Court Case in Maryland Could Threaten P3s Nationwide

A judge’s last-minute demand for new ridership projections for a light rail line in the Washington suburbs could make investors think twice about working with the government.
by | August 28, 2017
The Purple Line, a $2 billion light rail project in suburban Washington, D.C., will be completed in 2022. (Maryland Transit Administration)

Maryland has been trying for decades to build the Purple Line, a light rail line serving parts of suburban Washington, D.C. Now a judge's ruling on the project -- which could potentially doom it altogether -- might undermine public-private partnerships nationwide, a construction industry group warns.

The American Road and Transportation Builders Association (ARTBA) recently weighed in on the ongoing court case over the Purple Line. The $2 billion, 16-mile route would be built and operated by private companies on behalf of the government. It's a model touted by the Trump administration, which has been encouraging more P3s for infrastructure projects.

The new transit line was tantalizingly close to construction when a federal judge ruled last year that Maryland had to conduct more studies to determine how, if at all, Purple Line ridership might be impacted by ongoing troubles with the regional Metro subway system. The Purple Line would connect to Metro, but the two would be run by separate agencies. In July, an appeals court based in Washington allowed construction to move forward while the court battle continues.

The construction industry has urged the appellate court to overturn the lower court’s decision. “Unless reversed, this precedent ... will have adverse consequences for complex transportation and related infrastructure projects across the country,” ARTBA’s lawyers wrote. “Allowing a court -- at the culmination of years of environmental reviews and planning -- to superimpose its own views on whether a given project is good policy or cost-effective is not only wholly inappropriate legally, but would also create significant uncertainty for ARTBA and its members by threatening carefully planned project funding, schedules and construction.”

ARTBA is particularly worried about how the trial judge, U.S. District Judge Richard Leon, interpreted a key federal environmental law: the National Environmental Policy Act (NEPA). It is one of the most sweeping environmental laws on the books; for large projects like the Purple Line, it requires agencies to produce thorough environmental impact statements that can take years to complete.

The trade association objected to what it called Leon’s “rogue application” of NEPA to require the Maryland agencies to address concerns that aren’t related to the physical environment. Leon wanted to know whether declining ridership on the Washington’s beleaguered Metro system (known as WMATA) would make the Purple Line unviable, because one of its main goals is to connect several subway lines that branch into Maryland from the District. Metro subway ridership has declined in recent years, and chronic safety issues forced the agency to close large segments of the system over the course of a year to perform long-needed maintenance.

 

“At a minimum, WMATA and [the Federal Transit Administration’s] cavalier attitude toward these recent developments raises troubling concerns about their competence as stewards of nearly a billion dollars of the federal taxpayers’ funds,” Leon wrote in his ruling last year, just days before Maryland was originally scheduled to receive federal funding for the project.

If Metro’s woes decreased demand for the Purple Line, that could undercut the argument that the route needed light rail, as opposed to bus rapid transit or other alternatives. But the federal government refused to update its environmental impact statement for the project, in light of Leon’s ruling, because it said the physical footprint of the light rail line would remain the same, even if no passengers transferred from the Metro system.

The construction group took issue with Leon’s last-minute requests. “If plaintiffs or courts can upend the culmination of the onerous NEPA process for economic or policy reasons having nothing to do with the environment, the ensuing uncertainty and delay would discourage public and private investment needed to rebuild and improve the country’s transportation infrastructure,” the lawyers wrote. “These concerns are particularly heightened for P3s, which are central to modern infrastructure financing and development.”

Public-private partnerships are usually very complicated undertakings, for both government agencies and the companies that they partner with. These projects add new dimensions politically, financially and legally. “The key import of all these moving parts is that P3s take enormous time, and effort, and thus certainty is paramount,” the lawyers wrote. They said the lower court’s decisions on the Purple Line “are anathema to this needed certainty.”

Even if the judge ultimately approves the project after the new NEPA reviews, the costs of the delay “can be substantial, even fatal,” because interest rates could rise or new political leaders could take office in the interim, ARTBA’s legal team wrote.

The Purple Line has already survived many close brushes with death. In fact, Maryland Gov. Larry Hogan campaigned on halting the project. He agreed to go forward with it only after making changes that will substantially reduce the state’s portion of the bill for the light rail line.

The move by the appellate court to stay Leon’s ruling cleared the way for federal money to start flowing to the project. The U.S. Department of Transportation announced last week that it will spend $900 million on the project, even though the president’s budget proposal called for eliminating similar grants in the future.

“The Maryland Purple Line project is an excellent example of leveraging a transit project through a public-private partnership,” a Department of Transportation spokesman told The Washington Post. “Going forward, it demonstrates the effectiveness of P3s, and we hope it will expand to other infrastructure projects across the country.”

If it survives legal challenges, the line is scheduled to open in 2022.