DALLAS -- The private investors selected by Maryland for the Purple Line public-private partnership light rail line will use an $875 million low-cost federal loan and $330 million of private-activity bonds to finance their share of the $1.99 billion construction project.
Preliminary contract documents released Monday by the Maryland Department of Transportation said the consortium led by Fluor Enterprises will receive availability payments from the state of approximately $150 million per year for 30 years to operate the 16.5 mile rail line, which will take six years to complete.
Maryland Gov. Larry Hogan announced the selection of Purple Line Transit Partners earlier this month as the state's preferred concessionaire in the construction and operation of the light rail project. The partnership includes, besides Fluor as lead partner, Meridiam Infrastructure Purple Line and Star America Fund.
Hogan said last year he would cancel the Purple Line unless planners could reduce the construction costs from an estimated $2.45 billion. The $500 million of reductions in the final plan include shorter, one-car trains that allow for shorter station platforms and a slight decrease of train frequency.
The Purple Line would stretch from Bethesda in Montgomery County to New Carrollton in Prince George's County. It would include 21 stations and would connect with the Metrorail system operated by Washington Metropolitan Area Transit Authority as well as Amtrak's passenger rail service.
The project is expected to begin before the end of the year and to be completed in the spring of 2022.
Ridership on the line is projected to average 58,800 trips per day in the first few years of operation, and increase to 70,000 riders per day by 2040.
The Maryland Board of Public Works is scheduled to endorse the contract with the private partner on April 6. Financial close on the P3 contract is set for June.
The private partners' financial plan for the construction phase of the project includes an $875 million low-interest loan from the Transportation Infrastructure Finance and Innovation Act program and $330 million of tax-exempt PABs.
The three partners in the consortium promise to contribute an additional $140 million of private equity to the construction costs. The money will come from pension funds and insurance companies that are looking for long-term investments, the partners said.
Hogan said the cost to the state over the 36 years of the P3 agreement would total $3.3 billion. System revenue from fares, which would be set and collected by the state rather than the private operator, is expected to total $1.36 billion over the concession term.
Maryland will retain ownership of the Purple Line throughout the life of the contract.
The state will contribute $159.8 million from its transportation trust fund for upfront construction costs, with another $330 million from Prince George's and Montgomery counties.
The Federal Transit Administration said in 2014 that construction of the system was eligible for $900 million from its New Starts grant program. The Purple Line received $100 million of FTA grants in fiscal 2015 and again in 2016. It is in line for $125 million proposed in President Obama's fiscal 2017 budget.
However, the state cannot spend any of the New Starts grant money on the project until a full funding agreement with the FTA is signed after the signing of the contract with the private partners.
The concessionaire will receive monthly progress payments during the construction phase totaling $990 million, which includes a $30 million payment upon completion.
The annual availability payments following system completion are expected to average $149.4 million per year at current interest rates.
The availability payments include $55 million per year for private sector construction financing, $29 million for system maintenance, $27 million for operations, $19 million for return on investment and overhead, and $10 million for replacement rail cars and upgrades to station equipment.
