June 29, 2021

The Honorable Guy Guzzone

Chair, Senate Budget and Taxation Committee

The Honorable Maggie McIntosh

Chair, House Appropriations Committee

The Honorable Anne R. Kaiser

Chair, House Ways and Means Committee

Ladies and Gentleman:

By letter dated June 10, 2021, the Maryland Department of Transportation (MDOT) and
the Maryland Transportation Authority (MDTA), together as the reporting agencies, submitted for
review and comment a proposed public-private partnership (P3) agreement for Phase 1: American
Legion Bridge to 1–270 Relief Plan (Phase 1 P3 Agreement) in accordance with § 10A-203 of the
State Finance and Procurement Article. Section 10A-203 requires P3 agreements to be submitted
simultaneously to the budget committees of the General Assembly, the Comptroller, the State
Treasurer, and the Department of Legislative Services (DLS) for review, analysis, and comment
for a period of up to 30 days, after which the Board of Public Works (BPW) may approve the
agreement.

Background

The Phase 1 P3 Agreement is the first of several P3 contracts expected to be executed in

the effort to add two managed toll lanes in each direction to the Maryland portion of the
Capital Beltway (I-495) and to I-270 as part of the I-495 and I-270 P3 Program (program). The
program received BPW approval for designation as a P3 procurement in January 2020.

The Phase 1 P3 Agreement will govern predevelopment and preliminary design work for
the Phase 1 corridor, which extends from near the George Washington Memorial Parkway in
Virginia, across the American Legion Bridge, and up I-270 (including both spurs) to I-70 in
Frederick. The Phase 1 P3 Agreement does not include any construction work. The reporting
agencies expect to work with the phase developer, Accelerate Maryland Partner (AMP), during
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the predevelopment phase to determine the specifics of several project factors, including the
project’s design, construction price, and final toll rates.

The predevelopment work performed under this agreement will be done concurrently with
efforts to complete the environmental review underway through the I-495 and I-270 Managed
Lanes Study. Once the study is complete, assuming it culminates in a record of decision from the
Federal Highway Administration with managed toll lanes as the selected alternative, the reporting
agencies will seek approval from BPW for another P3 agreement for a section developer
(Section P3 Agreement). The section developer will be responsible for the final design,
construction, financing, operation, and maintenance of the first section to be constructed under
Phase 1, referred to as Phase 1 South, for a term of 50 years. Phase 1 South includes the area
beginning in the vicinity of the George Washington Memorial Parkway and stretching across the
American Legion Bridge to I-370. A map of the project phases, including the area encompassed
by Phase 1 South, appears in Appendix A of this analysis. AMP will hold a 51% ownership interest
in the section developer for this section. The 30-day review period required under §10A-203 of
the State Finance and Procurement Article will apply to all Section P3 agreements.
Predevelopment of future sections of Phase 1 will only proceed if AMP and MDOT agree that the
section is financially viable.

Financing Justification for Utilizing a P3 Model

According to the reporting agencies, a P3 development model is the only financially viable
means for the State to meet its goals and provide congestion relief in the near term. The reporting
agencies indicate that using the Transportation Trust Fund (TTF) to fund the project would
compromise the State’s ability to fund and complete other capital projects. For example, publicly
funding the capital cost of the American Legion Memorial Bridge reconstruction from the TTF
would represent approximately a full year of MDOT State Highway Administration’s (SHA)
capital program. Publicly funding the entire Phase 1 South project would represent approximately
three years’ worth of MDOT SHA’s capital program. Additionally, the project cannot be publicly
funded through MDTA Transportation Facilities Projects Revenue Bonds without significantly
expanding legislatively enacted debt limits. Similarly, Consolidated Transportation Bonds are
subject to debt limits. According to the State’s debt affordability analysis, this method of financing
would degrade coverage ratios outside of benchmarks and reduce debt capacity for schools and
other State facilities.

In a 2019 letter to the chairs of the budget committees and the Environment and
Transportation Committee, MDOT committed to providing a value for money analysis comparing
any private-sector proposal for project delivery to a public-sector option prior to seeking approval
for a P3 agreement. Generally, a value for money analysis compares the net present value of
expected cash flows from a P3 solution against the cash flows for a conventional, public-sector
delivery option. On June 15, 2021, MDOT communicated to the Treasurer’s Office and DLS that
a value for money analysis will be completed as the predevelopment work is further advanced
under the Phase 1 P3 agreement. Under the Phase 1 P3 Agreement, AMP will develop a committed
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section proposal (CSP) to complete the final design, construction, financing, operations, and
maintenance for each section. MDOT anticipates that AMP will submit its CSP for Phase 1 South
in May 2022. MDOT will develop its own estimate and value for money analysis for the purpose
of comparing a public sector option with the CSP and provide the value for money analysis to
BPW as part of the review and request for approval of the Phase 1 South Section P3 Agreement.

MDOT’s plan to provide a value for money analysis with the CSP technically complies
with the commitments made in its 2019 letter. However, if a value for money analysis – factoring
in all necessary legislative and regulatory changes to make the project viable as a public-sector
project – suggests that a public-sector project would be the optimal delivery method, the State
could pursue this option but would incur additional costs for terminating the Phase 1 P3 Agreement
for convenience.

Solicitation Process

The reporting agencies used a two-step request for proposal (RFP) process to solicit
proposals and select a phase developer. The reporting agencies issued a request for qualifications
for interested phase developers in February 2020. This resulted in the creation of a shortlist of
four candidates that the reporting agencies determined to be highly qualified. The qualified
candidates (proposers) were invited to submit a proposal to assist in the predevelopment work and
enter into the Phase 1 P3 Agreement for the program. The reporting agencies and the proposers
engaged in discussions for several months, culminating in three proposers submitting their
respective predevelopment work proposals in December 2020 and financial proposals in January
2021.

Scoring Methodology

Under the RFP, each proposer’s technical and financial response received independent
reviews from teams of multi-disciplinary experts that included MDOT and MDTA staff,
consultants, and advisors. The technical and financial proposals were considered approximately
equal in weight. Technical proposals could receive an overall adjectival rating of “exceptional,”
“good,” “acceptable,” or “unacceptable,” with “+” and “-” rating modifiers available for ratings of
Acceptable or higher. Proposers also received ratings for each of five primary evaluation criteria:
(1) delivery certainty; (2) minimizing impacts; (3) maximizing value to the State; (4) congestion
relief; and (5) Opportunity MDOT and community benefits. The financial proposals were rated
out of a total of 1,791 possible points, with more points generally indicating a higher rating overall.
The technical and financial review teams submitted their reviews to an evaluation committee
consisting of senior agency leaders, advisors, and an observer, that submitted its recommendation
to the selection committee comprised of the Secretary of Transportation, the MDTA Executive
Director, and the MDOT SHA Administrator.

In conducting a trade-off analysis as described in and authorized by the RFP, the evaluation
committee determined that AMP’s significantly higher financial score outweighed the marginally
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higher rating it gave Capital Express Mobility Partners LLC (CEMP) for its technical proposal,
making the AMP proposal the most advantageous offer to the State and the overall best value. This
recommendation was presented to the selection committee, and the selection committee concurred
with the evaluation committee’s assessment of AMP’s proposal. Exhibit 1 provides the scores for
the technical and financial proposals for each proposer that responded to the RFP.

Exhibit 1
Evaluation Results for Phase 1 P3 Agreement Responses by Proposer
Proposer Technical Proposal Score Financial Proposal Score
(Overall) (Overall)

Accelerate Maryland Good 1,356

Partners (AMP)
Capital Express Mobility Good + 665
Partners LLC (CEMP)
Accelerate Maryland Acceptable 800
Express Partners (AMEP)

Note: All financial proposals are out of a maximum of 1,791 possible points.

Source: Maryland Department of Transportation; Maryland Transportation Authority

Selection of AMP and Protest by CEMP

On February 18, 2021, the reporting agencies announced their recommendation to award
the Phase 1 P3 Agreement to AMP based on the findings in their evaluation. CEMP filed a protest
objecting to the decision on March 1, 2021. The contracting officer, after seeking advice from the
Office of the Attorney General, issued a final decision on April 15, 2021, determining that each
basis of CEMP’s protest failed on the merits and for being untimely or partially untimely. CEMP
filed an appeal on April 21, 2021, and requested a hearing on the appeal, which was not scheduled
as of the day the reporting agencies submitted the Phase 1 P3 Agreement report to the
General Assembly.

The Secretary of Transportation concurred with the contracting officer’s final decision.
Under the terms of the RFP, MDOT reserved the right to proceed with the solicitation and Phase 1
P3 Agreement if the Secretary of Transportation determines that proceeding without delay is
necessary to protect substantial State interests.
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The MDTA Board voted to approve the Phase 1 P3 Agreement on June 8, 2021. The final
award of the Phase 1 P3 Agreement to AMP is contingent on BPW approval. Assuming the
Treasurer’s Office and the Office of the Comptroller received copies of the P3 agreement to review
on June 10, 2021, the next regularly scheduled BPW meeting at which MDOT may seek approval
for the Phase 1 P3 Agreement is July 28, 2021.

Developer

The reporting agencies recommended AMP as the phase developer to conduct

predevelopment work required under the Phase 1 P3 Agreement. AMP’s team for the project
includes the following participants listed below.

• Lead Project Developers and Lead Contractors

• Transurban (USA) Operations, Inc.

• Macquarie Infrastructure Developments LLC

• Lead Designers

• Dewberry Engineers Inc.

• Stantec Consulting Services Inc.

• Supporting Construction Manager

• Bechtel Infrastructure Corporation

• Exclusive Subconsultants

• ECS Mid-Atlantic, LLC

• Floura Teeter Landscape Architects

• Soltesz, Inc.

• STV Incorporated

• Whitney, Bailey, Cox & Magnani, LLC (WBCM)

• Strategic Partners
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• Cavnue, LLC

• SIP Maryland Project Co. LLC

• Via Transportation, Inc.

• Diversity, Inclusion, and Local Workforce

• Modern Times, Inc. (Diversity and Inclusion Manager)

•
• Three E Consulting (Community Partnership Manager)

• Laisar Management Group LLC (Mentor Protégé Training Manager)

Financial Commitments, by Party

Subject to the requirements of an approved Phase 1 P3 Agreement, financial close for

Phase 1 South is to occur by October 31, 2022. Future sections of Phase 1 are uncommitted, and
predevelopment of such sections will only proceed if the phase developer and MDOT agree that
the additional sections are financially viable.

Accelerate Maryland Partners

As part of its proposal, AMP committed to pay the State a development rights fee (DRF)
of $145 million on financial close of a Section P3 Agreement for Phase 1 South. The DRF is
intended to allow AMP to offset MDOT-related project costs and commitments at final close. The
DRF is set according to certain key assumptions and may be adjusted to reflect the financial impact
of changes to these assumptions during the predevelopment work. The phase developer will pay
the DRF on financial close of Phase 1 South or on default by the phase developer during
predevelopment work.

AMP’s proposal also includes estimates for further financial commitments, including:

• $5 million for Vision Zero to improve pedestrian and bicyclist safety along the corridor, to
be made during construction; and

• over the 50-year term of the Section P3 Agreement for Phase 1 South:

• $300 million for transit services;

• $50 million in community grants; and

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• $25 million for supporting emerging technologies through an innovation alliance.

AMP’s proposal includes a $54.3 million predevelopment cost cap, the maximum amount
of allowed predevelopment costs that the Phase Developer may recover from the section developer
at financial close of Phase 1 South.

In accordance with the RFP, AMP provided MDOT SHA with a $5 million proposal
security that AMP will forfeit if it fails to enter into the Phase 1 P3 Agreement due to inconsistency
of any of its actions with the requirements of the RFP. Additionally, AMP will provide a
$10 million performance security for the predevelopment work on execution of the Phase 1 P3
Agreement. MDOT is authorized to draw from the performance security if AMP fails to meet the
requirements of the Phase 1 P3 Agreement.

State of Maryland

If Phase 1 is canceled for reasons that are not the fault of the phase developer, including
(1) termination by MDOT for convenience; (2) the failure of priced managed lanes for Phase 1 to
receive approval under the National Environmental Policy Act (NEPA); or (3) other changes to
the key assumptions set forth in the Phase 1 P3 Agreement that cause the project to become
financially unviable, MDOT will be responsible for paying the lesser of the $50 million Phase 1
South termination cap or the eligible costs incurred by AMP for the predevelopment work of
Phase 1 South up to the termination of the Phase 1 P3 Agreement. In return, the phase developer
will provide MDOT with the phase developer’s work product developed up to and during the
predevelopment work, including any designs and other intellectual property that could be used for
the development of Phase 1 in the future by the reporting agencies. AMP and MDOT plan to agree
to a separate termination cap for Phase 1 North in connection with the determination of Phase 1
North’s financial viability. Finally, MDOT could be responsible for reimbursing the phase
developer for reasonable and proper costs for certain limited compensable events, including the
cost of remedial actions and mitigation related to pre-existing hazardous materials or
archaeological artifacts.

The State is also responsible for reimbursing AMP for any MDOT-directed change orders
that are not part of the Phase 1 P3 Agreement. The State may pay for the change order directly, or
through an increase in the termination and predevelopment work caps to reflect the additional
costs. In addition, the occurrence of certain “relief events” could trigger certain rights for AMP to
recover associated costs. For both the change orders and relief events, MDOT plans to collaborate
with AMP to factor these additional costs into the section developer’s financing at financial close,
resulting in no net cost to the State.
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Expected Financing Plan Considerations for the Section P3 Agreement

While not the subject of the Phase 1 P3 Agreement, the reporting Agencies, in the report
to the General Assembly, included details on the expected financing plan for the Phase 1 South
Section P3 Agreement. In general, the section construction responsibilities will be financed
through a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan and private debt
and equity secured solely on toll revenue from the applicable section. Neither MDOT nor MDTA
will be provided TIFIA or other federal loans or credit assistance under the Phase 1 P3 Agreement.
If the financial plan for a section includes Private Activity Bonds (PABs), the phase developer will
be solely responsible for obtaining ratings, bond counsel opinions, credit enhancement (as
applicable), and an underwriting commitment or placement of the PABs, among other
responsibilities. The Maryland Economic Development Corporation will serve as the issuer of the
PABs.

For certain costs to be borne by the State, MDTA will issue notes through a private
placement issuance to the section Developer. These notes will be subject to a new master trust
agreement created for this purpose, and the notes are intended to cover costs that are the
responsibility of the State and that are critical components of the project. These costs include
environmental mitigation costs, program management costs, and certain right of way acquisition
costs. It is understood that there will be no impact to MDTA’s current trust and other transportation
facilities projects. The principal and interest on the notes are repaid solely from tolls from the
section and shall be nonrecourse on the MDTA system revenue or the State.

Future Revenue Sharing

Each Section P3 Agreement will contain contractual terms associated with future revenue
sharing in circumstances where the project outperforms initial expectations. Such revenue sharing
would be in addition to the DRF and any upfront payment made to the reporting agencies at
financial close of each Section P3 Agreement.

Tolling

MDTA has the responsibility to fix, revise, and set toll rates for the program in accordance
with § 4–312 of the Transportation Article and 11.07.05 of the Code of Maryland Regulations. On
May 20, 2021, MDTA announced the opening of the public comment period as part of the toll rate
range setting process for Phase 1 South, following MDTA Board approval to seek public comment
on the tolling proposal presented to the board. Written comments and call-in testimony through
voicemail will be accepted for the official record through Thursday, August 12, 2021, at 5:00 p.m.
MDTA will hold two in-person public hearings on July 12, 2021, and two call-in public hearings
on July 14, 2021.

Generally, toll rates will be set on a segment-by-segment basis with the goal of maintaining
free-flowing traffic at speeds of 45 mph or greater in the managed lanes by applying economic
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supply and demand principles. The toll rates will include minimum and maximum toll rates, as
well as a soft rate cap. The minimum toll rate is the lowest toll rate per mile charged at any tolling
point. The maximum toll rate is the highest toll rate per mile at any tolling point; this rate cannot
be exceeded under any circumstance. The soft rate cap is intended to constrain the toll rates when
throughput and vehicle speed are within certain thresholds. The soft rate cap may only be exceeded
when the operational metrics are not being met for the specific tolling segment impacted, and
increases will be controlled depending on the degree to which actual conditions exceed the
operational metrics.

Separately, a minimum toll per trip will be established for instances where the calculated
toll using the per mile rate is less than the costs of toll capture, MDTA processing, and collection
costs. This is intended to ensure that each vehicle minimally pays these costs to the system.

It is anticipated that toll rates set by the MDTA Board will be escalated annually on July 1
using factors based on the Washington Metro regional consumer price index to account for (1)
growth in traffic demand for the managed lanes; (2) annual inflation; and (3) the goal of providing
a faster and more reliable trip for customers over the life of Phase 1 South.

The MDTA Board is responsible for establishing discount programs for the toll lanes, such
as free or reduced passage for high-occupancy vehicles (HOV). Preliminary information
developed by MDTA staff recommends free passage for HOVs with three or more people, mass
transit vehicles, over the road buses, and motorcycles.

Recent Developments After MDTA Board Approval

Following approval of the Phase 1 P3 Agreement by the MDTA Board, several events
occurred that significantly altered the status of the program and the relationship between MDOT
and the National Capital Region Transportation Planning Board (TPB).

Impact of Actions Taken by TPB

On June 16, 2021, TPB voted to remove the program from the air quality analysis that TPB
is required to undertake to update the region’s long-range transportation plan, known as
Visualize 2045. This action effectively removes the program from the June 2022 update to the
plan. Additionally, TPB voted to update the plan again in 2024, two years ahead of the next
federally required update.

Regional projects must be included in the long-range plan in order to meet certain federal
requirements and advance to the construction phase. Without inclusion in Visualize 2045, several
key elements of the project as proposed are significantly disrupted. First, TPB’s action affects
financing for the development of Phase 1 South. Excluding the program from the air quality
analysis under Visualize 2045 means that the program cannot receive NEPA approval; this, in turn,
means that any future Phase 1 South Section P3 Agreement would be ineligible for a TIFIA loan.
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AMP’s financial proposal relies, in part, on the availability of TIFIA financing for project
expenses. Second, State funding may be in jeopardy, as Maryland requires the air quality analysis
to be completed before State funds may be used. Finally, the action prevents the State from
beginning the NEPA process for Phase 1 North.

TPB’s action does not prevent the reporting agencies from pursuing approval of the Phase 1
P3 Agreement, since the agreement does not include any construction work (construction work
would be completed under the later Section P3 Agreement). Moreover, while TPB effectively
removed the program from the June 2022 update to Visualize 2045, the program is technically still
included in the current version of the plan. However, TPB’s actions do call into question the
program’s future. While MDOT and AMP could move forward with the predevelopment phase,
the parties would likely be barred from entering into a future Section P3 Agreement due to the lack
of certain federal approvals – specifically, approval under NEPA. If that occurred, the State would
be forced to terminate the Phase 1 P3 Agreement and would then become liable for the lesser of
the $50 million termination cap or the costs AMP incurred for the predevelopment work of Phase
1 South up to the termination of the agreement, plus other costs owed in the event the State elects
to terminate the agreement. It should be noted, however, that MDOT may still be able to address
TPB’s concerns, which could result in TPB voting to reinstate the program in the long-range plan.

At this time, MDOT does not plan to delay its request for approval of the Phase 1 P3
Agreement. MDOT claims that such a delay would harm substantial State interests and introduce
substantial and unnecessary cost risks. According to MDOT, if the Phase 1 P3 Agreement is
delayed or does not move forward, MDOT will continue the predevelopment work and
environmental study through its consultant resources using funds from the TTF. Furthermore,
MDOT notes that a delay could cause AMP to withdraw from or reduce its offer to the State.
According to MDOT, the proposal was originally valid until July 7, 2021; however, AMP has
extended the validity of the proposal until August 18, 2021. A delay in approving the Phase 1 P3
Agreement past this date could risk losing certain commitments proposed by AMP, including the
potential to build the Phase 1 South improvements at no cost to the State, the $145 million DRF,
and other financial and environmental enhancements. It should be noted, however, that the value
of such commitments hinge on the ability of the project to proceed into section development.

Actions Taken by MDOT Following the TPB Decision

By letter dated June 21, 2021, MDOT Deputy Secretary R. Earl Lewis, Jr. informed TPB
that, based on the action it took to remove the program from the air quality conformity analysis
inputs, work on the analysis of the program cannot move forward until several key issues are
resolved and TPB approves a revised set of conformity inputs. Additionally, the letter noted that
part of the financial plan for the package of projects and studies submitted for the 2022 update of
the Visualize 2045 long-range transportation plan assumed $6 billion in private funding that was
reasonably expected to be available from a private concessionaire. This funding was slated for the
replacement of the American Legion Memorial Bridge and other smaller structures along the
interstate included in the Phase 1 South section of the recommended preferred alternative (here,
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the addition of two price managed toll lanes in each direction). Citing that the bridge and associated
interstates are part of the National Highway System, that MDOT is federally required to maintain
this infrastructure in a state of good repair, and claiming that TPB’s action essentially removes the
assumed $6 billion in private sector revenues that MDOT reasonably expected would be available
for the work when it submitted its inputs, MDOT stated that it must now begin the process of
reassessing project inputs for air quality and costs for financial constraint. In so doing, “projects
currently modeled for construction in the National Capital Region will almost certainly need to be
downgraded to studies or removed entirely to offset the loss of revenue for system preservation
costs of the American Legion Memorial Bridge and interstates” (emphasis in original letter).
MDOT plans to submit a revised package of inputs and financial information for consideration at
TPB’s July 21, 2021 meeting.

In essence, a new plan must be formulated to show that the State will have adequate funds
to build, operate and maintain the projects included in the air quality conformity analysis
specifically and in Visualize 2045 more generally. MDOT would propose to free up funds for these
projects by downgrading or removing other projects in the National Capital Region from the long-
range plan.

While DLS does not take a position on the actions taken by MDOT or TPB, it should be
noted that, according to a 2016 report by the U.S. Department of Transportation Federal Highway
Administration titled Successful Practices for P3s, a key concern articulated by many private
partners is the unpredictability of public agency decision making. However, while late-stage
intervention can derail projects, input from relevant participants is necessary to ensure that projects
delivered through P3s meet public needs. A collaborative resolution of all issues raised by MDOT
and TPB will likely yield the best results for the program, regardless of the form it takes moving
forward.

Relevant Legislation

Bills introduced during the 2020 legislative session (House Bill 1249 of 2020) and the
2021 legislative session (House Bill 67/Senate Bill 843 of 2021) sought to codify certain
commitments that MDOT pledged to incorporate into the RFP and resulting P3 agreements for the
project. Among these commitments were requirements that a developer complete certain actions
during the planning stage, including initiating community benefit agreements and entering into
memorandums of understanding with affected jurisdictions. Additionally, the bills required the
inclusion of certain features in the agreements, including the development of certain pedestrian
and bicycle paths and the ability of public transit systems to access the toll lanes free of charge.
AMP’s proposal aligns with most of the bills’ components, including commitments to local transit,
workforce development, and engagement with affected communities. However, because the bills
ultimately failed, the commitments are obliged solely under the proposal's requirements and
resulting P3 agreements and not in statute.
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Conclusion

The Phase 1 P3 Agreement is the first of many agreements that may come before the
General Assembly for review as the program progresses through its many stages. As the
predevelopment work intended under this agreement will be used to inform potential construction
efforts and necessary approvals, it is imperative that the reporting agencies ensure that sufficient
resources are devoted to monitoring the project and collaborating during the predevelopment work,
should it proceed, to ensure that the work quality is at a high level. In addition, continued
collaboration with affected communities is important to ensure positive outcomes for the phased
Developer, any future section developer for Phase 1, the communities being served, MDOT and
MDTA, and the State at large.

If you have any questions or need additional information, please contact Jeremy Baker
(jeremy.d.baker@mlis.state.md.us), Steve McCulloch (steve.mcculloch@mlis.state.md.us), or
Matthew Mickler (matthew.mickler@mlis.state.md.us).

Sincerely,

Victoria Gruber Ryan Bishop

Executive Director Director

VLG:RB/MM:JB/al

Enclosure

cc: President Bill Ferguson

Speaker Adrienne Jones
Members, Senate Budget and Taxation Committee
Members, House Appropriations Committee
Members, Ways and Means Committee
Secretary David Brinkley
Secretary Gregory Slater
 Appendix 1
Map of Project Phases

Source: Maryland Department of Transportation