The idea was ambitious when Montgomery County Executive Isiah Leggett pitched it in 2008: transform 90 acres of county-owned industrial land at the Red Line’s Shady Grove terminus into a transit-friendly urban village.
Leggett’s Smart Growth Initiative would be a break-even proposition for taxpayers over time, he said, and might even make money as the county got an attractive new residential neighborhood and replaced outdated warehouses and garages with state-of-the-art facilities elsewhere.
But nearly a decade in, as Leggett (D) nears the end of his 12-year tenure, this signature project has not gone forward as expected. Only a fraction of the money anticipated from land sales to private developers has been paid so far. And the county’s difficulty in finding a new site for a school system bus depot has slowed progress on a major portion of the planned Shady Grove community, including a new park and elementary school.
Critics on the Montgomery County Council say Leggett overpromised and underdelivered, adding to the county’s $3.2 billion debt by borrowing against land sales proceeds that have yet to materialize.
“This is just not a good news story,” said Council President Roger Berliner (D-Potomac-Bethesda), one of three council incumbents running for county executive in the 2018 Democratic primary.
But Leggett says he devised a creative way to replace outdated buildings and pursue transit-
oriented development policies far more quickly, and effectively, than had been done in the past. Even his own staff was skeptical, he recalled in an interview.
“I was the sole person who believed we could move all these pieces,” he said. “You can argue that a few dollars didn’t come in at the precise time. . . . The county comes out far ahead in the long term.”
In Leggett’s calculus, proceeds from land sales to private developers, along with fresh tax revenue from the new construction, would eventually pay for relocating and rebuilding outdated facilities in Shady Grove and elsewhere. There would also be savings from exiting costly leases the county was paying to rent some of the old structures.
After nearly a decade, parts of that vision have been realized. Along Crabbs Branch Way, within walking distance of the Shady Grove Metro station, the first of a planned 400 new townhouses and 1,100 apartments — some subsidized, some market-rate — are sprouting up where a school system food distribution center, a liquor warehouse and maintenance garages for Ride On buses once stood.
Those facilities and others, including the police and fire training academy, have been successfully moved and rebuilt on other county land.
But those relocations got more expensive as the county expanded the scope of the projects and made state-of-the-art improvements.
Changes in menus and increased emphasis on fresh food, for example, added $9 million to the $35 million school center. Advances in training methods raised the police and fire academy price tag by $15 million, to $63.1 million. All told, the cost of the replacement buildings increased by $60.8 million.
At the same time, Leggett narrowed the county’s expected revenue stream by changing Montgomery’s original agreement with EYA, developer of the townhouses and apartments on the west side of Crabbs Branch. The county initially expected to collect $103.8 million from EYA in fiscal 2015, according to a 2012 fiscal summary drawn up by Leggett’s office. But Leggett decided to allow EYA to pay incrementally as portions of the 45-acre site were built, in order “to help them with their cash flow.”
To date, the county has collected slightly more than $2 million from EYA, which has completed about a quarter of the Westside at Shady Grove project. On the other side of the ledger, the county has benefited from $19 million worth of roads and other infrastructure built by the company. It also credited the company with $4.5 million in exchange for building additional affordable and workforce housing.
Leggett has also strategically held certain parcels of county land back from the open market, believing that waiting will result in a better deal.
Five years ago, Montgomery struck an agreement with the developer Hines to convert the old public safety training academy on Great Seneca Highway in Gaithersburg into a life-sciences complex with companies and housing. Leggett placed the $70 million project on hold in hopes of luring a major cybersecurity center to the 50-acre site. That possibility is now less likely. The project has been placed back out for rebidding.
Most vexing for Leggett has been the difficulty in finding a new location for 400 county school buses kept in a 35-acre depot opposite the new townhouses on Crabbs Branch Way. The county agreed in 2012 to sell the land for $70 million to developers LCOR and NVR.
An initial plan to put some of the buses at the Carver Educational Services Center on Hungerford Drive drew sharp neighborhood opposition. Compounding the issue is overcrowding at all five MCPS bus depots. With no obvious available option, Leggett this spring ordered a study before he decides what to do about the Shady Grove depot. It is likely to delay development by 12 to 18 months more, at least, he said.
Council member George Leventhal (D-At Large) said it was “not good planning” to jump into the development venture without knowing where the depot would be moved.
“I don’t think it’s something we can foist on a community just to transform a Metro station,” said Leventhal, also a candidate to succeed Leggett as county executive.
The Shady Grove initiative has generated an unexpected level of debt. Most big capital improvements, such as roads and schools, are financed through the sale of general obligation bonds, where principal and interest are usually paid off over 20 years. But the Leggett administration, interested in moving quickly and anticipating that land sales proceeds would soon be in hand, kept the smart-growth projects out of the capital budget, opting instead to use $200 million in short-term loans on which it paid only interest. Such interim financing is meant to be retired quickly, to avoid added expense for taxpayers. But the county is still carrying a balance of about $160 million.
“These are hard decisions,” said council member Marc Elrich (D-At Large), another county executive candidate. “It was somewhat of a gamble, and it hasn’t turned out entirely the way everybody thought it would turn out.”
Looking for funds to pay off some of the debt, Montgomery officials announced last month that they may use the $22 million netted from settlement of the county’s lawsuit against the designer and builders of the Silver Spring Transit Center.
The county could also sell more bonds to convert the debt from short-term to long-term. But that would crowd out other construction projects in the capital budget, which caps new bond debt at $340 million annually.
Stewart Schwartz, executive director of the Coalition for Smarter Growth, and the region’s leading advocate for building most densely around mass transit, said despite the financial issues, the long-term benefits to the county remain significant.
“Given the growth that’s coming to the region,” he said, “the county needs to take as many opportunities like this as possible, so we don’t choke on our traffic.”