Met Council wasn't transparent about Southwest light rail cost overruns, delays, legislative auditor says

The Metropolitan Council continued to spend millions on the $2.7 billion Southwest light-rail line even though there wasn't enough money to finish a project that had already become rife with delays and cost overruns, according to a report released Wednesday by the Office of the Legislative Auditor.

The 42-page report, the second of four expected on the troubled project, questions the way the job was bid, the council's seemingly fraught relationship with its main contractor, and the lack of transparency in communicating the project's numerous issues to the public.

Southwest — at more than $1 billion over budget, the state's most expensive public works project ever — is more than 70% complete, but its budget is still short $272 million, according to the report. Service on the line between downtown Minneapolis and Eden Prairie is expected to begin in 2027, nearly a decade behind schedule.

The report, presented Wednesday to the Legislative Audit Commission, "reiterated our concerns over the mismanagement of this project" by the Met Council, said Sen. Scott Dibble and Rep. Frank Hornstein, both Minneapolis DFLers, in a joint statement. The duo, the driving force behind the legislative auditor's probe, are pushing for Met Council members to be elected rather than appointed.

"The lack of prior planning, an enforceable schedule, competitive bid process, and peer review process all led to increased costs and long delays," Dibble and Hornstein said in their statement. They added that the Met Council "knew that problems were present yet did not share these concerns until much later."

The report's conclusion that the council was not "fully transparent" with the public and legislators about the project's burgeoning cost and delays proved irresistible to the agency's many critics.

"Southwest light rail is a boondoggle of historic proportions," said Sen. John Jasinski of Faribault, the ranking Republican on the Senate Transportation Committee, in a statement. "The Metropolitan Council has utterly failed in its management of the project."

Legislative Auditor Judy Randall said Wednesday that the Met Council wasn't "as cooperative as most state agencies when we come calling." Requests for information often were made "numerous times" and, though she said most documents were ultimately provided, there was "a lot of back and forth and follow up."

In his formal response to the audit, Met Council Chair Charlie Zelle said the report doesn't give the council enough credit for transparency and accountability with its funding partners, the federal government and Hennepin County. He added: "While project funding is shared between multiple parties, risk and accountability resides with the Met Council."

Zelle told the Legislative Audit Commission that the council has adopted a new policy to "address and manage risk" when advancing transit projects that clarifies their risk, roles and responsibilities.

According to the report, the project's delays — which inevitably led to higher costs — can be traced in large part to the difficulty of building a tunnel for light-rail trains in the narrow and rocky Kenilworth corridor in Minneapolis, within inches of the Cedar Isles Condominiums.

Squeezing light-rail and freight trains and a popular bike and pedestrian path in the isthmus between Lake of the Isles and Cedar Lake, amid poor soil conditions, prompted a series of costly changes in the way the tunnel was constructed.

By October 2020, civil contractor Lunda-McCrossan Joint Venture (LMJV) was predicting a completion delay of 759 days — a little over two years — largely as a result of the tunnel difficulties, according to the report.

"The lengthy delay has serious financial implications," the report said.

While critics charge the Met Council should have known beforehand that tunneling in the Kenilworth corridor would unearth a wet, rocky mess, the auditor's report says that engineering reports done before construction began didn't predict any significant issues.

Other significant cost drivers were the late addition of a $93 million, 1-mile crash wall west of Target Field to separate freight and light-rail trains and reinstatement of a station in Eden Prairie that had been eliminated in 2015 in a fit of cost-cutting.

When the council bid the project in 2018, it did not include the crash wall or the Eden Prairie station in the package. The fact that work on the crash wall was not competitively bid prompted concern from auditors. Met Council officials claimed that bidding the work would have added more than $200 million to the project's cost and three years of delay, but auditors called that analysis "incomplete."

One of the recommendations in the report calls for the Legislature to create a framework for future light-rail projects where the lead agency bears some financial responsibility. The report notes that the Met Council has no incentive "to effectively manage spending" for a project in which it has little investment of its own.

Much of the report explores the seemingly strained relationship between the Met Council and LMJV, Southwest's main contractor. It concludes that the council did not hold LMJV accountable for "repeated failures to provide an acceptable project schedule."

In some cases when LMJV did submit a construction schedule, the report says, the council simply refused to accept it. On another occasion, the council identified more than 1,000 separate items requiring corrections.

The contract with LMJV gave the council the ability to suspend payments until it received an acceptable schedule, the report says. But the council "did not make full use of its leverage ... simply [allowing] the contractor to move forward without an accepted schedule for years."

In March 2022, the Met Council agreed to pay LMJV $210 million in a settlement that included a mutually agreed-upon schedule to complete the line. The council admitted that at least 30 months of delay was not the contractor's fault. But LMJV "has made no commitment to limit its charges to that amount," the report says, noting the council could wind up paying more.

The report notes that the council has delayed presenting detailed information about changes that would negatively affect the project. Met Council officials knew, for example, that there were issues with tunnel construction in the Kenilworth corridor at least by early 2020. But it wasn't until January 2021 that they announced a "potential delay" — without saying how long the delay would be or the associated cost.

"The council has no mechanisms to feel accountable to the public in any way whatsoever," Dibble and Hornstein said in their statement.

Two additional reports exploring the council's oversight of contractors and a financial audit are forthcoming from the legislative auditor. No release dates have been announced.