Funding now appears assured for controversial Southwest LRT

Over the past week, transit planners in the Twin Cities have cobbled together $145 million to salvage the Southwest light-rail line, providing a level of certainty to a project that has long been fraught with controversy.

"We will have a project," declared Adam Duininck, chairman of the Metropolitan Council, which is spearheading the $1.9 billion light-rail line from downtown Minneapolis to Eden Prairie.

After the project failed to win financial support from a bitterly divided Legislature, the 14.5-mile line was fast running out of cash, facing staff layoffs, possible shutdown and a flagging reputation with the federal government, which is expected to pay half its cost.

On Wednesday, the Met Council threw the project a critical lifeline — approving a new funding plan that deploys an obscure financial tool called "certificates of participation" to raise $103.5 million. The Counties Transit Improvement Board (CTIB), which consists largely of elected officials from metro-area counties, and the Hennepin County Regional Railroad Authority each agreed this week to kick in an additional $20.5 million, as well.

Still, some uncertainty lingers — a lawsuit filed by Minneapolis residents seeking to block the project is pending in federal court.

With local funding committed, the project now qualifies for $929 million in matching funds from the Federal Transit Administration. Without that commitment, transit planners say other projects around the country, including light-rail lines in San Diego, Phoenix and Denver, would move ahead in the federal pipeline.

But the funding fix for the Southwest line was not without controversy. Some members of CTIB complained on Wednesday that transit projects planned for the east and north metro, including the Bottineau Blue Line LRT and the Gateway Gold Line bus rapid-transit from St. Paul to Woodbury, may be endangered because the board opted to give more money to the Southwest line.

CTIB Chairman Peter McLaughlin, a Hennepin County commissioner, said the board "will have to adapt," but the alternative of shutting down the Southwest LRT was untenable. Already, $140 million has been spent on the project.

Other CTIB members said the fix sets a bad precedent with the Legislature for future projects, because it shows state support is not necessarily needed for public transit.

"This sends the message that, 'We don't need you, state Legislature, and we'll just do an end run,' " said Anoka County Commissioner Matt Look, also a CTIB member.

CTIB raises money through a quarter-cent sales tax for transit levied in Hennepin, Ramsey, Dakota, Anoka and Washington counties, as well as a $20 tax on new car sales. It played a key role in building the Green Line LRT project, which connects the downtowns of Minneapolis and St. Paul.

Once CTIB approved additional funding, the Met Council was called upon later in the day to issue the certificates for the Southwest line, despite a distaste for doing so. Duininck has repeatedly stated they are a "bad option," but claims Gov. Mark Dayton "overruled" him.

The council will try one more time to win state funding support for the Southwest LRT during the 2017 legislative session. If that fails, then the certificates will be issued the following July bearing an interest rate of about 3.25 percent — slightly higher than general-obligation bonds. If the legislative attempt is successful, both Hennepin County and CTIB's most recent contributions would be repaid.

The use of the certificates, which the council says is not debt, is rare, but not unheard of — about $13.5 million in certificates was issued to update the council's office building in downtown St. Paul. About $81 million of certificate financing was also used for the controversial $90 million Senate office building at the Capitol.

The Met Council will finance about $92 million of the certificates, which amounts to $4 million to $5 million a year to pay down principal and interest, while CTIB will finance $11.75 million, about $600,000 in principal and interest annually. The certificates are likely to carry a term of 30 years.

The vote by the Met Council, which consists of gubernatorial appointees, was unanimous Wednesday. Council Member Wendy Wulff, the sole member of the body appointed by Republican Gov. Tim Pawlenty, was on vacation for the meeting, but sent along a message opposing the move, saying it needs more study. "It puts us in a terrible negotiating position for future projects," she wrote.

Janet Moore • 612-673-7752