Debate lingers on Southwest light-rail deal to cover funding shortfall

A proposed funding agreement to shore up the Southwest light-rail line's budget drew criticism on Wednesday from some members of the Metropolitan Council — the very body that needs to approve the deal.

Just over two weeks ago, the Met Council announced that it had reached an agreement with Hennepin County to close an estimated shortfall of $272 million to $335 million in the project's budget. The county would pay 55%, with the council covering the rest.

But since then, several members of the council questioned the structure of the pact, which calls for the Met Council to pay its share using federal funds that would have otherwise paid for a diverse slate of public transportation projects throughout the seven-county metro area. Now, they say, the money will go to one big project — the $2.7 billion Southwest line, which will operate solely in Hennepin County.

"I'm not seeing the benefit to the rest of us," said Council Member Wendy Wulff, whose district encompasses suburbs in Scott and Dakota counties.

"This is a terrible agreement," added Wulff at a council meeting Wednesday. "We should be saying no."

The deal announced Aug. 21 must still be approved by the full council, which consists of 16 members appointed by the governor, and also by the Hennepin County board. Both are expected to vote on the matter sometime this fall. It's unclear what would happen if the pact fails to win approval.

Met Council Chair Charlie Zelle said he negotiated the deal with Hennepin County, with help from the governor's office, and stands by it. Before the framework was crafted, there was no mechanism to require Hennepin County to pitch in any more money beyond the $1 billion it has already ponied up for Southwest.

"Am I happy with it, is anybody here happy with it? No," Zelle said. "Hennepin County's position was zero, they're done, and we have no existing law or financial agreement that would give them any responsibility to pay a dime."

Hennepin County referred all questions about Southwest funding to the council.

The fact that the county will now pay more than half of costs moving forward is a "great achievement," Zelle said.

But there's another rub for some council members: No one knows exactly how much money will be needed to finish Southwest, which will connect downtown Minneapolis to Eden Prairie. The project is about 75% complete.

Council staff are working on a risk assessment needed to finalize the budget with representatives from the Federal Transit Administration (FTA), which has kicked in $929 million to help build the 14.5-mile line.

Last spring, the shortfall was estimated to be $272 million, $122 million of which would come from the council's coffers, but a final number won't be known until January.

Nick Thompson, Metro Transit's Deputy General Manager of Capital Programs, said Wednesday the council has built in a budget cushion of up to $150 million to cover its 45% share of the costs to finish the project — meaning the overall shortfall could be about $335 million.

There are still a number of unknowns associated with the project that could bump up the cost, including the fact that construction of a tunnel in the Kenilworth Corridor of Minneapolis for light-rail trains is only half complete. Squeezing a tunnel into the narrow corridor, along with space for freight rail trains and a bike/pedestrian path, is one of the major reasons why the project is over budget.

In addition, the council is still in mediation talks with homeowners at the Cedar Isles condos, a massive former grain elevator building that is located within inches of the tunnel in the Kenilworth Corridor.

Zelle said the worst of the construction has been completed near the condos but "we can't make a full settlement until we finish that work. There's no litigation, no one is suing each other."

Another unknown cost: The Met Council is entirely responsible for start-up costs before the line begins service in 2027, which includes testing trains and training operators.

Reports have surfaced in recent weeks that the shortfall is closer to $400 million, but Zelle said Wednesday "I have no idea where that number came from."

Council members were so aggrieved over the proposed Southwest deal, they delayed a vote that would have approved $75 million in funding from Hennepin County to move the Blue Line light-rail extension forward. That project would link downtown Minneapolis to Brooklyn Park beginning in 2030.

A vote on the Blue Line funding is expected to take place next Wednesday.