The proposed Purple Line ... will be the first state transit line built and operated by a private company, Gov. Martin O'Malley announced on Monday. ....
The east-west Purple Line is ...  to be financed, in part, by the higher gas tax the Maryland General Assembly approved this spring. It is also the first project launched under a new bill written to encourage private investment in public projects.  Construction is expected to begin in 2015.  Motorists saw a 3.5-cent-per-gallon increase to the gas tax in July, the first increase of several scheduled over the next three years.
There is a non-profit group Purple Line Now,  a coalition of business, labor, environment, neighborhood, and civic organizations that works with local, state, and federal government officials to promote the Purple Line.

Getting this new $400M commitment from the state for construction is a big step forward for the Purple Line. But we have many more challenges ahead before we are done. 
The MTA expects to complete the Final Environmental Impact Statement (FEIS) and to submit the Purple Line project to the Federal Transit Administration (FTA) late this summer for a Record of Decision. The critical ridership and cost effectiveness numbers look great for the Purple Line, and make it very competitive for federal matching funds! The Purple Line will be ready to move into Final Design and right-of-way acquisition as soon as a Record of Decision is received from the FTA. Construction can begin as early as 2015, IF we can meet the challenges that remain. 
The Washington Post summarized the key challenges remaining in the editorial "Jump start for the Purple Line". The biggest challenge remaining is to get the needed federal funding during this sequestration era in Congress. But the Post names other challenges as well: 

  • "...Will a suitable private operator be found? Will the state, whose contributions now total $680 million, dig even deeper into its pockets? How much local funding will taxpayers in Montgomery and Prince George's be asked to kick in? 

  • Through the inevitable setback and funding travails, it's important to remain mindful of the Purple Line's promise: to knit together a transit system that until now has been inadequate to the needs of a fast-growing region."
We have good reason to be excited about the announcement of $400M in state funding for Purple Line construction. But we need to stay focused on moving forward.

 And here is Matt Johnson, a planner with the city of Greenbelt's Advisory Planning Board, who reports on his blog that MDOT currently estimates that they could save about 20% of the cost of constructing and operating the Purple Line for 30 years by entering into a P3.
In a few months, MTA will ask qualified contractors to submit bids to operate the Purple Line.  ...  [The] MTA will use a "best value" method to pick the contractor, not necessarily picking the cheapest bid.  ...MTA will pay the contractor an annual "availability payment," which equals the contractor's contributions plus the operating costs the contractor estimated in their bid, divided by 35 (5 years of construction, plus 30 years of maintenance). ....
MTA, not the concessionaire, will set the fares, service hours and train frequency..... Like all transit lines in the United States, the Purple Line will not earn enough fare revenue to be profitable.   If the contractor can provide their services for less than what was budgeted, they'll keep the difference as (additional) profit. But if they go over budget, they'll lose money.   ....  MTA will write very detailed requirements in the contract setting performance standards for on-time performance and cleanliness. If the operator can't meet these standards, the MTA could pay them less. That gives the operator a financial incentive to provide good service.  ....
According to the MTA's Henry Kay, the Purple Line's risk profile is well suited to the private sector. In many cases, there will be tight quarters and traffic management plans. There's lots of risk that those conditions will delay the project or make it more expensive. One overarching contractor can better manage that risk than a public agency with multiple contractors. And if the contractor can't manage the risk well, it's their money, not the state's.   There are other risks, like unpredictable weather or even subway tunneling, which are difficult to manage.  ...
Why consider a P3 for transit at all? 
Using a P3 for the Purple Line will allow the MTA to spend a little less up front for the project, allowing Maryland to make better use of its gas tax revenues for projects around the state.  According to the MTA's Executive Director for Transit Development and Delivery Henry Kay, the P3 will be more predictable for MTA. For example, once MTA grants the contract, they'll know exactly how much it will cost to run the line every year for 30 years. If energy costs go up or labor costs go up, the contractor is on the hook. But the state will always pay the same price, unless the contractor fails to meet their performance targets (in which case, Maryland would pay less). That could help keep fares and tax rates in check. 
Of course, there are risks in a P3. The contractor could go bankrupt, or they could fail to deliver what they promised. MTA's goal is to provide good transit service, and they need to find a reliable partner who they can hold to the same high standard. 
Over the next several months, the MTA will release a Request for Proposals and companies will respond, allowing us to get a better understanding of how this P3 might work.