Disputes over money and time unravel Maryland’s Purple Line P3

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Money and time are at the center of a dispute that appears to have unraveled the public-private partnership building a light rail system in the Maryland suburbs of Washington, D.C.

Over the last few days the private partner, Purple Line Transit Partners, has shut down its construction activities on the line.

Silver Spring, Maryland Purple Line transit center
A February scene of construction at the Silver Spring, Maryland, Purple Line transit center.

At issue is about $800 million in cost overruns and the potential for further overruns. The partners are seeking this money from the Maryland Department of Transportation.

The Purple Line is being built between Bethesda in the northwest suburbs of Washington, and New Carollton in the northeast suburbs. The system is separate from the Washington Metro but includes connections to Metro and other transportation facilities.

“The contract with the private partners totals $5.6 billion, and the state will be responsible for annual availability payments starting in 2023. We view availability payments as debt-like obligations," Moody’s Investors Service said Thursday.

“The state anticipates that the portion of payments covering debt service will be paid from transit fare revenue,” wrote Senior Credit Officer Marcia Van Wagner and Analyst Pisei Chea. “However, MDOT and the [Maryland Transit Administration] are in a dispute with the concessionaire for the project, which elected to exercise its right to unconditionally terminate the agreement after its various delay and compensation claims were rejected by the state.

“The case is under continuing litigation and most recently the state experienced a set-back when its motion for preliminary injunctive relief was denied by the Circuit Court for Baltimore City,” they wrote. “The claims include $750 million for delays, representing the bulk of MDOT's potential exposure.”

A Maryland Department of Transportation spokeswoman said: “It is expected that the state could take on the day-to-day management of the construction as early as next week.”

She continued, “MDOT is committed to completing the project. The Transportation Trust Fund provides a flexible funding tool that allows us to keep the project moving in the short-term without impacting other projects. Long-term funding options are still under development.”

She said bonds issued by the department or by a new developer are a possibility. The federal Transportation Infrastructure Finance and Innovation Act will continue to be an important funding source, she said.

The department had projected the light-rail line would be operating in 2022. The project is said to be 2.5 years behind projections. The department spokeswoman declined to give its current estimate for opening.

Moody’s rates the department’s Consolidated Transportation Bonds Aa1.

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Public-private partnership Maryland Maryland Department of Transportation Transportation industry Infrastructure
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