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Maryland will pursue a private firm to design, construct, finance, operate, and maintain the $2.2 billion Purple Line light rail system planned for D.C.’s northern suburbs, Governor Martin O’Malley and top transportation officials announced at a news conference in Bethesda on Monday.
The decision to seek a public-private partnership to build the 16-mile, east-west light rail line was paired with the announcement that the state will pump an additional $400 million into the project, bringing Maryland’s total contribution to nearly $700 million, including $280 million for design and right-of-way acquisition.
Today Maryland Secretary of Transportation James Smith is scheduled to meet federal transportation officials to discuss the state’s bid for $900 million in matching funds under the New Starts program.
If project planners secure full federal funding, roughly $500 million would be left to a private sector operator and/or local governments to provide to complete the Purple Line, which is planned to connect Bethesda in Montgomery County to New Carrollton in Prince George’s County with 21 station stops in between and including the two points.
“We are going to tell them how ideal the Purple Line is for the full funding, guaranteed payments because of a number of things,” said Sec. Smith, referring to his meeting with Federal Transit Administration and U.S. DOT officials. “Maryland made the tough decision to raise revenues to support this. We have the matching money in hand and we are ready to go, and we are using the public private partnership process, which is something the federal government is encouraging people to do.”
Public-private partnerships, commonly referred to as P3s, are new in Maryland. In Virginia, P3s have been used to build highways because of the obvious revenue source that would attract a private sector firm interested in profit: tolls. Transit systems, however, are not profitable. Fares, subsidized by tax revenues, are kept low to encourage ridership.
So to attract a private contractor to run the Purple Line, which officials hope is ready to open in 2020, Maryland would “pay the contractor annual payments throughout the 30- to 40-year contract period,” according to a P3 “fact sheet” provided to reporters at Monday’s news conference outside the Bethesda Metro station.
“Deductions are made from payments if the contractor does not meet pre-determined performance targets, such as on-time performance, vehicle cleanliness, and customer service,” the fact sheet said. Instead of footing the bill now to pay for and then operate the Purple Line itself, the state would essentially pay a private firm to do so over many years, under the proposed arrangement.
Going with a private contractor is designed to speed up the Purple Line’s construction, potentially saving money while keeping fares stable. In Denver, the Eagle P3 transit project shaved $300 million off the bottom line, according to Joshua Schank, a transportation policy expert who runs the D.C.-based Eno Center for Transportation.
“The fact that [the Purple Line] is potentially using a public private partnership is not necessarily relevant to the bottom line for travelers or for taxpayers,” Schank said. “The way that P3 is executed is what matters. So if it is done well and if the public sector negotiates effectively and the private sector comes at it with innovative ideas, then the public could benefit from innovation, from potentially stable fares, and from potentially having a better transportation system.”
While Denver’s Eagle P3 reduced the total cost of the project, Schank said similar savings may be difficult to find in Maryland’s light rail project.
“The Purple Line has suffered through a lot of political challenges, and trying to change the alignment or come up with innovations on this project is going to be a lot harder than in Denver because of those political constraints,” Schank said.
The project already faces sensitive land use issues in Silver Spring, where the proposed alignment may result in the dislocation of some homes and businesses, and near the Capital Crescent Trail, an 11-mile, shared use trail that some residents say would be ruined by the Purple Line’s construction. A handful of protesters waving signs that read “Save the Trail” booed Governor O’Malley at the news conference.
For his part, the governor refused to answer any questions about the project, running from reporters to his limousine as soon as the news conference ended.
In a possible positive sign for the Purple Line, the Denver Eagle P3 project received $1 billion in federal New Starts money, Schank said. However, the Eagle P3 was the beneficiary of a program (Penta P) created by then Sec. of Transportation Mary Peters to encourage P3s in transit. The Penta P program no longer exists.
“Federal money is very scarce right now. It is going to be difficult for them to get everything they are bargaining for,” Schank said. “There is a lot of competition for [New Starts] money. The sequester is affecting that money.”