Southwest light rail price tag increases to $2 billion

The projected price tag for the Southwest light-rail line is going up $145 million to just over $2 billion, driven by rising steel, fuel, and labor costs, and mounting delays.

Planners said Tuesday that the budget hike for the 14.5-mile line linking downtown Minneapolis to Eden Prairie is expected to be borne by Hennepin County taxpayers through an existing sales tax for transit. The state's biggest public works project is expected to begin service in 2023.

"I still think it's an important project for our region," said Alene Tchourumoff, chairwoman of the Metropolitan Council, which will build and operate the Southwest line. "We know our region is expected to grow by 700,000 people, we need to continue to invest in a transit system, not by just expanding the highway network, we're talking about an entire transportation system that is multimodal."

The news comes after the Met Council opened construction bids to build the line earlier this month — for the second time. The first round of bids from four firms came in last fall between $796.5 million and $1.08 billion. The council threw them out, saying they were too costly and "nonresponsive."

When the second round of bids were opened, they came in even higher than the first — two firms bid $799.5 million and $812.1 million. The council has not publicly revealed the amount budgeted for the construction portion of the project.

"It's never a good thing when you have to rebid a project, rarely does it result in some sort of economy or cost reduction," said Tim Worke, CEO of Associated General Contractors of Minnesota (AGC).

But Tchourumoff defended the move, saying the early bids were valid for only 90 days and the council had to deal with additional environmental work related to the late addition of a $20 million crash protection wall near downtown Minneapolis. Landowner BNSF Railway required the mile-long wall to separate freight and LRT trains between the Royalston/Farmers Market and Bryn Mawr stations. This caused a four-month delay, adding $12 million to $16 million to the project budget.

"We would not have been able to wrap it up and award the contract before the 90-day window expired," Tchourumoff said.

Since August, the council said, diesel fuel prices have increased by 17 percent, and raw steel prices have surged by 40 percent. Property values have risen, affecting acquisition costs for land along the train's path. In addition, a tight labor market for construction workers is strangling the sector.

"When you can't find people, you have those challenges, and the cost is affected," AGC's Worke said.

Unlike a previous Southwest budget crisis in 2015, where two stations in Eden Prairie were deleted from the project, the news Tuesday did not involve paring stations from the project. In fact, a stop near the Eden Prairie mall has been added back into the project, but that's because the city won a $6.1 million federal grant to build it.

The council did cut some costs, including scaling back an operation and maintenance facility in Hopkins. As of the end of March, about $261 million has been spent on the Southwest project.

In coming weeks, Hennepin County commissioners must deal with the project's new budget reality — a briefing is scheduled for Thursday. The county is actually on the hook for $204 million to cover the funding gap, with extra money needed to pay for a land contribution.

Hennepin County Commissioner Peter McLaughlin said budget challenges are "bumps in the road. I invite anybody to read the history of any of these big capital projects across the country. There are always complications."

He noted that the existing Blue and Green LRT lines "have blown the doors off ridership projections."

The council is hopeful that ground can be broken on Southwest this summer, even before it receives $929 million in federal funding.

Janet Moore • 612-673-7752

Twitter: @MooreStrib