Maryland passes a bill to protect transit from non-compete clauses

The Maryland General Assembly passed a bill this week that will free state-funded transit projects from the threat of non-compete clauses in state contracts with private toll lane operators. This is a win for investment in transit.

When toll lanes are constructed by private companies on public highways through a public-private partnership (P3), the P3 agreement often includes a non-compete clause to protect the profits of the toll lanes operator. In Maryland, the Hogan administration has proposed an extensive P3 to construct express toll lanes on I-270 and the Capital Beltway which will in all likelihood include such a clause. The proposed P3 does not have a transit component.

Express toll lanes constructed by private operators are dependent on congestion in the adjacent non-tolled lanes to turn a profit. To keep the tolled lanes profitable, the toll lane operator typically insists on compensation from the state for anything the state might do to alleviate congestion on the non-tolled lanes.

On the I-270 corridor, for example, a contract clause could require the state to pay the toll lanes operator for lost profits if the state were to improve service on the parallel MARC Brunswick Line.

Other transit enhancements paralleling the highways with tolled lanes could also require the state to compensate the private toll operator, such as added commuter buses and even Metrobus service upgrades on parallel arterial roads.

The legislation introduced by Delegate Lierman — HB 816 — bans such clauses from inhibiting transit projects, stating:

A public–private partnership agreement for a project involving road, highway, or bridge assets may not include a noncompete clause that would inhibit the planning, construction, or implementation of state-funded transit projects.

The final scope of the P3 is not yet known, though more than two dozen firms responded to the state’s request for information about the project.

The state has long planned to upgrade MARC rail service, especially the Brunswick Line between Frederick and DC, and this bill guarantees that the state will not need to compensate a private toll lanes operator for lost revenue should the state implement those MARC service enhancements.

Non-compete clauses have caused issues elsewhere in the country where highway agencies have attempted to expand non-tolled capacity adjacent to private toll lanes or add new links to their road networks. With the passage of this legislation, Maryland can invest in transit improvements adjacent to potential toll lanes without having to pay off a private toll operator for the privilege.