State paying more than appraised for some Purple Line properties

State paying more than appraised for some Purple Line properties

The Board of Public Works approved $1.9 million for the Maryland Transit Administration to acquire this home on Montgomery Avenue in Bethesda in September 2017-- $1 million more than the home's appraised value. Photo by Julie Depenbrock / Capital News Service)

By Katherine Brzozowski 

Capital News Service

Maryland may be paying more for some properties in the main path of the Purple Line, state officials said, because one transit agency lacks purchasing leverage, and extended negotiations would cause costly delays.

Comptroller Peter Franchot in early February expressed concerns that the state is overpaying for properties it needs to make way for the new light rail.

“In our enthusiasm and support for the Purple Line we’re getting put over a barrel by some of these landowners. And we are having to pay a lot more than the appraised values,” Franchot said at a Feb. 7 Board of Public Works meeting.

At that meeting, the board unanimously approved $5.3 million for part of a Silver Spring apartment complex — $1.5 million over the state’s original appraised value.

Maryland Transportation Secretary Pete Rahn told Capital News Service that the state has paid more for certain properties in order to avoid costs of delaying the $5.6 billion project.

“We have a major portion of the right-of-way already secured,” Rahn said, “but we are running into situations where, on the ‘critical path,’ landowners know that we can’t afford to wait.”

Critical path

“Critical path” properties take priority because they are properties that must be acquired in order for the project to move forward, said Rahn.

If the state can’t provide access to the Purple Line’s “critical path,” contractors will charge the state for idle equipment and idle employees, Rahn said, and the “costs of delays on the Purple Line are huge.”

Because of Maryland law, the negotiating power of landowners with property needed for the Purple Line depends on where the property is — whether it’s in the “critical path” — and which agency is buying it.

Sometimes, the state determines that the Maryland Transit Administration must purchase the property; other times, it’s the State Highway Administration.

The highway agency is required to take land for the Purple Line if it’s along a state highway right-of-way, next to an administration-owned road or if highway work related to the light rail is being done on the road, said Charles Lattuca, executive director for transit development and delivery at the Maryland Transit Administration.

Everything else would be acquired by the Maryland Transit Administration, Lattuca said.

Quick take: SHA has it, MTA doesn’t

The MTA does not have the power to “quick take” properties because it operates under different laws than the State Highway Administration, which does, said Judy Freedman-Breckon, the transit administration’s real property acquisitions manager for the Purple Line project.

So, for critical path properties, the transit administration must come to the negotiating table and settle on a price before construction can start, whereas the State Highway Administration can use quick take. This allows it to acquire properties, pay owners what the state determines is a fair price, start construction right away and worry about possible litigation later.

Paying more than appraised value

On Feb. 7, the Maryland Transit Administration asked for nearly $5.3 million to acquire 25,115 square feet of property, and rent another 22,394 square feet at the Falkland Chase apartment complex in Silver Spring.

A portion of Falkland Chase lies in the Purple Line’s critical path.

The board unanimously approved the request, though it was more than $1.5 million over the $3,639,300 appraised value determined by the state.

The higher cost was within an appraised range and would cost the state less than delays, according to Rahn.

“This is not the first contract where I feel as if the state is being leveraged,” Franchot said. “This (problem of overpaying) is going to get worse and worse as the private sector catches on.” Rahn said he knows that the state is paying a premium on certain properties, but those additional costs are approved after the state considers the necessity of a property — whether it sits in the line’s “critical path.”

Then, Rahn said, a calculation is made between the additional cost of a critical path property — in order to move ahead quickly — versus the cost to delay the Purple Line due to a dispute.

The $5.3 million does not include the relocation costs of 20 households; this cost is not currently publicly available. It also does not include an additional $598,356 for rent loss that should be paid to the complex’s owner, according to state documents.

At the board meeting last month, Franchot called upon Rahn to ask state lawmakers to give the Maryland Transit Administration the same legal powers of “quick take” as the State Highway Administration.

“If you could perhaps suggest (to lawmakers) that (quick take) authority would save millions of taxpayer dollars and correct something that I think is not a level playing field right now, I would be appreciative,” Franchot said to Rahn.

Rahn said that there is good reason for legislation like this, calling Franchot’s comment, “absolutely valid.” However, he said it is unlikely that this is an issue that can be addressed this session.

“(Franchot) has been and continues to be a supporter of the Purple Line,” said Joseph H. Shapiro, assistant comptroller. He said Franchot is concerned that taxpayers get the most for the money spent on their behalf, and his worry is that because Maryland Transit Administration lacks “quick take,” the state is paying more than it should.

By mid-February, about 88% of all property planned to be bought for the Purple Line project was in hand, Lattuca told Capital News Service.

The process of property acquisition starts with an appraisal, state documents show.

When the Maryland Transit Administration needs to acquire a property, two independent appraisers each offer a valuation of the property, according to state documents.

Not throwing money away

Joseph Suntum, a lawyer who worked on a $22.9 million deal for a business center in Silver Spring, said the state actually acquired that Spring Center property at a “bargain.”

“The state is not throwing money away,” Suntum said. Acquisitions should be based on the quality and reliability of the appraisals.

“By law,” Suntum said, “property should be valued on its highest and best use, not the current use.”

Maryland’s Board of Public Works in September approved $1.9 million in state funding for the Maryland Transit Administration to acquire a 5,501 sq. ft. house in Bethesda for Purple Line construction — $1 million more than the home’s appraised value of $935,200, according to state documents.

For property not in the critical path, the Maryland Transit Administration can afford to wait, Rahn said.

If construction can continue without a property and the owner doesn’t accept the state’s offer, the transit agency would go through a negotiation process, and could wait for that property for a few years, Rahn said.

The budget for all Purple Line right-of-way property acquisition is $229 million and, so far, Lattuca said Feb. 16, the Maryland Transit Administration’s budget is on target for the project.

The $5.6 billion light rail project, funded through a public-private partnership with Purple Line Transit Partners, includes $2 billion in construction costs, according to Erin Henson, director of the Office of Public Affairs for Maryland’s Department of Transportation.

“We are working on the schedule of completion,” Rahn said Feb. 16. The project was planned to be finished by spring 2022, but after a year of delay in the courts a new date must be negotiated, he said.

Once completed, the 21-station light rail project is planned to link Bethesda and New Carrolton, and connect to Metrorail’s Orange, Green, and Red lines; the MARC Brunswick, Camden and Penn lines; and Amtrak.

Capital News Service reporter Julie Depenbrock contributed to this report.

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