Washington Post Reporter Katie Shaver has written a truly excellent article on how the Purple Line ended up with $755 million in cost overruns and is now on the brink of failure. She’s covered the issue for many years and this is the most comprehensive yet comprehensible explainer I’ve seen.
Earlier today, the Washington Post reported that Purple Line Transit Partners has filed a notice of termination if it cannot reach an agreement with the State over massive cost overruns within 60 days. Currently, there are $755 million in cost overruns on the $2 billion project. The State and the P3 consortium disagree over who should pay them.
An anonymous source tells Seventh State that Fluor, a major partner in the deal, has pulled out. Del. Marc Korman told Seventh State that:
What I have heard is talks with Fluor are ongoing but if those collapse, the consortium will walk because Fluor is a large minority party. Not to say I’m optimistic about construction negotiations.
On Twitter, Del. Korman further elaborated:
One way or another, Gov. Larry Hogan and the Maryland Department of Transportation need a plan to complete the Purple Line. We are not leaving a scar through Montgomery and Prince George’s Counties.
The State was ill-positioned to absorb these massive cost overruns before the pandemic. The categorical opposition of federal Republicans to aid to states, as was done during the 2007 economic crisis, only exacerbates the already severe problem.
While an autopsy on the current situation is perhaps premature, key architects of the project have now conveniently left the building. Perpetually purple tied Mike Madden, the deputy director for the project, is gone. Transportation Secretary Pete Rahn, who was critical to gaining Hogan’s support for the project which he opposed during his campaign, has also moved along. No one can say either lacks impeccable timing.
Proponents of the project love to blame the environmental lawsuit for delaying it. But these sorts of suits are utterly typical and expected in major projects. Gov. Bob Ehrlich managed to complete the Intercounty Connector on time and on budget despite major environmental lawsuits that attempted to stop that project.
More important factors include the severe underestimation of costs related to tracks owned by CSX. The consortium has also accused the State of being slow to acquire properties necessary to complete the project.
The prediction track record on the project of Cassandras like Seventh State has proven far more prescient than that of supporters who continue to tout that the Purple Line is a “great value” and how the P3 “has overcome challenges that hampered Metrorail’s Silver Line.”
Advocates have a lot of explaining to do. The P3 was sold as a means to insulate the public from exactly these sorts of problems. Instead, we’re faced with the prospect of paying incredibly higher sums to complete the project or left with the priciest ditch in America.
The recent county executive debate was fascinating if only for the incoherence brought to it regarding the Purple Line:
Rose Krasnow, deputy director of the county’s planning department and former Democratic Rockville mayor, said the Purple Line “will have wonderful benefits for people along its length. It will raise property values, but it will spur development,” she said. . . .
After Elrich expressed his concern about gentrification that could follow the path of the Purple Line, Leventhal spoke about the benefits the line would bring immigrant workers.
“We should stop frightening people about it, as Mr. Elrich has repeatedly done,” Leventhal said.
“I never said the word ‘destroy’ about the Purple Line,” Elrich responded, noting that his opposition to some of the plans resulted in changes that will preserve hundreds of affordable housing units.
Purple Line advocates have long argued that it will spur new development around Purple Line stations. Indeed, although Metro stops have not resulted in urban nodes similar to Bethesda or Silver Spring near any station in Prince George’s, proponents have faith that the slower moving light-rail Purple Line will nevertheless make it happen.
If they’re correct, the Purple Line will, as Rose Krasnow points out, result in more development and higher property taxes. More generally, if land near Purple Line stations becomes more desirable, its value will increase and so will taxes on it. Generating more tax revenue was a major rationale for the Purple Line.
If a place becomes more desirable and tax rates increase, the cost of renting or buying housing near Purple Line stops will rise and some current residents will find it harder to afford housing. Developers and landlords obviously prefer higher rents — and the Purple Line’s goal is to stimulate investments that will allow them to charge more.
As a result, current residents will gradually be forced out. It can occur when a property is wholly redeveloped so that higher prices can be charged. Alternatively, greater demand will allow landlords to raise rents and sellers to charge more. People who worked hard to buy homes there will gain.
This is not a side effect of the Purple Line. It is the intent of the Purple Line. Indeed, the more successful the Purple Line is achieving economic development, the more it will occur. Notwithstanding all of the social justice blandishments, there is only so much counties can do to stop it.
Nor do they want to do so because they want the tax revenue and it’s the nature of the market. When areas become more desirable, prices rise. This is not meant as an attack on people who leave as abandoning the neighborhood or on people who move in as insensitive gentrification agents. It is simply how the market works.
George Leventhal says “We should stop frightening people about it.” But, as the debate highlighted, change will occur. To the extent that the Purple Line is a transportation boon, and billions are going to be invested towards that end, it will raise prices and drive current residents out, as it has in Bethesda and increasingly in Silver Spring.
There are a variety of policies one can do to increase the availability of affordable housing more generally. But the Purple Line is not one of them. Marc Elrich, an advocate of the Purple Line and more aggressive efforts to preserve affordable housing near Purple Line stops, explained his view in more detail in a blast email yesterday:
To zero in on an important case that came up at the forum, county officials have too often proposed zoning changes that would displace low-income communities of color. In 2012 and 2013, a Long Branch sector plan that included the upzoning of a very large swath of existing affordable multi-family housing – housing occupied largely by Long Branch’s low-income immigrant community – was brought before the County Council. The plan’s architects intended to tie construction of the Purple Line to new, much more expensive housing developments that would replace the existing affordable housing in that area. Even if 15% of the new units were “MPDUs” (moderately priced dwelling units), which was the best-case scenario, there would have been fewer total affordable housing units available in Long Branch if this plan had been implemented – in other words, less available lower-priced housing for people who need it.
Many of the families living in the existing affordable multi-family homes would not have qualified to live in MPDUs. Some had more family members than most MPDUs would have been able to hold (the proposed plan did not require developers to provide family-sized units). Some families had incomes too low or credit histories too short to qualify. For others, legal status would have been their chief barrier. In addition, the county did not have the resources to provide long-term rental assistance on the scale that would have been required in Long Branch.
In other words, under the Planning Board’s proposal, the current low-income immigrants in Long Branch would have been forced to relocate elsewhere. Since the existing buildings weren’t even an impediment to building the Purple Line, the Planning Board’s recommendations were particularly ill-advised.
When I met with planning staff and their director at the Long Branch shopping center, I told them – forcefully – that their plan was unacceptable.
I am happy to note that, within a week of my meeting, the proposal to rezone the particular properties I had questioned was withdrawn. I was also able to get results when the same process unfolded in two more sector plans and a proposal from the Planning Board to do a mini master plan. But these plans should never have been proposed in the first place. I am convinced they never would have been if we had a racial equity lens in place and were required to show the impacts such plans would have had on the surrounding communities of color.
I’ve been the consistent voice on the County Council speaking out on these issues because I know what the consequences will be if we fail to preserve our existing affordable housing. And as your next County Executive, I would like to make the consideration of racial equity the expectation in all of our policymaking, rather than the exception to the rule.
Put another way, the question is essentially how much power is county government willing to exercise over developers both in terms of what they can do and what they have to pay. However, it’s also a question of how much tax revenue the county is willing to sacrifice. Happy talk is not the same as action or making the best of not-so-easy choices.
By Adam Pagnucco.
Council Member Marc Elrich, who recently equated potential gentrification near the Purple Line with “ethnic cleansing,” is taking flak for his remarks and is not backing down. We will leave it to others to judge his choice of words. But what interests us is the policy proposal he has made: specifically, Elrich would like to see rent control imposed near Purple Line stations. That’s worth discussing.
Economists tend to disagree on many issues but a huge majority of them oppose rent control. Liberal New York Times columnist Paul Krugman has written, “Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.” A massive review of economic research on rent control found evidence that it encourages conversions of rental units into condos and leads to higher rents in non-controlled units. Rent control repeal in Cambridge, Massachusetts led to a surge in property values in both controlled and non-controlled units and a 20% increase in housing investment. Even Communists denounce rent control. In 1989, Vietnamese Foreign Minister Nguyen Co Thach told a news conference that rent control did more damage to his capital city than American bombs. “The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy.”
One need not go to a Communist nation to observe the effects of rent control. MoCo has a good example of that policy right here at home: the City of Takoma Park, which passed a rent control law in 1981. We examined U.S. Census data to analyze how the city’s housing stock compares to the county’s. Below we show that just 10% of the city’s housing was built in 1980 or later, much lower than the county’s percentage of 47%. That’s not a fair comparison since the city is much older than the vast majority of areas in the county. However, other older areas inside the Beltway like Downtown Bethesda (27%), Chevy Chase (20%) and Downtown Silver Spring (26%) have much higher percentages of their housing built in 1980 or later than Takoma Park.
It gets worse. Takoma Park has been losing rental housing units for years. Below we show the city’s total, owner-occupied and renter-occupied housing units in 2000, 2010 and the five year period of 2011-2015. During that time, the city’s total housing units fell by 4% and its renter-occupied units fell by 18%. Owner-occupied units increased by 10% and vacancies rose by 30%. No housing policy that produces double-digit losses in rental units can be described as good for renters.
Takoma Park’s housing decline is not going to turn around soon. According to the site plans, preliminary plans and sketch plans listed on the MoCo Planning Department’s development tracking map, only two housing projects with a combined seven units are pending in Takoma Park. Those units are all single family, which are exempt from the city’s rent control law.
This extract from the Planning Department’s site plan map shows the huge contrast in development plans between Takoma Park and Downtown Silver Spring.
The implication of all this is clear: housing developers are steering clear of Takoma Park’s rent control law. These folks are not going to be any more enthusiastic about rent control near Purple Line stations. Why does that matter? When it comes to building new housing, there are basically three options. First, you can build it near transit. Second, you can build it away from transit, thereby incurring the associated congestion and environmental costs. Or third, you can try to block it from being built, and that’s one probable effect of rent control. But that won’t stop population growth – instead, it will result in overcrowded housing, unsafe living conditions and code violations. (Such phenomena are not unknown in some areas of the county.) Rent control near the Purple Line just encourages options two and three.
Finally, the Purple Line is a huge investment, costing at least $2.65 billion to construct. Only an insane society would pour billions of dollars into a transit project and then stop new housing from being built next to it. Even Vietnamese Communists would agree.
Disclosure: Your author is a long-time supporter of the Purple Line and is a publicly listed supporter of Council Member Roger Berliner for Executive.
By Adam Pagnucco.
In response to a question about just cause eviction and rent control at the Progressive Neighbors County Executive forum, Council Member Marc Elrich stated that the Purple Line would cause “ethnic cleansing” without a rent control law. Elrich said:
I support rent stabilization and I think we need to be honest with ourselves about this. If we throw up our hands about this and say the market will determine the price of housing and the market alone will determine that, then we are going to wipe out neighborhood after neighborhood in Montgomery County. If you did that, then if you did not put rent stabilization around the Purple Line stops, for example, then the neighborhoods around the Purple Line will not continue to exist. They will be bought, they will be repurposed and they will go to other people.
When we did the Long Branch plan, and Park and Planning came in and said we want to rezone all the existing housing in Long Branch, I accused the Planning Board of ethnic cleansing. And I said some people do it with the gun, you guys are doing it with the pen but the truth is those folks would be gone and they would be gone forever…
Elrich’s remarks begin at the 2:29 mark of this video taken by Ryan Miner.
Disclosure: Your author is a long-time supporter of the Purple Line and is a publicly listed supporter of Council Member Roger Berliner for Executive.
Judge Richard Leon’s decision that the failure to scrutinize the potential impact of Metro’s stagnant or declining ridership on the Purple Line requires a supplemental environmental impact statement (SEIS) has been controversial to say the least. But what is the likely long-term impact on the light-rail line’s future?
The Purple Line faces a number of hurdles at this point, so let’s examine each in turn.
Rest of Judge Leon’s Decision
Judge Leon still has to issue the rest of his decision on many other portions of the lawsuit. Much of the remainder rests on claims of environmental harms caused by the Purple Line. As a conservative who tends to read such statutes tightly, it seems unlikely that Judge Leon will also delay the project on these grounds.
Appealing Judge Leon’s Decision
Purple Line defenders will need to appeal the decision requiring more study of the impact of poor Metro ridership on the PL. Though I remain deeply skeptical of the projected PL ridership numbers, light-rail proponents have a strong probability of winning the appeal. The National Environmental Policy Act’s (NEPA) focus on environmental impact will facilitate claims that the judge reached beyond the statute with his demands for new ridership studies.
The Cost of Delay
Even though they will likely win their appeal, gaining an injunction to allow the State to move forward immediately will be more difficult. Any costs created by delay–the State says these run at over $13 million per month–have been caused by the failure to allow the NEPA process, including judicial proceedings, to play out before beginning so much work. This should not engender much judicial sympathy. Additionally, courts are reticent to issue injunctions and use them, well, judiciously. Still, it could happen.
The Washington Post reports that the State would need to shut down the project around August 1. I don’t really buy this claim because it was part of the State’s effort to pressure a quicker decision out of the Judge. (The choice by Gov. Hogan and other PL proponents to follow Trump’s lead by impugning not just a judge but also his wife likely had no impact but it’s not a model that I would imitate.)
The State has also set this up as too big to fail. MTA states it would suffer an $800 million loss if it shut down the project. Deputy Project Director Mike Madden even says that there are no contingency plans. These claims alone should invalidate Hogan’s claims of bringing business sense to Annapolis.
What sensible businessman would sign a contract entailing heavy losses before the federal funds guarantee with no contingency plans? My guess is that this was done precisely to make it politically impossible to pull the plug.
The Trump Administration
Dependability has not been Trump’s hallmark. FTA has a window open only so long to sign a federal funding agreement. The window could shut before the State can sign. Of course, Trump could also just kill the project if someone explains to him where Maryland is, points to the blue on the map, and reminds him that Republican Gov. Hogan refused to back him.
At this point, however, FTA seems eager to sign the agreement. Who knows what will happen in Washington these days, but my bet is that the State can get the agreement if it can surmount the other obstacles. Despite some major last minute hiccups, odds remain good that the Purple Line will eventually come our way.
Larry Hogan joined in the attacks of the most extreme Purple Line supporters in accusing U.S. District Court Judge Robert Leon of being conflicted in the case. As Bethesda Beat reported:
Hogan, who discussed the project with U.S. Transportation Secretary Elaine Chao during a meeting last month, said the $900 million can’t be “shaken loose” because of Leon’s alleged conflicts.
“Secretary Chao can’t do anything about a judge whose wife happens to be involved in an opponent group and who has a conflict of interest who’s making a decision to hold this up,” Hogan said.
However, there is no real evidence of the claim that Judge Leon’s wife is involved beyond her membership in a citizens association that has opposed the project:
Christine Leon, the judge’s wife, has been a block captain for Andover Road for the Brookdale Citizens Association since at least 2005, according to documents posted on the associations’ website. The association is part of the Citizens Coordinating Committee on Friendship Heights, which testified against the Purple Line in 2008 during a public hearing hosted by the state and submitted written testimony on stationery that noted the group was “representing the Citizens Associations of Brookdale, Chevy Chase Village” and other nearby communities. There’s no evidence that Christine Leon personally lobbied against the project.
One can only imagine the cries of sexism that would have emerged from Purple Line Now if the judge had ruled the other way and Purple Line opponents accused him of a conflict. Hogan went to spread a bizarre outright lie:
“But even with federal funding, we can’t move forward because of a judge who lives at a Chevy Chase country club,” Hogan noted.
Leon’s house is actually about 3 miles from Columbia Country Club in the Brookdale neighborhood of Chevy Chase.
Of course, Greater Greater Washington joined in the smear.
Lack of Transparency or Responsiveness
If the State thought there was a real conflict, they would have brought it up before the case was heard. As it stands, these sour grapes look designed to cover up the State’s total lack of transparency or responsiveness regarding the question of ridership raised in the judge’s decision.
Specifically, the judge wanted to know how the steady decline in Metro’s ridership will impact estimated ridership on the Purple Line. As is well known, Metro ridership has been affected by its chronic problems along with the rise of ride-sharing services like Uber and Lyft as well as telecommuting.
The State’s response to the judge’s concern was not to present any analysis but instead to thumb its nose at the court and declare such an analysis unnecessary. The claim of the unimportance of transfers directly contradicts the State’s own website, which highlights as a major benefit that the light rail “Connects to Metrorail Green and Orange lines and both branches of the Red Line.” Oops.
The State’s failure to respond to Judge Leon is a continuation of its total lack of transparency on how the ridership figures were calculated. MTA has consistently refused to divulge critical information about how the ridership numbers were calculated by Parsons Brinckerhoff. Call it a faith-based initiative.
Frankly, I have little expertise as to the legal or substantive merits of judge’s decision. I’m not a lawyer let alone an expert in environmental law. Nor do I know Judge Leon or anything about his record. But leaving legal questions entirely aside, why is the State so desperate that it must demean the court? Why has the State stonewalled and hidden the critical ridership analysis? If the Purple Line is so great, why not reveal all?
Why the secrecy?
It’s #23 on his list of emergency and national security projects. Oh, what a dilemma for Maryland liberals!
In the wake of District Court Judge’s Richard Leon’s decision that the Purple Line Final Environmental Impact Study (FEIS) violated the National Environmental Policy Act (NEPA) by failing to take into account ongoing Metro problems in their ridership estimates, the defendants have several different options.
First, defendants can produce the Supplemental Environmental Impact Study (SEIS) required by the District Court. According to the Maryland Transit Administration (MTA), this would set the project back by six months and could unravel the public-private partnership. I suspect that this is hyperbole and that MTA would manage to do it more quickly, though the study would need to be substantial enough to satisfy Judge Leon.
Alternatively, the defendants can appeal. Maryland Secretary of Transportation Pete Rahn has said that Maryland will appeal the ruling. Except that the decision about any appeal rests with the Federal Transit Administration (FTA) and the Justice Department, as the federal government is the defendant in the lawsuit.
As a first step towards any appeal, the federal government would need to seek a stay of Judge Leon’s ruling. The decision on any request for a stay would be a critical moment. If appellants win their request, the Purple Line could continue to proceed even as the appeal moves forward.
In order to receive a stay, the federal government would like have to show substantial, irreparable harm from a delay and the appellate court would have to deem them likely to win their appeal. In my view, the first condition would not be hard to demonstrate. The second point also strikes me as winnable, if only because NEPA suits tend to fail. But I’m not a lawyer–I don’t even play one on TV–and the Judge’s decision increases uncertainty.
Whether they are granted a stay or not, MTA and FTA would most likely wisely start to produce an SEIS so that they are prepared regardless of the outcome of the appeal. If FTA wins an appeal, they won’t need it but the money is small beans in comparison to the overall cost of the project. The appeals process could well take longer to conclude than an SEIS.
Regardless of the outcome, Judge Leon’s decision has highlighted MTA’s flat unwillingness to produce information on how it calculated Purple Line ridership. In effect, this biased and politicized agency is saying “trust me” to the public on this enormously expensive project–eerily reminiscent of Donald Trump’s “believe me.” Even the ardently pro-PL Washington Post acknowledged this fundamental issue in its editorial decrying the decision:
Granted, Maryland transit officials have not been sufficiently transparent about how they arrived at ridership numbers. And if their estimates for the Purple Line fall short of forecasts, it could prompt the state to raid other revenue sources to pay off the project’s construction debt.
Additionally, Purple Line advocates are in the uncomfortable position of explaining (1) their utter faith that Metro ridership will rise even though it has declined for several years despite strong regional growth, (2) why we should believe that the trend toward telecommuting and biking, which they use to explain the decline, will cease, and (3) why Metro’s deep problems will be solved anytime soon, despite the recent derailment of the brand new Silver Line.