Southwest LRT is short $500 million in funding, according to legislative auditor review

Though the cost of the Southwest light-rail line has doubled to $2.7 billion over the past decade, the Metropolitan Council is still short more than $500 million to meet its budget, according to a special review released Friday by the nonpartisan Office of the Legislative Auditor.

It's unclear where the additional money — nearly 20% of Southwest's current budget — will come from, signaling a looming crisis for the state's most expensive public works project. The total price of the 14.5-mile line connecting Minneapolis to Eden Prairie has not been finalized, either.

Officials from Hennepin County, which has committed $1 billion to the project, told auditors that directing more money to Southwest would prove "challenging." The county has also made financial commitments to the Blue Line extension, another light-rail line in the works that will extend from Minneapolis to the northern suburbs.

The legislative auditor's 56-page report lays out only the facts surrounding the planning and construction of the Southwest line by the Met Council. Recommendations are expected next year.

One especially stark fact revealed in Friday's report: The Met Council purposely omitted from the bid package sent to potential contractors a station in Eden Prairie and a $93 million crash wall required by BNSF Railway to separate freight and light-rail trains in Minneapolis.

This meant the cost of these additions had to be largely be taken from the project's contingency budget — including a change order of nearly $83 million for the mile-long crash wall, west of Target Field. The cost of the Eden Prairie station was partly offset by a federal grant and funding from the city.

An unnamed Met Council official quoted in the report said there were concerns that including the two in the bid package would cause delays, possibly limit interest in the project from the construction community and result in higher costs.

"I think that is a huge red flag," said Rep. Frank Hornstein, DFL-Minneapolis, who pushed for the legislative auditor's review at the Legislature this year. "In the annals of public works projects, how could you put out a bid that doesn't include very, very key pieces of the project?"

Met Council spokeswoman Terri Dresen said Friday the crash wall wasn't included in the bid package because it was still under environmental review at the time.

Cited in the Legislative Auditor's review as the major drivers of the project's ballooning budget and lengthening timeline are construction of the Eden Prairie Town Center station; the crash wall; uncertainty about the final location of freight rail along the route; and special construction methods needed to build a tunnel in Minneapolis' narrow Kenilworth corridor.

In a memorandum released last fall, the Legislative Auditor's Office found that a "prolonged and significant" difference of opinion on construction issues between the Met Council and a major contractor for the line also contributed to a series of cost overruns.

Friday's report noted that opening day for the line has been delayed by nine years; service once set to start in 2018 now is expected to begin in 2027. As of June 30, $1.6 billion had been spent on the project, which is more than 60% complete, according to the Met Council.

Council officials told auditors the controversial tunnel in the Kenilworth corridor is the biggest reason why costs have soared. The council originally counted on freight trains using the stretch to be diverted through St. Louis Park, leaving just light-rail trains and a bike and pedestrian path along the corridor.

But St. Louis Park and Twin Cities & Western Railroad officials objected, and the Met Council was forced to pivot — resulting in freight and light-rail trains, along with the bike and pedestrian trail, sharing a corridor only 50 feet wide and perilously close to housing in spots.

The tunnel for light-rail trains near Lake of the Isles and Cedar Lake forced the council to use an alternative construction method that took an additional $30 million from the contingency fund, according to the review.

Sen. Scott Dibble, DFL-Minneapolis, who also pushed for the Legislative Auditor's probe, said Friday he's not sympathetic when Met Council officials claim they ran into difficult circumstances building the tunnel.

"They failed to do proper analysis," Dibble said. "There's no excuse to not know those things. They have been in control and they have deceived the public every step of the way."

By the summer of 2021, the project's contingency cushion of $204 million was "insufficiently funded," requiring a $200 million infusion from Hennepin County to keep the project afloat. It was at that point that Hornstein and Dibble requested the legislative auditor review, to which the Legislature and Gov. Tim Walz agreed.

The Legislative Audit Commission, which includes legislators from both parties, will hold a public hearing on the report Thursday.

Hornstein said Friday he will renew efforts to remake the Met Council as an elected body, an effort that has lingered for years without success at the Legislature. Met Council members currently are appointed by the governor.

In a statement responding to the report, the Met Council's Dresen said: "This independent report confirms the Met Council has been transparent about the costs and timeline every step of the way. We strongly believe accountability and transparency are critical to ensuring public programs and projects are run and managed efficiently."

Regarding future funding, Dresen said the council "is working with our project partners to finalize a long-term funding source." The state is legally prohibited from giving the project more money.

Hennepin County spokeswoman Carolyn Marinan said Friday that the county and its railroad authority "have fulfilled our financial commitment to this project" and that county officials will work at the federal, state and local levels "to find a global funding solution."

Rep. John Petersburg of Waseca, the GOP leader on the House Transportation Finance and Policy Committee, said the Met Council "has a responsibility to explain why a multibillion-dollar project continues to face mismanagement and delays at the expense of the taxpayer, as well as how it will pay for the deficit in funding."

Many are worried that Hennepin County taxpayers will be stuck with the bill.

"This document proves Southwest light rail is the worst financial and environmental public works disaster Minnesota has experienced in its entire history, and it was completely avoidable," said Mary Pattock, spokeswoman for the Lakes and Parks Alliance, a Minneapolis nonprofit that sued the Met Council in 2014 for alleged violation of state and federal environmental laws.

"If the Met Council had listened to residents about the problems with the Kenilworth route, we'd probably have light-rail trains running today, and for a reasonable cost," Pattock said.

Some members of the public also wondered why the review was released just before a holiday weekend. Legislative Auditor Judy Randall said her office releases reports "as soon as we get them. When we have the information, we want people to read it."