DALLAS -- Almost $1.2 billion of debt that will finance Maryland’s $5.6 billion Purple Line light rail public-private partnership project has been rated an expected BBB-plus by Fitch Ratings, roughly two weeks before the first bond sale for the project.
The rated debt includes $323 million of tax-exempt PABs set for pricing on June 13 and an $873 million federal low-interest loan under the Transportation Infrastructure Finance and Innovation Act with an anticipated financial close on June 14.
The PABs will be issued by the Maryland Economic Development Corp. on behalf of Purple Line Transit Partners LLC. The Maryland Board of Public Works approved the 36-year concession agreement between the state and the private investors in early April.
The ultimate ratings on the Purple Line debt will be determined once the final financial documents and legal options are available, Fitch said.
Fitch also gave an AA-minus rating to an estimated $4.5 billion of availability payments the state must make to the private partners over the 30 years of system operations and maintenance covered by the franchise agreement.
The concessionaires must meet specified benchmarks for system upkeep and scheduling to qualify for the monthly availability payments, which are expected to total $150 million per year.
Fare revenues over the three decades of operations are expected to total $1.36 billion.
Other funding includes an $897 million New Starts capital investment grant from the Federal Transit Administration.
Construction of the Purple Line will cost an estimated $2 billion and take 70 months to complete.
The line is expected to be operational by spring 2022. The contract with the Purple Line Transit Partners will expire in 2052.
The three partners in the consortium – Fluor Enterprises, Meridiam Infrastructure Purple Line, and Star America Fund -- will contribute $140 million of private equity to the construction costs.
Maryland does not consider the pledged availability payments as state-supported debt, State Treasurer Nancy Kopp told the public works panel in April.
Maryland’s policy is to keep its tax-supported debt at less than 4% of annual personal income and cap its debt service at 8% of annual state revenues, she said.
Maryland has about $12 billion of state-supported debt, according to a recent report from Moody’s Investors Service.
Federal, state, and local funds for the Purple Line will be kept in a trust account and monitored to ensure the money is not mixed with other state accounts, she said.
“None of the payments included in the agreement should count as state tax-supported debt that would impact the state’s capital debt affordability limits,” Kopp said.
However, S&P Global Ratings said on May 26 that it considers as state debt the availability payments as well as the milestone payments going to the investment consortium during construction.
“We will incorporate the net present value of the milestone payments in the state's net tax-supported debt ratios through the period before Maryland starts making availability payments for the P3 project,” S&P said. “Once P3 project construction is complete and operational, we will incorporate availability payments that are not supported by project revenue into our estimates of the state's net tax-supported debt ratios.”
The milestone payments include $100 million at the completion of construction and another $30 million when passenger service begins.
Purple Line opponents who filed a federal environmental lawsuit against the project in 2014 argued recently that work should be halted until Washington Metropolitan Area Transportation Authority resolves the maintenance issues that have hobbled the Metro rail system.
The Purple Line will connect with four of the Metro lines, whose riders are expected to account for a third of passengers on the Maryland system.
Purple Line ridership is projected to average 58,000 trips per day in the first few years of operation, rising to 70,000 riders per day by 2040.
