Surprising many, Gov. Larry Hogan announced that he plans to move forward with the Purple Line. Before analyzing this decision, I want to congratulate my many friends who have supported the project on this major step forward. While it’s not a done deal, my assumption at this point is that it will get built.
Gov. Hogan has set this up nicely to flummox his opponents. He will tell his supporters that he has substantially reduced the cost and made heavily Democratic Montgomery and Prince George’s pay more for it. If they cannot come up with the money, he can shift the blame for Purple Line failure on to them.
Cost Down Less and Borrowing Up More Than Advertised
The Governor has adopted the Orwellian speak surrounding the project of referring to the money that the concessionaire (i.e. the project builders) will spend as the “private sector contribution.” Of course, it’s not a contribution but money that the State will be paying back with interest for many, many years.
A sizable chunk of the cost reductions touted by the Governor are not really reductions but additional money being put on the Giant Purple Credit Card. It’s analogous to claiming that you saved money on buying your house because you took out a bigger mortgage.
Prince George’s County Negotiates
While Montgomery seems happy to pony up another $50 million for the Purple Line, Prince George’s has been much more hesitant. But Prince George’s response looks less like a flat no than the savvy opening gambit in a negotiation.
In their eagerness for the project, Montgomery officials may have left the County in an exposed position in which we’ll end up paying a lot more than our neighbors. Is Montgomery willing to raise its contribution further? If so, how much? If others stand firm, will Prince George’s pay?
Montgomery County Pays–But How?
How does Montgomery plan to find the extra $50 million? County Executive Leggett and Councilmember Floreen said that we could issue bonds but bonds have to be paid back. As County borrowing capacity is limited, at least if it wants to maintain its credit rating, this will reduce our ability to borrow for other purposes.
As a result, Montgomery will have to cut spending in other areas. What will the cuts be? Will the County maintain its commitment to build the bike path next to the Purple Line? Alternatively, will the County try to raise taxes even though income taxes are at the legal max and raising the property tax above the Charter limit would require a unanimous Council vote?
The County could create a special taxing district on new development in the Purple Line area. It will be interesting to see if the Chevy Chase Land Company is willing to start paying substantial sums towards this project which will benefit it immensely. Or will it continue to shift costs on to the rest of us.
Who Pay for Cost Increases?
If costs rise after the contract is awarded to the concessionaire–either due to changes requested by the State or provisions within the contract with price flexibility (e.g. related to energy prices)–who will pay for the inevitable cost increases? Will it fall on the State or on Montgomery and Prince George’s County?
These are tough questions, which is why many smart proponents of the project have been more cautiously celebratory than might be expected and carefully sorting through the Governor’s new proposal. And now that the project is moving forward, County officials will have to begin really answering them.