Fitch puts Maryland’s Purple Line debt on negative outlook

The state of Maryland, already reeling from a transportation budget cut is absorbing another hit as Fitch Ratings changed the outlook on $100 million of private activity revenue bonds series 2022A and $543.5 million of series 2022B PABs from stable to negative. 

Both series are designated as green bonds and retain their BBB rating. They were issued by Maryland Economic Development Corporation on behalf of Purple Line Transit Partners LLC for the Purple Line light rail transit project.

Fitch also applied the change in outlook for the approximately $1.8 billion subordinate Transportation Infrastructure Finance and Innovation Act loan to PLTP for the project. 

According to Fitch, “The negative outlook reflects the project’s complex construction works that have led to delays approaching the design build and lenders’ long stop dates for a second time in the short two-year span since financial close.” 

The ratings agency gives passing grades to the partner’s revenue risk and favors the current contractors working on the project. Midrange judgments extend to lifecycle plans, and the debt structure. 

Fitch also provides a roadmap for bringing the outlook back up. “Outlook may be returned to stable over the next one-to-two-year period should the project handle future delays in an expeditious manner that supports timely projection completion and preserves the collaborative working relationship between all parties.” 

The news adds an additional financial burden to a state that’s facing a $418 million budget deficit in fiscal 2025 that is projected to balloon to $1.8 billion by 2028. 

In December, first-time Democratic Governor Wes Moore’s administration announced plans to  cut $2 billion from the state’s transportation projects, with highway construction taking a $1.6 billion hit.

The cut represents an 8% reduction to all the agencies within the Maryland Department of Transportation. Maryland separates transportation money from the rest of the state’s budget which still leaves a large hold to fill. 

MDOT indicates that $7 billion in federal infrastructure funds remain unaffected and it appears that projects already underway, including the Purple Line will remain intact.

The Purple Line is a troubled sixteen-mile, twenty-one station, commuter light rail line connecting New Carrollton in Maryland’s Prince George’s County to Bethesda in Montgomery County. Along the way it intersects with Amtrak’s MARC rail line, along with the Washington Metropolitan Area Transit Authority’s Orange, Green, and Red line metrorail stations. It’s estimated that the project is now over 50% finished. 

“There is a lot of frustration with this project,” said Montgomery County Council President Evan Glass during a council session in September. “It’s taken too long to complete and it’s way over budget. So not only do we have to get this project done as quickly as possible, but all the construction problems that are associated with it need to be fixed as quickly as possible.”

As of last July, construction costs are estimated to be $3.8 billion over its original $5.6 billion budget. The projected opening has been pushed back to May 2027, making the train five years late. The project has motored through three governors and a major change in contractors since its 2016 launch.