Financing for the Maryland Purple Line closed on Friday, June 17 – marking an important milestone for the Maryland Transit Administration’s (and Maryland Department of Transportation’s) plan to deliver a transit solution to ease travel between the Maryland suburbs and Washington, D.C.
Once the project reached commercial close in early April, the winning concessionaire, Purple Line Transit Partners LLC (PLTP), worked closely with the MTA/MDOT team to finalize the financing structure and various other issues. This culminated in a week of financial closings which allowed the precedent-setting approximately 36-year public-private partnership (P3) to proceed.
PLTP’s financing plan included:
- Negotiating an $874.6 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, which closed June 14;
- Securing approximately $313 million in Private Activity Bonds (PABs), issued through the Maryland Economic Development Corporation and underwritten by JP Morgan and RBC Capital Markets, on June 17;
- Harnessing $138 million in private equity from PLTP’s members; and
- Utilizing approximately $900 million in anticipated federal “New Starts” grant funding.
The Purple Line’s financing structure helped Maryland taxpayers realize substantial savings. Since the proposal deadline in late 2015, due to rate and credit spread risk sharing under the project’s P3 agreement, the State of Maryland will save more than $550 million over the term. The PABs utilized in the project, in fact, were sold at the lowest interest rates ever achieved in the United States P3 market.
As the project reached financial close, the parties also executed an amendment to the P3 contract. The amendment reduced the base availability payments owed during the operations period to amounts determined by factoring the savings on future interest payments into PLTP’s financial model. Maryland anticipates that the “New Starts” full funding grant agreement with the Federal Transit Administration will be signed later this summer.
The Purple Line achieved several industry milestones. It is the largest full DBFOM P3 in the history of the U.S. and Maryland’s third – and by far largest – P3, with total value over the term at approximately $5.6 billion, including a capital cost of about $2 billion. The project also secured the fifth largest TIFIA loan (and second largest TIFIA loan for a P3 project) in the TIFIA program’s history.
Jumpstarting the development process, the parties negotiated a notice to proceed that allowed limited work to proceed before the financial close. Construction activities are on schedule to begin in late 2016, and the project is slated to open for service in spring 2022.
The project faced several challenges, including a change in state executive administration and ongoing litigations generally involving environmental impacts diligence and property valuation. It also grappled with stakeholder demands and a need to find cost efficiencies during a formal procurement lasting more than 30 months.