How will Southwest LRT make up $534M gap? Met Council chair promises answer soon

Metropolitan Council Chairman Charlie Zelle says he'll know by the end of this year how his agency will make up a $534 million funding gap for Southwest Light Rail.

The 14.5-mile rail line, which is the most expensive public works project in Minnesota history, has doubled in cost and time to build since 2011. Met Council now expects a $2.74 billion budget and a 2027 opening. 

Zelle appeared before the Legislative Audit Commission on Thursday, where he faced questions about a new report from the legislative auditor about the light rail's cost overruns and delays. Met Council officials have declined to say publicly how they'll make up the $534 million shortfall that officials first identified in January, but Zelle did make news about when he'll have the answer.

"I have confidence we will have an answer, and we should have that by the end of the year," Zelle told lawmakers. "I can't comment on it now, but it's something that's actively being discussed."

There's no clear answer about where Met Council will go. The Federal Transit Administration has committed $929 million, but an agency spokesman has been clear that the FTA doesn't increase its contributions after the initial agreement is signed. State contributions are capped at the $30 million that's already been kicked in.

That leaves Hennepin County, which is already on the hook for $772 million. Met Council officials have floated the possibility of raising more funds from the county, but the legislative auditor's report makes that sound dubious.

Light rail train

A light rail train leaves a Green Line station.  (FOX 9)

"The county has made commitments to fund the construction and/or operation of other transit lines using the same revenue sources it has used to fund the construction of Southwest LRT," the report states. "According to a Hennepin County official, the county would be unable to provide additional funding to Southwest LRT if doing so would impair the county's ability to meet any of these other commitments."

A county spokeswoman said Hennepin County, the FTA, Met Council, and Gov. Tim Walz's office are working in a "collaborative effort" to solve the projected funding gap.

Met Council remains fully committed to Southwest LRT, which it will operate once built. 

"I think it's important for the project to move forward because it's in the region's best interest," Zelle told lawmakers Thursday, repeating a line he's often used that shutting construction down would be "drastically more expensive."

He expressed optimism that Met Council and its contractors would be able to meet the revised $2.74 billion budget and 2027 opening date. 

Senate Transportation Chairman Scott Newman, R-Hutchinson, asked if there were any change orders lurking that would require the budget to grow again.

"I'm not aware of anything that would be outside this (current) scope," Zelle said. But he cautioned that the project's most complicated feature, a half-mile tunnel through the Kenilworth corridor of Minneapolis, is ongoing. "There's still risk and it could go either way."

Uncertainty remains over the tunnel construction. In January, crews stopped construction after owners at the nearby Cedar Isles Condominiums noticed cracks in their building.

An engineering firm hired by the Met Council concluded that other factors, including weather patterns, were mostly to blame for the cracking. 

Met Council has never released the full engineering report, and officials have cited two reasons for shielding the information from public view. One, they say the engineering firm, Socotec, never had a direct contract with the council but was instead hired by Venable, a law firm Met Council is paying for light rail consulting. Two, Socotec prepared the information for potential litigation, officials said.

The council has agreed to additional monitoring and physical remediation, Zelle said. Former state Supreme Court Chief Justice Kathleen Blatz is leading mediation between the council and the condo association.

The legislative auditor's review is a recap of Southwest LRT's 40-year planning history, most of which was already public. But it did reveal that Met Council officials knew years ago that its cost estimates were too low.

Met Council started the bidding process for Southwest Light Rail's civil construction contract in 2018 without including two expensive change orders, even though project officials knew they would need to be included, auditors found. Project officials said delaying the bids would push back the project's timeline and increase costs, two things that happened anyway.

Met Council awarded the $799 million civil construction contract to Lunda McCrossan Joint Venture. In March, the council reached a settlement with its contractor that adds up to $210 million to the contract. The council is negotiating a similar settlement with its systems contractor, Aldridge-Parsons Joint Venture, though the extra costs are expected to be less significant.