Worries grow that costs could still rise for Southwest light-rail line

A shortage of construction workers and uncertainty about a potential rise in the cost of building materials in the wake of Hurricanes Harvey, Irma and Maria could drive up the price of the $1.9 billion Southwest light-rail project at a time when transit planners are trying to pare its costs.

The Metropolitan Council, which will build and operate the 14.5-mile line, opened construction bids last month — but discovered that even the lowest bid of $797 million was higher than it had budgeted for the work.

The project, which will link downtown Minneapolis to Eden Prairie, is expected to be bid again Oct. 30, with the council encouraging contractors to help suss out cost efficiencies. The council has not disclosed its construction budget.

"While certainly this is a setback in our schedule, it doesn't change the importance or strength of the project," Met Council Chairwoman Alene Tchourumoff said last month.

Southwest — the largest public works project in Minnesota history — is expected to hire some 7,500 construction workers to build it. The long-standing dearth of workers in Minnesota and across the country is not a new phenomenon but is still a worrisome one for transit planners.

A recent survey of 40 Minnesota firms by the Associated General Contractors of America (AGC) and the software firm Autodesk found that 78 percent reported having a tough time filling hourly craft jobs. Among the trades most in demand: carpenters, heavy-equipment operators and concrete workers — the same skills needed to build light rail.

The shortage could push up labor costs as employers pay overtime and bonuses to retain employees. (The construction payroll for Southwest is expected to be about $350 million.)

Met Council officials say construction of the Green Line LRT, which occurred at peak employment during the North Dakota oil boom, drew workers from more than 60 of Minnesota's 87 counties. They expect workers to travel to the Twin Cities again for Southwest, which is expected to begin service in 2022.

Rebuilding efforts following the hurricanes are not expected to lure Minnesota construction workers to points south in search of lucrative pay.

"It's questionable whether Florida or Texas will be able to attract many workers from Minnesota, where there seems to be plenty of work and wages are probably higher on average," said Ken Simonson, AGC's chief economist.

Still, the hurricanes are expected to affect Southwest's costs in other ways, as severe damage and flooding disrupted oil production and refining, manufacturing and shipping, according to Cumming, an international consulting firm. "The impact on construction costs will become swiftly apparent," the firm said in a recent report.

"So all of those [Southwest] contractors have to go back to their suppliers and say, 'OK we have to start over, give me your current market prices on steel, or concrete or cement,' " said Tim Worke, chief executive of AGC Minnesota. "There could be shortages or spikes in pricing. That's a dangerous proposition."

Four joint ventures, involving some of the largest construction firms in Minnesota, submitted bids ranging from $797 million to $1.08 billion to build Southwest. With a strong economy and other construction projects in the works locally, Worke said he "wouldn't be surprised if some of the teams that originally bid don't go after it again — they're not going to chase good money after bad."

Dave Zanetell, president of Kraemer North American, one of the bidders on the Southwest project, said, "How the hurricanes will impact the markets isn't yet known or understood at this point." Other contractors who bid on the project could not be reached for comment.

But Dan McConnell, business manager at Minneapolis Building and Construction Trades Council, said uncertainty with a big public works project is nothing new. "You saw the same thing with the [Vikings] stadium, they were planning it for 10 years and nobody thought it was a go, and then it was a go. You never know until you put a shovel in the ground."

Met Council officials remain optimistic, noting that the bidders on the Southwest project "have experience ordering materials amid changing market conditions." Officials said early work will involve clearing vegetation, demolishing buildings and removing roadway and other pavement.

That won't start until summer 2018 — "nearly a year after the start of hurricane rebuilding efforts," the council said.

Janet Moore • 612-673-7752