Hogan Announces Settlement to Continue Purple Line Construction

A Purple Line construction site in September. Photo by Bruce DePuyt.

After months of acrimony, the Maryland Department of Transportation and the firms building the Purple Line have reached a $250 million settlement.

Under the agreement, announced Tuesday, two of the firms that made up Purple Line Transit Partners — Meridiam and Star America — will retain their involvement in the Prince George’s-Montgomery light rail project.

The settlement funds, if approved by the state Board of Public Works, will be paid to the consortium, at which point the third firm in the group, Texas-based Fluor Corp., would exit the partnership.

The agreement “settles all outstanding financial claims and terminates the current litigation between the parties regarding the Purple Line project,” MDOT said in a press release.

Gov. Lawrence J. Hogan Jr. (R) and state Transportation Secretary Greg Slater have pledged for months that work on the 16-mile project would move forward despite the departure of PLTP’s main subcontractor, Purple Line Transit Constructors, in September.

Slater and consortium officials have been negotiating intensely for months over the $800 million in cost overruns that caused PLTC to sue for the right to sever its ties to the project, a court victory it won in September.

MDOT and the Maryland Transit Administration took over day-to-day management of PLTP’s contracts two months ago in an effort to keep the project from stagnating.

PLTP signed a 36-year, $5.6 billion contract to build and run the system in 2016. Purple Line advocates said Tuesday’s settlement was the best possible outcome.

“Being able to keep the same concessionaire moves all the time frames forward,” said Greg Sanders, vice president of Purple Line NOW, a local advocacy organization. “It would be a lot slower to have to replace the concessionaire.”

“Their people have the knowledge of the project,” he added. “I’m overjoyed.”

The original Purple Line project partners and their relationships.

With Fluor out of the picture, the remaining firms will seek a new “design-build” contractor to replace PLTC. (In addition to having a 15% stake in PLTP, Fluor also owned a piece of PLTC and Purple Line Transit Operators, an entity created to operate the Purple Line once it is complete.)

The search for a new primary subcontractor will take place “in coordination with the Maryland Department of Transportation and Maryland Transit Administration,” according to the state.

It was unclear on Tuesday how long it will take for PLTP to solicit and evaluate bids from potential construction contractors and negotiate an agreement with the one it selects.

“We don’t really know,” said Sanders. “We just know that, in terms of the bad or worse (options), this is the bad option. This is the one that is as simple as possible, given how long the dispute lasted.”

The Purple Line has been touted as the largest transit “public private partnership,” or P3, in the country. The impasse between the state and its prime contractor has been closely watched within the construction financing industry — and has led to criticism of Hogan’s leadership.

A real estate developer before entering politics, Hogan touted his business bona fides during his campaign for governor in 2014. He is considered a potential candidate for president four years from now.

“This agreement is a major step toward completing the Purple Line, a transformative project for our state and the region,” Hogan said in a statement.

“I would like to thank Greg Slater and our partners at Meridiam and Star America for coming together to find a path forward that will lead to a new contractor. We continue to make progress on all of the highest priority transportation projects across Maryland.”

Del. Marc Korman (D-Montgomery) called the announcement “the most efficient and cost-effective means to keep the project moving and towards completion.”

“Obviously it’s too bad we were ever in this position but the settlement is in the relatively low end of the claims,” he added.

A long-planned, long-awaited east-west link

While PLTP searches for a new construction contractor, MDOT and MTA will retain oversight of hundreds of contracts and purchase orders, including light rail car manufacturing, bridge work, stormwater drainage, paving, utility and pump station construction.

The agencies will also push forward with design work, permit acquisition and utility work in the Purple Line corridor.

The long-planned transit line is the first in the Washington, D.C. region to run from suburb to suburb.

When finished, it will connect New Carrollton and Bethesda, linking inner-Beltway neighborhoods with job centers, the University of Maryland College Park, Metro’s Red, Orange and Blue lines, MARC and AMTRAK.

Because of a lengthy lawsuit that delayed the project’s start and the subsequent battle over costs, the line will not begin operation until 2024 at the earliest. It was originally projected to carry passengers starting in 2022.

Residents and business owners in the Purple Line corridor have been looking forward to the new service for many years.

The slowdowns mean that investors will have to wait longer to begin defraying their upfront costs with fare-box revenue.

“Construction is nice. Construction causes some jobs,” said Sanders. “But ultimately it’s the trains actually running between Maryland’s economic centers that really produces the value for the state.”

Montgomery County Council member Tom Hucker (D) tweeted: “In an ideal world, MDOT & PLTP would have avoided this stalemate and legal fight. But today’s news allows Maryland’s #1 econ development project to move forward. And it does so w/o any new expectation on @MontgomeryCoMD & Prince George’s taxpayers. Congrats to Sec. Greg Slater!”

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Editor’s Note: This story was updated to include additional detail and reaction.