A Public-Private Pittance

Longtime readers know that I’ve long been crusading for privatization of state construction projects and transportation systems. So I was encouraged when I heard that the MTA was seeking input from private contractors on how to build the Purple Line in the DC suburbs.

That being said, what was reported from the meeting gives me a bit of pause:

Maryland officials are seeking ways to cover the state’s half of a Purple Line’s construction costs as they seek highly competitive federal aid for the other half. How much of the state’s $1 billion share the private sector would be asked to cover is still under consideration, officials said. Dormsjo said it could be about 5 to 10 percent of the construction costs. 

That puts the private investment roughly in the $50-$100 million range. Not a small sum when it comes to investing in transit, but also potentially leaving the state on the hook for most of the $1 billion estimated cost to construct the line. However, it isn’t that significant an investment when compared to the fact that three companies are each pledging north of $700 million to build a casino in Prince George’s County.

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Why is the state seeking such a small amount of private investment? Follow the money:

In any Purple Line public-private partnership, Maryland officials said, the state would own the rail line and control fares. The joint venture of private companies could pay for some or all of the design and construction costs, which the state would pay back when certain milestones have been reached, officials said. 

The joint venture also would recoup its investment over an agreed-upon period as it operated or maintained the line. Because transit systems don’t make a profit, the state would make periodic payments based on whether the rail line met certain performance standards, such as keeping trains clean and on time. 

Such an arrangement would ensure that the rail line is well-run and maintained, and would free up some public money during the design and construction phase for other transportation projects, state officials said.

Emphasis mine.

Basically the system that the state has in place is not one that is operated by any particular profit margin, but instead based on small investment in a system in which the only metrics regulating performance and ensuring payment to the private vendors is meeting basic performance metrics.

I’m not entirely sure how this is supposed to save the taxpayers money however if the $100 million investment is being offset by future payments.

The reason that three companies put up close to a billion each in order to operate a casino was one word: profit. These companies saw the risk of a large upfront investment offset by the ability to make huge profits on the backside. With the current Purple Line (and Red Line) public-private partnership proposal, there is no profit motivation at all. With the state maintaining ownership of the lines and control of the fares, how will this be any different than the state contracting out construction of the line? The only difference is that the state is getting somebody else to build the lines for them. Hardly a motivation for quality and cost savings.

When Virginia built their High Occupancy Toll lanes, they outsourced the entire construction and operation to Australian firm Transurban for 75-years. Those lanes were built quickly and so far have been operating smoothly. We can have the same thing with the Purple and Red Lines if we have the political will to do so. 

It behooves us, both as transportation consumers and taxpayers, to stop with these private-public partnerships that provide only a pittance of cost-savings to taxpayers. We must do better to be competitive as a state.

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