment between Bethesda and New Carrollton have said they worry they won’t survive a prolonged period of torn-up entrances and lost parking. Orange construction barrels line Campus Drive through the heart of the University of Maryland, and a popular recreational trail between Bethesda and Silver Spring remains closed.
Prince George’s County Council member Dannielle M. Glaros (D-District 3), who has nine Purple Line stations in her district, called the delay “incredibly painful” and the new price tag “astounding.”
“But there’s also no turning back,” Glaros said. “With roads torn up, the project just needs to be done as expeditiously as possible at this point … When you rip up a community and leave it in the state it’s in today, you have a commitment to deliver the project.”
Montgomery County Council member Evan Glass (D-At Large) said residents have expressed “deep dismay” about the delays and the construction’s lingering effects on pedestrians, cyclists and drivers.
“The Purple Line needs to be built on time and on budget,” Glass said. “The state needs to get this project back on track.”
The Maryland Department of Transportation has continued managing some work in the interim, such as moving underground utility lines. The new contractor, American subsidiaries of Spanish construction firms Dragados and OHL, would replace the original construction team led by Fluor, Lane Construction Corp. and Traylor Bros.
Matthew Pollack, who oversees the Purple Line project for the Maryland Transit Administration, praised the new construction team’s “years of experience” on highly complex projects, including public-private partnerships.
“We think that they’re creating the missing piece to this whole program,” Pollack said. “We are going to have the right team in place now to run this project to completion.”
Asked about problems Dragados had with delays and escalating costs on construction projects in at least four states, Pollack said, “I think the reality of the construction industry in the United States is that you can’t really Google a company and not find a problem project. There’s just too much involved with these complex projects, too many unknown conditions that you come upon.”
He said the Purple Line was at less risk of future cost overruns because state officials have the necessary environmental permits while state contractors have continued to move underground utility lines — two major causes of projects going over budget.
The Purple Line will be the first direct suburb-to-suburb rail line in the Washington region. It’s designed to provide faster, more reliable mass transit than buses and to attract economic development around its 21 stations in older, auto-centric suburbs. It will connect to Metro’s Red, Green and Orange lines but, unlike the subway system, will run single-vehicle “trains” mostly along local roads and a recreational trail.
Under the new construction contract, the entire line would open at once — not in two phases as previously planned.
The additional $3.7 billion for the long-term financial agreement would include the additional construction costs, as well as a $250 million legal settlement previously paid to the original contractor after the team quit, state officials said. The total $9.3 billion would cover the line’s operations and maintenance for 30 years, the expense of refurbishing tracks and rail vehicles as they age, and debt service payments that would balloon as part of financing the more expensive construction. The concessionaire also would make a profit.
The new $3.4 billion construction price — an almost 80 percent increase — would include about $1.1 billion of construction costs already paid. In addition to the pandemic-related expenses, the new contractor also priced in the additional financial risk of completing work started by other companies, state officials said.
The state and private consortium, known as Purple Line Transit Partners and led by infrastructure investor Meridiam, also didn’t have much choice. The winning construction proposal was one of two bids.
A PLTP spokesman said Wednesday the consortium declined to comment on the new costs and timeline.
Under proposed changes to the long-term financial agreement, the private concessionaire would cover the additional construction costs with $140 million more of its own equity and by incurring more debt. The state would then pay for those additional costs via monthly payments over 30 years after the line opens. The payments, which originally amounted to an average $154 million annually, are expected to grow to an average of $240 million annually under the new agreement, MDOT said.
MDOT officials had avoided state limits on tax-supported debt by pledging in 2016 that they would cover the private consortium’s debt service with fare revenue from the Purple Line. Because the Purple Line’s own fare revenue isn’t expected to fully cover those private financing costs for about 15 years, state officials had said they would use fare revenue from the MARC commuter rail to make up the difference. They would then backfill MARC funding with other transportation revenue, such as from the state gas tax.
Jaclyn Hartman, MDOT’s chief financial officer, said Wednesday the additional money for the Purple Line debt could come from other state transit revenue, not just MARC. She said other transit systems can be funded from the larger pool of transportation revenue sources, including taxes on new vehicle titles and the state corporate income tax — both of which have recovered more quickly during the pandemic than MDOT had projected.
“MTA is not going to be gutted,” Arnold said.
The Purple Line’s construction fell behind schedule and over budget before crews could even start. A judge’s 2016 surprise ruling in an environmental lawsuit filed by project opponents delayed the start of construction by almost a year. Other problems soon followed, including what the original contractor said were delays in the state securing right of way and changes in design requirements for a wall between the Purple Line and CSX freight rail tracks. The state, the contractor said, also had revised its requirements for issuing environmental permits.
Pollack said the state has resolved the CSX wall and permit issues. It also has “legal control” over all necessary right of way, though the price of some parcels is still being negotiated in court. The new partnership agreement also will shorten and streamline the dispute resolution process, officials said.
Greg Sanders, vice president of the advocacy group Purple Line Now, said he believes MDOT is willing to pay more for a firm timeline on a project designed to bring economic development, new housing opportunities and transit access.
“I think it’s safe to say Maryland wants more certainty,” Sanders said. “They’re willing to pay a premium to get it … The numbers are bigger than we’d like and it’s later than we’d like, but the key thing is getting to that opening day.”