Southwest LRT: Met Council hasn't held contractors accountable, been transparent to public

The Metropolitan Council overseeing the construction progress of the Southwest Light Rail Transit (SWLRT) project spent more money than initially committed to the project, and has not held its contractor accountable for failures to provide an acceptable project schedule, according to a new report from the Office of the Legislative Auditor (OLA).

While saying the Council "has not been fully transparent about the project’s delays and cost increases," the first of two reports the office plans to release this year details several concerns and recommendations, including the Legislature create a framework for light rail projects for the government to bear financial responsibility for construction costs and increases in the future.

Before the Council began overseeing construction in 2019, it estimated the SWLRT would cost $2.003 billion in total, and the line would open in 2023. 

The Council now estimates that it will cost $2.767 billion to complete and will open in 2027. 

The Minneapolis to Eden Prairie line is now shorter than originally planned, and has one fewer station – a result of cost-cutting moves undertaken in the mid-2010s.

Created by the Minnesota Legislature in 1967, the Council is the regional government authority for the 14.5-mile light rail line that will run from downtown Minneapolis to the suburban communities of Eden Prairie, Hopkins, Minnetonka, and St. Louis Park. A board of 16 members and a chair govern the Council – the governor appoints all.

According to the report released Wednesday, "despite knowing that project costs were increasing beyond its available funds, the Metropolitan Council developed no formal contingency plan for temporarily or permanently stopping project work, and no estimate of the costs it would incur by doing so."

After bipartisan calls mounted for an audit, an OLA report in September 2020 said the project remained $534 million short, with officials making little progress to close the funding gap for Minnesota's most expensive public construction project – seven months after they first revealed the shortfall.

"More than $500 million of the project's estimated $2.74 billion budget is currently unfunded, and the Metropolitan Council has not yet identified a funding source," auditors wrote at the time.

The report released Wednesday notes while the SWLRT project is comparable to other light rail transit projects nationally on a cost-per-mile basis, its cost increases during construction have been far higher than most.

A recommendation included in the report says the Minnesota Legislature should create a framework in which a government entity is responsible for light rail transit construction, and bears some financial responsibility for construction costs and potential cost increases.

The Metropolitan Council – or any other responsible agency – should also be required to inform the Legislature if cost overages or project delays reach certain thresholds stipulated throughout the bidding process, according to a recommendation.

"Minnesota’s framework for developing light rail projects has created a mismatch between the entities that fund the construction of transit projects and the entities that are responsible for constructing them," the report said.

Future costs unknown, more communication needed

In addition to current cost overages and schedule delays, the Council still doesn’t have a firm grasp on what the project’s end cost will be or when it will open for riders, according to the report.

The Council is currently seeking "$650 to $750 million to complete the project," and in August 2022, provided the OLA a list of expenses that additional funding would cover. The total amount identified $764 million in additional costs and contingency amounts.

However, an examination of the estimate found a significant portion of the additional $764 million the Council seeks is based on, "undocumented professional judgments" or "an assumption that civil construction costs will not reach the maximum amount agreed" – ultimately concluding that the lack of certainty surrounding the underlying estimates would again exceed the current budget.

According to the report, about 25% – or $187 million – of the estimated $764 million budget increase is based on "rough order of magnitude" estimates, which are not based on detailed historical cost or contract data, but instead are "professional judgments by project managers, engineers, or consultants based on their experience and expertise." 

When asked to provide details of the calculations used to create the estimates, including comparison projects or purchases, the OLA was told that the estimates were not based on any calculations in most cases.

"We don’t have the money to stop, and we don’t have the money to go forward," audit project manager David Kirchner said Wednesday about the future of the SWLRT.

A rebuke of the Council included its need to increase transparency with the public regarding both cost overages and projected schedules.

Although the report notes the full impact of changes to both costs and timelines only gradually became apparent, "the Council knew the project would not stay within its budget and timeline long before it shared that information with the Legislature or the general public," the report alleges.