Category Archives: Metro

Smart Growth or Corporate Welfare? Part Two

By Adam Pagnucco.

In making the case for Bill 29-20, which would grant developers at Metro stations 15-year property tax breaks, supporters claim that Metro high-rise development is not currently happening. And they say that’s the case for the entire region.

Is it true?

WMATA had a spate of development projects at Metro stations from 2002 through 2007, when the region’s real estate market was hot. There are much fewer proposals in the works now. They include:

Grosvenor-Strathmore, Montgomery
WMATA selected Fivesquares Development as its ground lease development partner at the Grosvenor-Strathmore station. In 2018, the Montgomery County Planning Board approved a sketch plan for 1.9 million square feet of mixed use development at the site. The original plan was supposed to include seven buildings, two of which would be 300 feet tall and another 220 feet tall. However, Fivesquares subsequently claimed that it needed tax breaks to finance the high rises, thus giving rise to Bill 29-20. Fivesquares wrote the following in its testimony about the bill:

Simply put, but for this legislation, Montgomery County’s goals to promote high density growth at transit accessible locations and, specifically, to implement the Grosvenor-Strathmore Minor Master Plan Amendment that the Montgomery County Council and Montgomery County Planning Board unanimously approved in 2017, would not be feasible due to the prohibitive economics of building high-rise projects. There is a significant gap in building high rise projects due to the gap between costs and revenue and the unique infrastructure requirements of Metro sites.

In the absence of this legislation, instead of the potential at the WMAT A property at the Grosvenor Strathmore Metro station for over 2,100 units, including over 350 Moderately Priced Dwelling Units (MPDUs), the only feasible development would be lower density, stick-built housing that would dramatically underutilize the site, resulting in less than half the number of total housing units and MPDUs.

New Carrollton, Prince George’s
WMATA plans to replace the parking on the station’s south side with hundreds of thousands of square feet of office, retail and multi-family space. At full build-out, the site could have a dozen buildings ranging in size from five to fifteen stories. Construction of a new garage is also planned for the station’s east side. Along with Grosvenor-Strathmore, this is easily the most aggressive of WMATA’s current development plans.

A rendering of development on the south side. Credit: WMATA.

College Park, Prince George’s
WMATA is planning a 5-story project at this station with more than 400 housing units.

A rendering of development at College Park. Credit: WMATA.

Capitol Heights, Prince George’s
WMATA would like to place a 6-story residential building with ground retail at its Capitol Heights station parking lot. This project was terminated in 2018 but WMATA staff asked for a new solicitation last year. KLNB is advertising the project’s retail component.

Deanwood, D.C.
In 2018, the WMATA board approved a joint development project to replace its Deanwood station parking lot with a mix of residential and retail and a garage. The project is not high-rise; rather, it envisions four-story buildings.

That’s about it. The project in D.C.’s Takoma neighborhood looks stalled as does the Greenbelt site in Prince George’s, which was once considered for the FBI. Amazon’s arrival in Northern Virginia could eventually stimulate development at Metro stations there but that seems quite a ways off.

Other than the Grosvenor-Strathmore site (which led to Bill 29-20) and New Carrollton (which might not have been viable without the relocation of the state’s housing agency), none of these projects has a high-rise component. That’s not an accident. Developers at Metro station sites have to deal with replacing existing parking (either with a garage or underground), station access issues, bus circulation issues and even possible amenities like park space. There is also WMATA’s time-consuming approval process on top of any local planning approvals. Developers of private sites don’t have to deal with these problems. Combine the construction costs of high rise as opposed to wood frame with the extra costs of building at WMATA sites and the economics of such projects get difficult, even with high rents and condo prices.

DC Urban Turf, a website that tracks residential development, lists hundreds of new residential projects that have been delivered, are under construction or are planned in the area. Many of them are high rises. High rises are being built in the region. They are just not being built, for the most part, on Metro stations.

So if high rise construction at Metro stations requires huge tax breaks to work, are the bill’s supporters right? Should Fivesquares and other developers get 15-year property tax exemptions? There are lots of other considerations to be discussed. Let’s do that in Part Three.

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Smart Growth or Corporate Welfare? Part One

By Adam Pagnucco.

For many years, MoCo has focused its land use and economic development policies on transit-oriented development. Since 2006, the county has adopted eight master plans centered on Metro stations, another four centered on Purple Line stations and one more centered on Corridor Cities Transitway stations. Another plan is in the works for Downtown Silver Spring.

The capstone for the Metro-based plans is development on top of the Metro stations themselves, which requires joint development agreements with WMATA. Placing the highest density on Metro stations, along with nearby parcels, enables the county to balance growth, transportation and environmental priorities in its march towards the future. For fifteen years, that’s what we have been told.

Now we are told that this approach won’t work without taxpayer subsidies.

The problem is that most, if not all, development on top of Metro stations is not proceeding. And that is because of economics. In order to be economically viable, Metro development projects must charge rents or condo prices sufficient to not only cover construction costs, financing and investor returns but also the unique costs associated with Metro station sites. The economics are particularly difficult with high rise projects, which have higher material and construction costs than wood-frame projects. And so the county council has proposed Bill 29-20, which would eliminate property taxes on Metro station development projects for 15 years and replace them with undefined payments in lieu of taxes to be set later.

In justifying the bill’s purpose, consider these remarks by Council Members Hans Riemer and Andrew Friedson, the lead sponsors of the bill, and Planning Board Chairman Casey Anderson at the council’s first work session.


Riemer
I want to say that this is a smart growth proposal. This is about making development feasible where decades of inactivity has demonstrated it is not feasible. If you look at Montgomery County and our Metro stations, you will almost universally see empty space on top of the Metro stations and despite efforts by WMATA over many years to support development at those stations, to solicit development on their property, there is very little that has happened. And there is very little that has happened recently, in the last ten years or so. Very little high rise, especially, and because of a shift in the market, I think which is driven by regional economic shifts and global economic shifts that have made the cost of high rise construction prohibitive except in the most high rent communities…

I think very broadly speaking, we have sought to channel all of our development, almost all of it, through a smart growth framework. We want to get housing that is high rise. We want to discourage sprawl. But the problem is we have not – the market isn’t producing the high rise that we have zoned for, that we want. And so the end result is we’re not getting much development. We’re not getting very much housing. We’re not even getting much commercial development.

Friedson
The idea that we’re forgoing revenue and that has a direct cost, that we’re leaving money on the table, we’re not leaving money on the table – the table doesn’t exist currently. That is the issue. There is no development, there is no investment. At best, the table is going somewhere else. It’s been shipped to another region of the country. It’s been shipped to another county. The whole point here is to create the opportunity. You know, the idea that we would be serious about transit-oriented development, that we would be serious about meeting our significant housing targets to address the housing crisis that we currently face but wouldn’t be willing to do anything about it is troubling. And we need a game changer. We need something to change the economic development path that we’re on, we need something to change the housing path that we’re on, that currently does not work. And I will say our housing situation, that is our version of a wall in Montgomery County. What we do with housing is a decision that we make on whether or not we want new residents here or not. That’s the local government version of whether we put up a literal or proverbial wall to say who can and who can’t live here, who we want and who we don’t want here.

Anderson
Will the development happen anyway? And I think the market is not just speaking, it’s screaming that the answer is no. Because you don’t have to take any particular real estate developer’s word for it, you can see what’s happening in the real world. It’s not just in Montgomery County, you can look at what market rents are at every Metro station in the region and you’ll see that there’s a few, particularly in Northern Virginia and in Bethesda, where rents can justify new high-rise construction there. Everywhere else, the answer is no, and that’s not just true of Grosvenor, or for that matter Forest Glen, as you mentioned, it’s also true of White Flint.


In considering these remarks, let’s remember who is saying them. It’s not County Executive Marc Elrich, who voted against numerous transit-oriented development master plans when he was on the council. It’s Casey Anderson, who has served on the Planning Board for nine years and chaired it for six; Hans Riemer, who has served on the council for ten years and is the current chair of its planning committee; and Andrew Friedson, who has emerged as the council’s principal champion of economic development during his first term in office. These are not development critics as Elrich has been. Anderson in particular, and Riemer to a lesser extent, are two of the architects of the county’s Metro-oriented land use policy and they are saying that it has failed.

They are also saying that the only way to rescue it is through what may ultimately become the biggest application of corporate tax breaks in the county’s history.

Are they right? We’ll discuss it in Part Two.

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Skewed Metro Ridership Forecasts Too High

We can’t rely on WMATA ridership forecasts.

Today, I look at forecasts for MetroRail and MetroBus for the two most recent comparable periods with available data. In the period from July 2017 through March 2018, MetroRail forecasts were above projections in four months and below in five months.

This doesn’t sound too bad until one examines the overall numbers. Metro overestimated ridership for these nine months by nearly 2.8 million. Actual ridership was 2.1% lower than expected by WMATA in its budget forecasts.

On the good news front, the rail ridership forecasts were not as off as the previous year.

In July 2016 through March 2017, WMATA overestimated rail ridership every single month, resulting in a net overestimate of 19.4 million or 13.0%. However, though WMATA projections are less wildly optimistic, notice that the skew direction remains the same.

The improvement was less strong in MetroBus ridership forecasts and the skew direction remained overly rosy. Here are the projected and actual MetroBus ridership for the most recent period.

WMATA projected more MetroBus riders every month than expected with the projections worse in the most recent months. Overall, there were nearly 4.5 million, or 5.1%, fewer riders than anticipated by the budget forecasts.

Like for MetroRail, the previous year’s MetroBus projections were abysmal.

The previous year’s projections were off by even more in every single month. WMATA overestimated MetroBus ridership by 9.3 million. Actual ridership was 9.2% lower than the forecast.

WMATA needs to reform its projections so they do not skew in favor of overestimating ridership. Indeed, if anything, it would be better to err on the conservative side since Metro’s budget relies in part on the expected collection of fares related to these projections.

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Metro Ridership Still Falling

Today, I’ve put together MetroRail and MetroBus ridership over the same period from July though March for FY2017 and FY2018.

Among the nine months with comparable data, MetroRail ridership was up over the previous year in four months and down in five months. The months with decline, especially January, saw overall greater slump than the months with gain.

As a result, MetroRail ridership for more recent period is a net 1.57 million lower, or 1.2%, over the previous year. Metro should find this very discouraging. SafeTrack ended, at least temporarily, in June 2017, so the current year is completely post-SafeTrack. Its completion along with the “Back to Good” campaign has simply not halted the long-term hemorrhage.

Moreover, one can hardly blame the decline from December through March on a brutal winter this year. This planned closing of  stations in summer from 2018 through 2021 for weeks on end doesn’t seem likely to help matters either.

If you think the rail numbers are somewhat discouraging, take a look at the bus numbers.

MetroBus ridership is off by 8.6 million (!) over the previous year, an incredible decline 9.4%. No month saw a year-to-year increase. Declines in ridership impact Metro’s budget, as it depends on fares to provide a significant portion of its budget.

Data Sources: Vital Signs Report (Q1-2017), p. 21; Metro Performance Report (Q3-2018), p. 40.

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Rosapepe a Barrier to Metro Reform?


Metro Reform Bill Passes House of Delegates

The Governor and both houses of the General Assembly are behind bills to create dedicated funding for Metro sponsored by Dels. Erek Barron, Marc Korman, and Sen. Brian Feldman. However,  I’m hearing from Annapolis-land that parallel legislation designed to heighten scrutiny of how WMATA spends the money are having trouble in the Senate.

Specifically, Sen. Jim Rosapepe is philosophically opposed to the creation of an strengthening of the inspector general. I suspect voters and taxpayers have stronger objections to handing over large sums to Metro on a repeat basis without the slightest increase in oversight despite repeated problems not just before but also in the wake of SafeTrack. Federal reports on the tracks and work done have been damning.

Time to get past philosophy and on to practicality in this case.

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Other Systems May Have Problems but Only Metro is Hemorrhaging

One of the responses to Metro’s critics is a variation of “things are tough all over.” Not so fast. Other major subway and light-rail systems may have problems but this graph from yesterday’s Wall St. Journal shows that WMATA is in a class all its own. Ridership is down 19% from 2011 through 2016. And no one thinks those figures are picking up even though SafeTrack is over and we’re theoretically “Back to Good.”

You can make the case that this proves the dire need for more money invested in capital improvements to make the system more reliable. But it also makes the case for improved accountability for WMATA. This goes beyond Paul Wiedefeld to include Metro’s ineffectual board and problematic unions.

Resources are important but it’s also how they are spent. Consider how many escalators have been “fixed” or even completely replaced only to stop working almost immediately. Consider further how many problems federal inspectors found with the tracks even right after SafeTrack passed through an area.

ATU Local 689 has fought against firing track inspectors who falsified inspection reports and put public safety at risk. You can say that the union is doing its job for its workers. But the workers, and the union that defends them, sure aren’t working for Metro’s riders or public safety here.

My sense is that Paul Wiedefeld has pushed change in a positive direction of actually trying to fix the the system. But the ridership numbers tell the story. I want Metro to get more money but I equally want evidence that Metro will spend it better.

We’re hearing a lot from Maryland state legislators, and even the Governor, about dedicated funding. Not as much about reforming its expenditure. Dels. Marc Korman (D-16) and Erek Barron (D-24), who have been leaders on dedicated funding, also have a bill in to improve how we appoint Maryland’s board members. (Sen. Brian Feldman D-15 is sponsoring the Senate bills.) It’s a start. But far, far more is needed to restore public confidence.

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Busting Three Metro Myths

The six graphs – one for each Maryland branch of the Metro – in today’s post reveal the ridership figures for all Maryland Metro stops from 2005 through 2016. They’re not encouraging either for the health of the system or cherished myths around it.

Transit Always Heralds Urbanism

“If you build it, they will come.” Usually not. In Maryland, only three stops have become high traffic urban nodes: Bethesda, Silver Spring and Friendship Heights – the latter is shared with the District. The other 24 stops have not witnessed remotely this level of impressive urban development or Metro ridership. Outside the urban three, the highest ridership occurs mainly at end-of-the-line commuter stops, such as Shady Grove, Greenbelt and New Carrolton.

Transit advocates and developers are both very attached to this myth. The former because they believe fervently in transit. Developers like it because they are permitted to build far more when transit is built, which allows them to make a lot more money even if nobody ever rides it. Proximity to transit also raises the value of their property at somebody else’s expense.

The uncomfortable truth is that no nodes similar to Bethesda or Silver Spring – or Ballston or Rosslyn – have emerged in Prince George’s County. Leaving aside the terminus stops, ridership is not very high and certainly not growing. And the terminus stops have seen more precipitous declines than in Montgomery – 34% at New Carrollton, 21% at Greenbelt, and 20% at Branch Avenue.

Thriving Urbanism Heralds More Transit Riders

Not necessarily. Bethesda, Friendship Heights and Silver Spring have continued to grow yet ridership has declined. In 2016, all three served many fewer riders than at their peak – 15% in Bethesda, 17% in Silver Spring, and 20% in Friendship Heights.

Transit is a positive for these areas but it’s only one factor among many. It’s not that smart growth or new urbanism is totally off base. The focus on transit may lead to overestimation of its importance to successful development. Density and the mixture of residential and commercial looks more crucial to their continued success. It’s why places like the Kentlands thrive even though they’re nowhere near Metro.

There is little sign that less intense development around Metro stations other than the big three has increased ridership either. Throughout the Maryland portion of the system, ridership has tended to stay flat or decline. Remember that this has occurred despite population increases in both Prince George’s and Montgomery.

Declining Ridership is Temporary

Two major excuses are given for Metro’s declining ridership: the financial crisis and Metro’s “temporary” maintenance backlog. At this point, the former explains little as the recession is over and the population is now higher, so Metro should have more riders. The latter is belied by the similar decline in Metro’s bus ridership. Moreover, SafeTrack will not bring the system back to tip-top condition but simply prevent its complete collapse, as General Manager Paul Wiedefeld has been at pains to point out.

The wheel of technological change is driving changes in transportation patterns fast. Increasing numbers of jobs can be done via telecommuting. Competition from services like Uber and Lyft are remaking the taxi industry and attracting many new riders. Every price increase in Metro or its parking lots only makes them more competitive – and the price of both is likely to head up.

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