It's your soil. MG Organic has a lot of nutrients in it, and it is too much for seedlings. That purple is from your seedlings being fed too 'hot' too young, and they will grow out of it. Make sure you are letting the soil dry out pretty well between waterings. Also, get your water pH up to 6.8. MG Organic is peat and is prone to becoming a bit acidic; it drops over time.

You will be ready to give nutes at a low dose when you see the 5th node forming and re-pot to the next size up, which should be a 5-6" pot with GREAT drainage.

EDIT:
Tap water is almost always FINE. Please don't try to answer problems when you've got no experience of them.