Maryland Embraces P3 Approach to Speed Delivery of Purple Line Light-Rail Project
P3 Speeds Purple Line: Strategic Partnership Between Public and Private Sectors is Key to Delivering Light-Rail Megaproject
Last month, readers learned about recent construction milestones achieved on Maryland’s Purple Line, a future 16.2-mile light-rail system that aims to improve mobility and connectivity inside the Capital Beltway. At $5.6 billion, this megaproject is one of the largest public-private partnership (P3) developments in North America today.
The Purple Line is owned by the Maryland Department of Transportation Maryland Transit Administration (MDOT MTA), one of the largest multimodal transit systems in the United States. MDOT MTA selected a conglomerate of global public-private infrastructure companies known as Purple Line Transit Partners (PLTP) to design, build, finance, operate and maintain the asset as concessionaire.
The PLTP consortium includes Meridiam Infrastructure Purple Line, which holds a 70 percent share in the joint venture, as well as Fluor and Star America, which each hold a 15 percent share. The light-rail infrastructure and support facilities are being constructed under a $2 billion design-build contract held by Purple Line Transit Constructors (PLTC), a joint venture subcontractor of PLTP comprising Fluor, The Lane Construction Corporation and Traylor Bros., Inc.
“Our project team brings a wealth of experience in P3 delivery, light rail expertise, construction management and operations and maintenance,” says Doran Bosso, PLTP Commercial Director. “In contrast to typical design-bid-build projects, our designers, constructors and operators work together in the same office every day, ensuring that all project elements are fully integrated.”
The Purple Line is one of several state projects that Governor Larry Hogan has championed in his commitment to bring long-awaited traffic congestion relief to Maryland commuters. “In Maryland, we are proud to be setting an example for the rest of the nation and the Purple Line is at the heart of our state’s infrastructure success story,” affirmed Governor Hogan in a public address in September 2019. He was joined by MDOT Secretary Pete Rahn and other Purple Line advocates to commemorate the installation of the first section of track, a major milestone showing real progress on the project.
“The leadership of Governor Larry Hogan and Transportation Secretary Pete Rahn have been absolutely critical to the success of the project. Their belief in and support of our work, in partnership with the talented MDOT MTA team, is indispensable,” Bosso says.
A Transformative Project
The Purple Line has been under construction since August 2017 and is on schedule to begin operations by the end of 2022. Once fully complete in mid-2023, the railway will offer commuters faster, more direct east-west transit service between the communities of Bethesda in Montgomery County and New Carrollton in Prince George’s County. The system is anticipated to carry about 59,000 daily passengers in 2023 and about 75,000 by 2040.
“The Purple Line will connect people and places in the Maryland suburbs of Washington, D.C., like nothing else,” comments Charles Lattuca, MDOT MTA Executive Director for Transit Development and Delivery. “As one of the nation’s first circumferential rail transit lines, the Purple Line will function as a wheel connecting an array of radial transportation spokes. Specifically, our project will link to the greater Washington, D.C., Metrorail system in four locations, Maryland’s MARC commuter rail in three areas, Amtrak and numerous local and long-distance bus services.”
Besides expanding the public’s access to employment, educational and recreational opportunities, the Purple Line is expected to remove thousands of cars from the road each day, helping to improve air quality and reduce traffic delays in one of the nation’s most congested regions.
Though still a couple of years away from carrying passengers, this new transit option has begun spurring economic development throughout the region, including near the project’s 21 planned stations. “The project already is catalyzing a real estate renaissance, and doing so in a sustainable, smart growth manner,” Bosso observes. “More than $2 billion of desirable higher-density, lower-impact development is underway or planned.” This conservatively translates into more than 7.7 million square feet of development. For perspective, that’s more than twice the usable space of the world’s largest office building, the Pentagon.
Increases in existing residential and commercial property values could potentially revitalize the area by attracting new residents and businesses. However, fast-growing populations have historically experienced affordable housing shortfalls and other socioeconomic challenges.
To address these concerns, communities along the developing light-rail corridor are taking action to accommodate anticipated regional growth. Additionally, Montgomery and Prince George’s counties are adopting policies to preserve affordable housing and also retain the richly diverse culture of the corridor.
Potential for 6,300 Construction Jobs
The Purple Line project brings even more economic value to the table: an estimated 6,300 construction jobs. “The Purple Line project team’s extensive efforts in workforce development are enhancing workers’ skills and experience, giving them a lifetime of improved employment prospects that also benefit the overall economy,” Bosso notes.
Thus far, around 2,500 construction jobs have been created and a total 4.2 million staff hours (professional, design, and construction) have been logged, including 1.3 million construction hours. Approximately 5.5 million construction hours are anticipated to be worked to complete the transit system.
“During design and construction, the project features aggressive goals to help ensure equal opportunity,” Lattuca adds. As of November 2019, a total 140 design and construction contracts had been awarded to 116 disadvantaged business enterprise (DBE) contractors. “Of the total design services performed, 40.6 percent of the total value has been paid for services performed by DBE firms, far exceeding the 26 percent goal. With the project still in the early phases of construction (20 percent complete), 11.3 percent of the total construction services value has been awarded to DBE companies (the completion goal is 22 percent).”
Once operational, the Purple Line is expected to employ 80 train operators and 150 others who will support Purple Line operations and maintain the trains, tracks, overhead power lines, power substations, passenger stations, and other infrastructure associated with the line.
Key Advantages of P3 Framework
Worldwide, the P3 delivery model has proven advantageous in helping governments leverage private-sector resources to expedite and streamline certain types of projects, particularly those in surface transportation, as well as offset financial risks to taxpayers. By bundling project delivery components, the P3 framework can spur greater synergy and a higher-quality product because a project’s operability and maintenance are greatly affected by how well it is designed and constructed.
Expanded capital access is another benefit of the P3 approach, which uses a blend of equity and debt to finance activities. Comparatively, traditional procurement methods only utilize annual agency revenues, federal grants or municipal bonds, which can potentially impede project delivery because of the time it takes to raise capital.
“The P3 structure promotes whole-life costing and innovation through the integration of construction with long-term maintenance, realized by a multi-disciplined team working in an integrated manner,” Bosso explains. “By investing our own equity in the project and seeking to manage this asset for the long term, we have real skin in the game and are highly incentivized to make every effort to ensure the project’s success.”
After extensively considering various project delivery options, in 2013, MDOT MTA determined that a design-build-finance-operate-maintain P3 approach would provide the most significant long-term efficiencies and savings. In April 2016, the state entered into a 36-year, performance-based agreement with PLTP in which appropriate risks and benefits are allocated in a cost-effective manner between the contractual partners.
PLTP’s financing includes an $874.6 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan and $900 million in grant monies from the federal government, as well as $313 million in “Green Bonds” from Private Activity Bonds underwritten by JP Morgan and RBC Capital Markets. Supported by contracts backed by the investment-grade credit ratings of the Maryland Transportation Trust Fund and Fluor, the bonds were sold at the lowest interest rates ever achieved in the U.S. P3 market, which generated significant savings for MDOT MTA.
In total, the state has reduced overall costs during the 36-year life of the agreement by more than $550 million. “The Maryland Purple Line project is an excellent example of leveraging a transit project through a public-private partnership,” states U.S. Transportation Secretary Elaine L. Chao. “P3s hold great potential for revitalizing our infrastructure and demonstrate how communities’ projects can benefit through access to additional funding resources, which can accelerate project delivery and provide greater innovation.”
Bosso concurs, adding: “Working in close collaboration with our MDOT MTA partners and our PLTC contractor team, our delivery of the Purple Line will help guide the development of future P3s, from exciting upcoming opportunities in Maryland to the wider U.S. to international markets.”
A Spirit of Teamwork and Cooperation
The diverse expertise and resources of the entire P3 team has been essential in the Purple Line’s end-to-end development. According to Bosso, the cornerstone of this collaborative partnership is a shared spirit of teamwork and cooperation. He notes further, “This level of teamwork is critical in removing the roadblocks and overcoming the challenges that occur in the delivery of a complex megaproject such as this.”
Internal communications have been especially vital to advancing the project. “Our intensive collaboration with MDOT MTA and PLTC is the glue that holds together the project, which is why we co-located client, developer and contractor staff in the same building,” Bosso emphasizes. “Externally, our extensive outreach is essential to addressing the concerns of neighboring residents and businesses, elected officials and other stakeholders, while keeping the public at large – our future riders – focused on the many benefits they’ll enjoy once we begin service.”
Ultimately, the long-term P3 partnership structure and alignment of objectives among the full Purple Line team will be pivotal to ensuring the public’s best interests are served over the course of the project. “With the long-term investment horizon of the equity partners, coupled with the contractor’s participation in both the construction and subsequent 30-year operation and maintenance of the project, the P3 structure is ensuring accountability for Maryland’s taxpayers over the long haul,” Lattuca says.