Hennepin County Board members ask why Southwest light rail cost keeps rising

Faced with a $204 million budget shortfall for the Southwest light-rail project, Hennepin County Board members on Thursday asked why the price of the project keeps rising.

Earlier this week, the Metropolitan Council announced that the price tag for the proposed LRT project from downtown Minneapolis to Eden Prairie surged to just over $2 billion. The council, which will build and operate the line, cited a number of budget-busters, including higher steel, fuel, labor and property acquisition costs.

It's now left to Hennepin County to fund the gap largely through a transit sales tax levied on goods sold in the state's most-populous county. All told, the county is on the hook to contribute $792 million toward the project — but there's no firm assurance that figure won't go up again.

"I'm not even slightly confident this will be the last increase," said Commissioner Jeff Johnson, a longtime opponent of light-rail transit, following a meeting of the county's railroad authority Thursday.

Other board members wanted to be reminded of the line's benefits and wondered about lingering risks facing the project, which has been in the works for at least two decades. Two lawsuits are pending in federal courts: one involving an appeal in a case lodged by Minneapolis residents who claim the project violates environmental laws, and another filed by Twin Cities & Western Railroad, which will share part of the 14½-mile route.

In addition, TC&W filed has filed a challenge with the Surface Transportation Board, a federal agency that is reviewing the council's freight agreements related to Southwest. (The line is slated to share about 6 miles with freight rail trains.)

Another unknown involves whether the Federal Transit Administration (FTA) will make good on its anticipated $929 million contribution to the project, amid uncertainty about transit funding in Washington, D.C.

The Met Council is not expected to apply for the federal grant until this fall, and the project still enjoys a strong rating from the FTA. As of late March, about $261 million in local funds have been spent designing and engineering the project.

"We could end up with zero or $929 million," Johnson said. "We really don't know what the federal government will do."

Another recent change to the project involves decreasing a contingency fund for unanticipated expenses from 19 percent of its total cost to 14 percent — a move the FTA will have to approve. "What if the federal government says 14 percent is too low?" Opat asked.

Board members were assured the estimate is a sound one. But if that cost — or any other — increases, it will be up to the county to cover the shortfall.

There's also some uncertainty regarding construction bids to build the line. Last fall, four firms bid $796.5 million to $1.08 billion, but they were deemed too costly and "unresponsive." The bids were let again and earlier this month, two firms bid $799.5 million and $812.1 million.

But another bid package for the project's electrical and communications systems is on the horizon, too.

"What are our prognostications for that?" asked Commissioner Marion Greene.

Southwest Project Director Jim Alexander said the lessons learned from the construction bid package last fall will be incorporated into the systems bid, but admitted the council has little control over the price of commodities, such as copper.

At one point during the briefing, Johnson asked, "Have we had the discussion [asking], 'When do we turn back and say this is too expensive?' "

Commissioner Peter McLaughlin responded that the "stopping point" could be when the construction bids are contemplated in coming weeks. But as a longtime transit advocate, he doesn't support that.

The commissioners and the county railroad authority will vote on the funding infusion May 31. Transit planners say additional cost oversight will be put into place for major decisions involving the project.