Public-Private Partnership Policy Casebook/Maryland Purple Line

This case study reviews the Maryland Purple Line Project. The casebook is a product of the George Mason University graduate program, as an assignment for the Public-Private Partnership Policy course under Dr. Jonathan Gifford. It explores case elements such as key actors, event timeline, risks, financial and institutional structures, policy issues, and takeaways.

Summary

The Purple Line is a 16-mile light-rail line extending from New Carrollton in Prince George's County to Bethesda in Montgomery County and is currently under construction. It is a public-private partnership (P3), between the state of Maryland and concessionaire Purple Line Transit Partner, which is responsible for design, build, finance, operate, and maintain the project. The project is expected to cost over $2 billion, making it the largest transportation P3 in the U.S. according to Gov. Larry Hogan.

While the Purple Line was originally scheduled to open in 2022, a series of issues have pushed that back. The primary issue is that the main construction contractor terminated their contract, citing the cost overruns as the reason. Despite this major issue, the P3 agreement has been preserved with a new design-builder to be soon announced.

Annotated List of Actors

Public Actors

• Maryland Department of Transportation (MDOT) and Maryland Transit Administration (MTA) are the public owners.

• The National Capital Region Transportation Planning Board- The federal government's planning agency for the National Capital Region
• Governor O’Malley- In 2008 his administration allocated $100 million to design the Purple Line within the six-year budget. In 2009 he endorsed a $1.52 billion version of the project.
• Governor Hogan- Current governor of Maryland, succeeding Gov O’Malley.

Private Actors

• Purple Line Transit Partners, LLC (PLTP)- Private partner, consisting of Meridiam and Star America.
• Fluor- Texas based construction company. Originally the lead contractor to design and build the Purple Line, but left the project in September 2020 over delays which caused cost overruns. The company reached a $250 million settlement in 2021.
• Maryland Transit Connectors, Maryland Purple Line Partners, and Purple Plus Alliance- The three other consortium that “short-listed” to bid on the project

Timeline of Events

2001 - 2005: Beginning of the endorsement for the 14-mile that the Purple Line Project would start construction on. A nonprofit named “Purple Line NOW” formed as a union to support the Purple Line plan.The National Environmental Policy Act was kicked off by the Federal and Maryland transit officials. This was for the Purple Line which would cause multiple alternatives and design options for the project.

2007: The Maryland Governor and Secretary of Transportation officially reverted the project’s name to be called “Purple Line”.

2008: Governor O'Malley put $100 million towards the design of the Purple Line . This amount was created for a six-year budget.

The Purple Line was endorsed by the Washington Post’s editorial board.

2009: Two major wins for the project: key backing by then Governor O’Malley and approval by the National Capital Region Transportation Planning Board.

2013: Reported by the Washington Post, there was $200 million that went to Maryland to buy private property in the Purple Line area.

O'Malley committed another $400 million toward construction. He stated the line needs to be built and operated from a public-private partnership.

There was a legal agreement signed between Maryland and Columbia Country Club. This was to ensure that the shift for the purple Line alignment would protect the golf course. Due to this, the club agreed to take legal action.

2014: Approval was earned for the purple line. This was granted by the Federal Transit Administration.

Capital Crescent Trail and a group of Chevy Chase residents filed a lawsuit against the Purple Line construction due to it hurting the environment during construction.

The Purple Line project is now costing $2.45 billion.

2015: Governor Hogan endorsed the Purple Line after meeting with county executives. However, Hogan decreased the cost of the project by cutting some provisions (environmentally friendly building materials, shortened platforms, and reduced the number of elevators).

2016: “Maryland’s Board of Public Works awards a 36-year, $5.6 billion contract to Purple Line Transit Partners — a partnership of Meridiam, Star America and Fluor Enterprises — to design, build, operate and maintain the new line.”.

2019: The completion date gets pushed to 2023 by the Purple Line Transit Partner. It increases the overall cost by $275 million.

The project gets hit with a second lawsuit.The first section of the Purple Line track is installed in Lanham.

The Maryland transportation officials said that the project will open in different sections, with some in operation by the end of 2022.

Early 2020: The purple line gets hit with a third lawsuit from Friends of the Capital Crescent. The Trail and Chevy Chase residents’ case is dismissed. While all this was happening, the Purple Line Transit Partners asked for an extended five months with $187.7 million. They needed this extra funding to build a crash wall where the Purple Line is supposed to run adjacent to CSX  trains. There was a post report estimate that the overall Purple Line cost overrun would end up at $526 million with a delay of about 17 months.

Late 2020: Fluor Enterprises, Lane Construction, and the Traylor brothers told MTA they would cease construction due to low funding costs. 60 days given or the partnership would be terminated. They were looking for a new state agreement, and in the agreement they laid off 700 workers. The state takes over due to PLT partners claiming $800 million in unpaid costs. $2 million sought from Montgomery County for businesses that were affected by construction. $250 million settlement for the continuation of the Purple line. Settlement approved with $100 million coming from the state's transportation fund, construction continues.

2023: Anticipation of when the Purple Line Project will be finished and complete.

Narrative of the Case

Project Procurement

The Purple Line was procured as a public-private partnership. The concessionaire is responsible for design, build, finance, operate, and maintain the project. The Maryland state government hired a group of private sector firms that goes by the name Purple Line Transit Partners. The group of firms composes of Meridiam, Fluor Corporation, Star America, CAF and Alternate Concepts.

On March 2, 2016, Governor Hogan announced the chosen team for $3.3 billion over 30 years of operation and maintenance the a light-rail Purple Line in the Washington suburbs. On April 2016, Maryland’s Board of Public Works awards a 36-year, $5.6 billion contract to Purple Line Transit Partners.

Under the terms of this agreement, the private partners will accept risk from MDOT and MTA in exchange for availability payments, and they will complete five third-party projects that will complement the completed Purple Line.

Under the state’s plan, the Maryland Transit Administration would own the Purple Line and set fares. The private companies would design and build it over about five years, and then operate and maintain it over 30 years. The private team would finance some of the construction costs. The state would pay off the private sector’s debt service costs over time and pay the private team monthly for operating and maintenance costs.

On December 7, 2015, four teams composed of major American and international firms submitted their bids to realize the project. The four consortiums of private companies bidding on the project are: Maryland Purple Line Partners, Maryland Transit Connectors, Purple Line Transit Partners and Purple Plus Alliance:

• "Maryland Purple Line Partners" composed of Vinci Concessions, Walsh Investors, InfraRed Capital, Alstom and Keolis,
• "Maryland Transit Connectors" composed of John Laing Investments, Kiewit Development Company, Edgemoor Infrastructure & Real Estate and RATP Dev,
• "Purple Line Transit Partners" composed of Meridiam, Fluor Corporation, Star America, CAF and Alternate Concepts,
• "Purple Plus Alliance" compose of Macquarie Capital Group, Skanska, Kinki Sharyo and Transdev.

On April, 2016, Maryland’s Board of Public Works awards a 36-year, $5.6 billion contract to Purple Line Transit Partners (PLTP) to design, build, operate and maintain the new line.

Project Description

The Purple Line is a proposed 16-mile light-rail line extending from New Carrollton in Prince George's County to Bethesda in Montgomery County. The Purple Line project is designed to provide faster and more reliable east-west transit than buses, rejuvenate older inner-Beltway communities around its 21 stations, and connect Maryland's Metro lines with neighborhoods and Amtrak and MARC commuter rail stations.

The corridor is located along the Capital Beltway near Washington, D.C., in a densely populated area with continued commercial, institutional, mixed-use, and residential development. The Project will include five major activity center stations (Bethesda, Silver Spring, Takoma-Langley Park, College Park, and New Carrollton) and 16 smaller stations that serve residential communities, commercial districts, and institutional establishments.  It will also provide direct connections to three branches of the existing Metrorail system, all three MARC commuter rail lines, and Amtrak’s Northeast Corridor line.

The Purple Line Project is primarily intended to address severe traffic congestion and improve mobility for transit-dependent neighborhoods, providing for an east-west transit option to complement the north-south option currently available through the existing Metrorail system and MARC lines. The Project is expected to reduce travel times by approximately 40% and eliminate approximately 17,000 auto trips per day.

Project Cost

The project cost is about $2 billion. It will be paid for out of several different sources, including federal grants, state transportation dollars and local contributions. The total cost to the state over the next 35 years will be $5.5 billion because of the payments Maryland must make to the private sector consortium hired to build, operate, finance and maintain the Purple Line. (Di Caro, 2017)

Financial Structure

The Purple Line Transit partners have secured their financing for this project. They were able to lock in $85 million towards the department of transportation. This happened through the Transportation Infrastructure finance innovation act loan.

Due to the FTAs Capital Investment Grant contribution, they were able to get 50% of the $162 million that was needed for the cost of the Purple Line Project.

The other half of this project costs are being funded by: Approved transit income tax, City of Indianapolis, Department of public works, and some other Federal Highway Administrations and FTA sources once this has all been set and confirmed, IndyGo would like to have some contractors bid on different construction packages they are offering on this project.

Funding Structure

The Purple Line budget for this project was projected at $2.6 billion. There were many funding sources that contributed to this overall project. Being that there were a number of funding sources, they are outlined below to show the amount disbursed among them all. This project received a direct loan from TIFIA credit assistance. They will need to repay this through September 2050. This agreement was signed on June 14, 2016. Currently the financial status is that of the repayment of the TIFIA loan. The payback of the loan will go through a 29-year maturity with a final maturity at about 2050.

Funding	Amount
Progress Payments	$860 million
Revenue Service Availability Payment	$100 million
Final Completion Payment	$30 million
Short-term Private Activity Bonds (PABs	$100 million
Long-term PABs	$213 million
PABS Premium	$54.3 million
TIFIA Loan:	$874.6 million
Equity	$138.5 million
Interest Income	$6.8 million
MTA funds	$608.879 million

Contract Type

The Purple Line project is a design, build, operate, maintain, and finance DBFOM public-private partnership between the public sector Maryland Department of Transportation (MDOT) and Maryland Transit Administration (MTA) and the private partner, Purple Line Transit Partners, LLC (PLTP). The contract for the operation and maintenance period is 30 years.

Risk

Risk Allocation Table

Risk type	Risk Allocation
Scope Changes	Government
Environmental Approvals	Government
Permits & Approvals	Shared
Financing	Shared
Design	Purple Line Transit Partners
Environmental	Shared
Construction	Purple Line Transit Partners
Quality Assurance/Control	Purple Line Transit Partners
Operations and maintenance	Purple Line Transit Partners
Quality Assurance/Control	Purple Line Transit Partners
Changes in law	Shared
Force majeure	Shared
Ridership & Revenue	Purple Line Transit Partners

Risk Details

• The financial risk for this project is shared by both the owner ( The Maryland Department of Transportation (MDOT) and the Maryland Transit Administration (MTA)) and the Concessionaire (Purple Line Transit Partners).  
• The risks in the design and build phase are assumed by differently by the key actors actors. The Owner is responsible for permits and permitting construction, while the Concessionaire is responsible for making sure the construction is done on time and at planned cost.
• A force majeure is a risk for both parties. Events during the Design-Build Period both parties assume some risk. If an event occurs during the operations and maintenance period it could impact one or both parties. The Owner is at risk if it impacts ridership, while the Concessionaire is at risk if it impacts their operations and maintenance.
• The Owner holds most of the risks for ridership. The Owner pays PLTP for the operation and maintenance, and sets the fare prices. This means that a decrease in ridership would impact the Owner’s costs.

Future Development

In November 2020, The Maryland Transit Administration (MTA) procured a second P3 to finish the work on its troubled Purple Line project, should the state not reach an agreement with the Meridiam-led Purple Line Transit Partners (PLTP) concessionaire. A second P3 contract would help the state with the remaining $1 billion in work that needs to be completed before the line reaches commercial operation. A second P3 would also see the company operate and maintain the 16-mile railway. (Zachary, 2020)

The Purple Line is currently under construction. Construction has been stalled since Fluor, the main construction company, withdrew from the project amidst contract dispute. The dispute has been settled and the partners are currently looking for a new construction company and plan to have one in place by early 2022.

Project Termination and Delays

On June 23 2020, PLTP formally notified the Maryland Transit Authority and Maryland Department of Transportation of its intent to terminate the partnership in 60 days, citing the cost overruns as the reason. (Zachary, 2020)

The joint venture has stopped construction, seemingly proceeding with plans to quit the light-rail project over $800 million in disputed cost overruns. The remaining 16 miles of unfinished construction includes tunnels and roadways through Prince George’s and Montgomery counties.

The Maryland Transit Administration (MTA), Meridiam-led Purple Line Transit Partners (PLTP) and the banks behind the debt package, have signed forbearance agreements to not withdraw from the deal until 30 October 2020. (Zachary, 2020)

The decision to retain the status quo creates a last-gasp opportunity for the Maryland Department of Transportation (MDOT) and Purple Line Transit Partners to reach agreement on the nearly $800 million in cost overruns. (DePuyt, 2020)

Montgomery County seeks $2 million from the state to aid businesses affected by Purple Line construction. Maryland and the Purple Line consortium reached a $250 million settlement to continue construction. Maryland's Board of Public Works approves the settlement, with a $100 million initial payment coming from the state's transportation fund. All litigation that could delay the project is settled. Maryland is overseeing day-to-day work but will solicit bids for new project managers.

Issues and Lessons Learned

Issue 1

In 2016 right after the Purple Line project was started, a lawsuit was brought by opponents of the project. In August 2016, US District Court judge Richard Leon ordered a new forecast on the light rail’s ridership to account for the decreasing ridership on Metro trains. After Leon's report of the new forecast, the Maryland Department of Transportation appealed the decision and halted all construction. After eleven months, a three-judge panel of the US Circuit Court of Appeals allowed for construction to continue, and the project broke ground in August 2017. (Wester, 2021)

• Lessons Learned

• The lawsuit was brought by opponents of the project. Communication and collaboration with the public or stakeholders are important to reduce the possibility of potential lawsuits.  
• It is important to have a solid ridership forecast with informative data at an early planning stage to sustain possible scrutiny and challenge the forecast.    

Issue 2

Because of the delay, the projected operation date was pushed further and overrun fees started adding up. In June 2020, the partnership of construction firms wrote a letter saying they would stop work on the Purple Line because MTA would not pay added construction costs. After failed negotiations and lawsuits, the construction firms quit construction and walked off the job in September 2020. (Wester, 2021)

Lessons Learned

• It is important the contract includes the responsibility of each part to handle the risk of delay. Development of scenarios of project delays with associated costs/resources to be allocated to which party would be helpful to mitigate the risk resulting from project being delayed.    

Issue 3

PLTP is expected to finalize its decision for the new design-builder later in 2021.Some work has continued under the management oversight of MDOT MTA. The works mainly consist of underground and overhead utility relocation that is necessary for the new design-builder to resume full construction activities. (Wester, 2021)

Lessons Learned

• It is good that the MDOT and MTA picked up the works and prepared for the project to get back on track. The underground and overhead utility relocation are preparation works for the project. The cost and ability for the relocation works can be reasonably handled by the state DOT.  

Takeaways

• The Purple Line is a 16-mile light-rail line extending from New Carrollton in Prince George's County to Bethesda in Montgomery County and is currently under construction (Donovan, 2019).
• The Purple Line Project is primarily intended to address severe traffic congestion and improve mobility for transit-dependent neighborhoods. The Project is expected to reduce travel times by approximately 40% and eliminate approximately 17,000 auto trips per day.
• The project is expected to cost over $2 billion, making it the largest transportation P3 in the U.S. according to Gov. Larry Hogan (Donovan, 2019).
• It is a public-private partnership (P3), between the state of Maryland and concessionaire Purple Line Transit Partner, which is responsible for design, build, finance, operate, and maintain the project for 30 years.
• The Purple Line Transit partners locked in $85 million through the Transportation Infrastructure finance innovation act loan and got 50% of the $162 million from the FTAs Capital Investment Grant contribution. The other half of this project costs are being funded by various sources such as approved transit income tax, City of Indianapolis, Department of public works, and some other Federal Highway Administrations and FTA sources.
• On June 23 2020, PLTP formally notified the Maryland Transit Authority and Maryland Department of Transportation of its intent to terminate the partnership due to over $800 million in disputed cost overruns. (Zachary, 2020)
• In November 2020, The Maryland Transit Administration (MTA) procured a second P3 to finish the work on its troubled Purple Line project. A second P3 contract would help the state with the remaining $1 billion in work that needs to be completed before the line reaches commercial operation. A second P3 would also see the company operate and maintain the 16-mile railway. (Zachary, 2020)

Discussion/ Questions

• The project encountered termination and delays. What contract type or funding mechanisms can be modified to make the project move forward?
• There were many controversies with this project. Did you feel one sector was more “at fault” than the other?
• Do you think that the complications from this project will impact the development of other P3s in the future? Particularly public transit P3s.