This story was corrected Oct. 31, 2011. An explanation follows the story.
Partnering with private companies to build and operate the Purple Line will save taxpayers about 20 percent of the cost of the whole project, a state transportation official told a County Council committee Monday.
“They’re going to get the work done with fewer people,” said Henry Kay of future contractors, known as concessionaires.
Kay was one of several representatives from the Maryland Transit Authority and the Department of Transportation who spoke at the county Transportation, Infrastructure, Energy and Environment committee meeting, detailing the process behind the public/private partnership also known as P3.
The $2.2 billion Purple Line is proposed to run 16.2 miles east-west across Montgomery and Prince George’s counties. Construction is slated to begin in 2015 and the state says it will be operational in 2020.
The project has generated controversy for the many properties that will be demolished or affected along the way, and the clear-cutting of 3 miles of the Capital Crescent Trail to make room for the tracks.
Unlike other public/private ventures, such as Beltway HOT lanes in Virginia, the concessionaire constructing and running the Purple Line would not have any control over fares nor would it make a profit from them.
Instead, a 30-year contract would outline exactly what the concessionaire would be paid in exchange for specific services rendered. These payouts are called “availability payments” because they depend on the availability of the services outlined in the contract.
Any problems or issues with the Purple Line would be handled by the MTA and not the private company, Kay said.
Glenn Orlin, deputy staff director for the County Council, asked what recourse the state would have if the company stopped running trains as often as it had agreed to.
Kay said withholding payments was how the state would motivate the company to follow its contractual obligations. Whatever company ends up taking on the role, Kay said, would have incurred debts that needed repayment and therefore would be unlikely to jeopardize getting regular payments from the state. He likened the arrangement to taking out a mortgage.
“You want them to have enough debt so they are motivated to take care of the asset,” Kay said.
Councilwoman Nancy Floreen (D-At large) of Garrett Park, pressed him, and Mike Madden of MTA, about how much the county would be responsible for — not including the cost of the Capital Crescent Trail, which will cost the county about $16 million.
Kay said Prince George’s and Montgomery counties were responsible for 10 percent of the total $2.2 billion, making Montgomery County’s share $110 million.
However, the county has already made contributions — such as rights of way — that will be taken into account when the final tallying is complete, he said, so no final number was available.
The state is expecting about $900 million in federal funding and the concessionaire’s contributions could be from about $400 million to $900 million for construction.
The state will know for sure about the federal funding by February, Kay said, which will be key before issuing a request for qualifications from companies.
“No private partner will invest if we don’t have federal funding,” Kay said.
The MTA will present the P3 idea before a state Board of Public Works meeting Nov. 6. The board consists of the Gov. Martin O’Malley (D), Comptroller Peter V.R. Franchot (D) and Treasurer Nancy Kopp. Franchot and Kopp both represented Montgomery County in the General Assembly.
“We need for this to work,” Berliner said. “We’ve invested a lot of time. We’ve invested a lot of our own resources.”
Explanation: The secondary headline originally misstated the estimated cost savings under a public-private partnership.