Minnesota lawmakers ‘speechless’ after scathing legislative audit report on Southwest light rail transit

So much bad news has flowed from the Met Council and its Southwest light rail transit project that a harsh report from the state’s legislative auditor might be seen as just more of the same.

“Minnesota has a mismatch between the entities that fund the construction of light rail transit projects and the entities responsible for constructing them,” wrote the Office of the Legislative Auditor in a special report requested by the Legislature. “We also found that the Metropolitan Council obligated itself to spend money it did not have, added or changed substantial work after the project was bid, and was not fully transparent about the project’s increasing costs and delays.”

But while the report brought no new revelations, having it all in one place by an independent auditor was sobering for members of the joint Legislative Audit Commission.

“It seems that nobody’s at fault, or everybody’s at fault,” said Rep. Rick Hansen, a South St. Paul DFLer who chairs the audit commission. “We have policies and we have processes and we have working groups, task forces, reports, warning signs and bells and whistles saying something’s wrong, and it still goes off the rails.

“We’re still stuck here in a corner where we can’t stop and we can’t continue,” he said. “I’m just kind of speechless. How do we get out of this box and how do we ever prevent this from happening again?”

The 14.5-mile project from Target Field to Eden Prairie was supposed to cost $2 billion and carry its first passengers in 2023 when it was approved by the federal government in 2018. It is now set to open in 2027 and cost $2.767 billion with the council not sure where all of the money is going to come from. Audit project manager David Kirshner described that 38% cost increase as “quite unusual” when compared to light rail projects across the U.S.

While the audit attempted to find the cause of the problems facing the project and suggest remedies, its recommendations, if adopted, would do little to change this project, leaving commission members frustrated. Said Minneapolis DFL Sen. Scott Dibble: “I’m not quite sure where to start, there’s so much here to unpack.”

Other members of the audit commission took turns bashing the council and the project. Republicans were able to reiterate complaints about using light rail as a mode of transit when buses are cheaper and more flexible. DFLers pointed to the OLA findings that the Met Council has not been transparent in communicating problems with budgets and timelines. Both suggested that the very structure of the appointed regional government needs reassessment. All could find sections of the audit to support their statements. For example, according to a presentation led by David Kirchner of the OLA:

• “The structure of how the region builds big transit projects creates a mismatch between the entities that fund the construction and transit and the entities that are responsible for constructing them.” That is, the Met Council has relatively little money in the project, instead relying on the federal government, Hennepin County and earlier the now-defunct five-county Counties Transit Improvement Board. The federal share of $929 million is capped and Hennepin County has balked at finding what remains of the $500 million shortfall identified a year ago.

“The Legislature should create a framework so the entity that is leading light rail construction has some of its own money at stake so if it goes over budget, it feels the pain, it’s penalized and if it comes in under budget it’s rewarded,” Kirchner told the commission. 

Other key pieces of the report: 

• When it learned in early 2022 that it no longer had enough money to complete the project, the project was faced with that dilemma cited by Hansen — it didn’t have enough money to end the project, because that would require repaying federal funds and restoring the route to pre-construction conditions. And it didn’t have enough money to finish it, either.
• The Met Council bid the project knowing there were significant pieces of the project not included and not yet estimated. When it added a $90 million wall between its tracks and BNSF freight tracks, it did so as a change order rather than using a new bidding process.
• The council did not hold its contractors accountable for repeated failures to provide an acceptable project schedule. But OLA also found that after the contractor blamed the Met Council for the delays, the Met Council eventually agreed.
• The pre-construction engineering and analysis of underground conditions in the narrow — and troubled — Kenilworth Corridor where a shallow tunnel is being built did not identify soil conditions blamed for expensive changes and long delays.
• The Met Council has not been transparent with the Legislature and the public about the project’s increasing costs and delays.

Wednesday’s report was the second of four planned by the legislative auditor. The first came out in September and laid out the history of the project — its design, politics, funding and timeline. The third that will focus on the Met Council’s oversight of contractors will come out in late April or early May, Legislative Auditor Judy Randall said. A financial audit will come out later in the year.

Met Council Chair Charlie Zelle, an appointee of Gov. Tim Walz, leads the 17-member appointed council and the agency staff. He said that much of the cost overruns and time delays were caused by the construction of the tunnel in the narrow Kenilworth Corridor. That tunnel was required to fit both light rail and freight rail in the same passageway and was a decision made in 2013. The previous OLA report described the technical and political factors that went into what was known as co-location.

“The large delay and cost overruns that we announced a year ago largely come in that Kenilworth Corridor, that colocation with freight rail on a narrow, 59-foot swath and not anticipating the risks of those soil conditions,” Zelle said. “That is probably the No. 1 thing that goes back a number of years before construction. This is hindsight. There’s no question.”

The size of the contingency fund, which was exhausted long ago, is set by the Federal Transit Administration based on a risk assessment that has since proven to have lacked all information needed. Going forward, Zelle said, the Met Council will do a better job of examining construction and budget risks on any new projects.

But he took issue with accusations that the Met Council staff wasn’t transparent with the Legislature and the public. He said the staff is in frequent contact with the FTA and Hennepin County and has reported regularly to the Legislature and to the full Met Council.

Zelle pointed to a chart in the audit that showed that the $138 million cost per mile for SWLRT is near the $130 million median price of other light rail projects around the nation. Another showed that while SWLRT’s cost overruns have only two peers — lines in Maryland and Virginia — both the existing Blue Line and Green Line came in at or under budget.

And he repeated his assertion that SWLRT has spurred construction along the route of multifamily housing and commercial buildings around planned stations.

“We still believe in this project,” he said, adding, “I believe in the competency — which is borne out in a MNDOT review — of this team. I think they’re doing an excellent job given the hand that they were dealt.”

Elected Met Council?

Dibble, the chair of the Senate Transportation Committee, used the presentation to make the case for his bill to require Met Council members to be elected by voters, not appointed by governors. The idea is also supported by House Transportation Committee chair Frank Hornstein, DFL-Minneapolis.

“The conversation that needs to be had … is with the Legislature,” Dibble said. “We have an opportunity to do something about this.” The Met Council is acting as it is designed to act, he said, based on its lack of elected officials and the insularity it provides.

“It works as designed but not as the public wishes,” he said. “If it is not elected, come up with a better idea. We need reform, we need accountability, we need transparency. Full stop. Bottom line.”

Hornstein said he will hear a bill on how the Met Council is governed Thursday. He will amend the bill calling for immediate election of council members with a task force to examine how to do so. But he said it is not a way to put off the issue but to reconcile different ideas from different legislators as to how best to change the way the council is run.

Zelle said he wouldn’t comment on how the Met Council should be governed but said Walz is “open to that conversation.”

Did she say “subpoena?”

Randall was asked by Dibble about the level of cooperation from the Met Council, detailing his own struggles to get information.

“The Metropolitan Council was not as cooperative as most state agencies are when we come calling,” Randall said. “We did ask for a lot of information but with every request, the Metropolitan Council requested an extension on the deadline. We often had to make requests several times.

“Ultimately they provided most of what we requested, but it required a lot of back and forth, it required a lot of follow up,” she said. While her office had hoped to provide a more-complete report now, it decided to break the reporting into parts in order to get some information to the Legislature more quickly. She blamed that decision on the slowness in Met Council responses.

“That being said, we did not issue a subpoena, and we have the ability to do that, but it did not rise to that level,” Randall said. Sen. Steve Drazkowski, R-Mazeppa, said he was shocked to hear the OLA “was inches” from issuing subpoenas. But Randall said after the meeting that she didn’t use that term, saying instead that it is a tool that the auditor can use to get information but that she hadn’t reached the point of preparing such a legal document.

Sen. Mark Koran, R-North Branch, said the OLA is empowered as the sole performance auditor of the state and said agencies must be “extremely cooperative.” Of the Met Council, Koran said it is becoming less cooperative and less forthcoming.

“I find it completely unacceptable that the legislative auditor has to delay because of these continued delays,” Koran said. “We cannot tolerate that.”

Zelle said the OLA deserves transparency and cooperation but said “it is news to me” that they were close to issuing a subpoena for data.