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What’s new – and not new – in Southwest light rail auditor report

Rather than follow the normal pattern of findings and recommendations, the review by the Office of the Legislative Auditor was instead an explanation of a lot that was already known about how the project’s budget and timeline expanded.

Southwest light rail transit Glenwood Avenue bridge construction
As the debate over the funding and the future of the line continue, construction is ongoing. Here, crews work on a bridge at Glenwood Avenue in Minneapolis leading to the Royalston Avenue/Farmers Market station.
Metropolitan Council

The Southwest light rail transit project is rarely spoken of without the precursor “troubled.” As such, a report by the Office of Legislative Auditor ordered by a rare state House-Senate bipartisan agreement must carry the precursor “much-anticipated.”

Released last week and discussed Thursday by the House and Senate’s Legislative Audit Commission, the special review was something of a disappointment. Rather than follow the normal pattern of findings and recommendations, the review was instead an explanation of a lot that was already known about how the project’s budget and timeline expanded.

Judy Randall, the legislative auditor (a different office than State Auditor Julie Blaha), told the commission that the limited scope was intentional and that there is more to come.

“We have a team still working on a program evaluation and that’s still on the way. But we decided to do a special review to try to get some information out to members and the public as quickly as possible,” Randall said. 

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Of the nearly 20 questions posed by the Legislature, “we decided to pull out the ones we could answer the most quickly,” Randall said. “What is the budget? How has it changed? Who is paying for Southwest? What is the timeline, and how has it changed?”

In the report’s cover letter, the Office of the Legislative Auditor admitted to other limitations. “We did not evaluate whether cost overruns or cost delays were justified. We also did not evaluate the quality of project designs or engineering; the adequacy of the route-selection process; or whether different designs, engineering, or routes could have resulted in lower costs or fewer delays.”

Sources for the Southwest LRT Project Budget, March 2022
Source: Office of the Legislative Auditor, analysis of Metropolitan Council data
Sources for the Southwest LRT Project Budget, March 2022
The project will connect the Target Field Station to Eden Prairie. The 14.5 mile line will include 16 new stations, two rail tunnels and six pedestrian tunnels. The Met Council estimates that it is 62 percent completed with a scheduled opening date of 2027.

Given the somewhat limited scope of this report, here’s a look at some of the things readers of the report didn’t learn, what they did and what is yet to come.

Four things we didn’t learn:

1. Any evidence of fraud or wrongdoing. Those expecting the Met Council to be blasted, or were hoping to see clear evidence of wrongdoing or fraud that could lead the project to be scrapped were likely disappointed. That doesn’t mean such evidence doesn’t exist in the history of the project first approved in 2011 by the Federal Transit Administration. It is just that the auditors didn’t go there – at least not yet.

2. A lot of new information. Given the scope of the special review (it is specifically NOT called an audit which is a broader examination of a program), there isn’t all that much new. This report is the legislative auditor’s attempt to understand the long history of this project, including how the price tag doubled and the projected opening was extended by nine years.

3. How the project’s budget grew and how the project was delayed. We already knew from the Met Council back in January that the project budget has grown to $2.74 billion. That’s when the Met Council also revealed there’s no identified source of money for the $534 million gap between the new budget and money available. When announcing the new budget and timeline, the Met Council also projected the first paying riders won’t board trains until 2027. In fact, it was those admissions by the Met Council leadership that turned up the fire under the council and the project and led to the request for the legislative auditor’s special report.

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4. Why the budget grew and the project’s timeline was delayed. The Met Council had already explained the main causes for the time and budget delays that the report describes in detail:

  • The long back and forth over whether freight lines through the corridor would be relocated, giving the entire space to light rail, or co-locating light rail and freight in the same narrow corridor.
  • The construction of the tunnels for light rail trains in the Kenilworth Corridor, tunnels made necessary by the decision to co-locate freight and passengers.
  • The demand by BNSF that if light rail was to share the right of way owned by the railroad it would need to build a long, expensive wall meant to prevent collisions between light rail and freight trains if either train derailed. 

Cumulative Cost of Change Orders by Month, March 2019 to April 2022
Source: Office of the Legislative Auditor, analysis of Metropolitan Council data
Cumulative Cost of Change Orders by Month, March 2019 to April 2022
Four things we did learn:

1. The funding gap still exists. The report showed what the Met Council pointed out in January is still a problem. That is, no progress has been made to close the gap from earlier this year when the council staff pointed out a few sources for the first $80 million. Met Council Chair Charlie Zelle said he is working on that question. “I am confident we will have an answer and will have it by the end of the year,” he said Thursday.

2. Met Council staff’s decisions contributed to increased costs. When the giant construction contract was put out for bid, two expensive pieces weren’t included: the barrier wall and a station at Eden Prairie Town Center that had been removed as a cost-cutting move and then put back after that city received a federal transportation grant and covered the difference with city funds.

The interior of the SouthWest Station.
Metropolitan Council
The interior of the SouthWest Station.
Staff told the legislative auditor that neither was fully designed when the civil construction contract was put out for bid. Waiting for full design work would have delayed the bid process, and delays have always cost the project money. The costs of both were added later as change orders. Legislators like Sen. Scott Dibble, DFL-Minneapolis, have called that deceptive. Paying for known costs out of contingency funds – funds meant to cover unexpected costs – kept the budget artificially low, Dibble said.

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3. The relationship between the Met Council and Hennepin County is sour. That isn’t a positive development, because Hennepin County and the Hennepin County Regional Rail Authority (both of which have tax authority and are governed by the same seven commissioners) are the only sources of additional funds for the project. That’s because generally the federal contribution is frozen when funding agreements are signed.

When the Counties Transit Improvement Board, the five-county funder of regional transit projects, dissolved, Hennepin County took on the obligations within the state’s largest county. The situation improved with the doubling of the county’s transportation sales tax. But that funding source covers the county contribution not just to SWLRT but also the Blue Line extension, operating costs for light rail within the county, bus rapid transit projects and the Northstar commuter rail.

Available Contingency Funds, July 2019 to February 2022
Source: Office of the Legislative Auditor, analysis of Metropolitan Council data
Available Contingency Funds, July 2019 to February 2022
When the Met Council this spring sought a transfer of some pandemic-related federal funds from the county to the project, the county board of commissioners said no thanks.

“According to a Hennepin County official, the county would be unable to provide additional funding in Southwest LRT if doing so would impair the county’s ability to meet any of these other commitments,” the legislative auditor’s report stated.

4. The Met Council remains all in. Zelle said the council remains convinced Southwest LRT will benefit the region both as transportation infrastructure and as a driver of economic growth. Killing it now would cost more than completing it, he said Thursday.

Two things we still might learn when another report is released some time next year.

1. An evaluation of Met Council staff actions. After discussing the decision to not include the Eden Prairie station and the corridor wall in the big bid process, “OLA’s upcoming program evaluation plans to examine whether the Council adequately accounted for these expected change orders in the project’s budget, contingency fund, and/or timeline.”

More answers to the 20 questions posed by the Legislature. Lawmakers want the Office of the Legislative Auditor to make recommendations as to how the Met Council can avoid future problems and increase transparency. They also want the legislative auditor to conduct a cost-benefit analysis.