Hennepin County and the Metropolitan Council have come to an agreement that will plug the cost deficits associated with the Southwest Light Rail project once and for all. Yes, that includes any potential project costs increases.

The agreement, reached in August, calls for splitting up to $350 million of the remaining cost of the project 55-45 percent. Hennepin County will commit up to $190 million, while the Met Council will commit up to $150 million. At the time the agreement was reached, the project faced a $272 million funding gap.

The two entities voted to enshrine the agreement this month, with both entities providing $100 million to the project. The Met Council has an additional $50 million they can allocate as part of the deal, but aren’t doing so yet.

“We may not need the $50 million, you know, it's an up to 150 number,”  Deputy General Manager Nick Thompson said at a September Met Council meeting. Thompson said Metro Transit does not get $150 million in funding annually, so they can spread out the cost over the construction life of the project. The Southwest light rail extension project is set to be complete in 2027.

The Met Council voted in September 2023 to advance a resolution to support the agreement, though not unanimously. Met Council members did unanimously vote to pony up $100 million as part of their existing capital grant agreement this month. Hennepin County also voted to put in the $100 million 5-1 on Jan. 23, with Commissioner Kevin Anderson voting against.

At the Jan. 9 Met Council Transportation Committee meeting, Met Council staff reported the cost of the project would increase to $2.86 billion, or about 1.7 times more than what the Met Council projected it would cost in 2010 when the 2010 figure is adjusted to 2023 dollars. The costs include starting up the line, testing the trains, station fare readers, surveillance cameras, and training operators.

“We have a pretty high degree of confidence that [$2.86 billion] is going to be our number with revenue service in 2027,” said project manager Jim Alexander at a meeting earlier in January. Alexander said construction on the challenging Kenilworth corridor is concluding. Construction for the entire route is more than 75% complete.

Wait, I thought this was a Met Council project, why is the County involved?

Hennepin County originally conceived the idea of the Southwest Light Rail corridor. As railroad companies abandoned rights-of-way throughout the state in the 1970s, the State legislature passed a law in 1980 allowing government agencies to form so-called regional railroad authorities to preserve such rights-of-way for future agricultural, industrial or passenger transportation uses.

Hennepin County created a regional railroad authority, with the goal of converting the abandoned rail corridors into light rail lines. The county’s regional railroad authority bought the Southwest corridor and other corridors in 1984 (Many of these corridors are bike trails maintained by the Three Rivers Park District, which can be identified with signs that say they are reserved for future light rail use.).

In 1988, the regional railroad authority identified several corridors, including what today is the Cedar Lake Regional Trail, which runs southwest from the Midtown Greenway to downtown Hopkins, as a potential light rail corridor. Hennepin County studied the idea with the Met Council for years, deciding in 2009 to proceed with building light rail.

Met Council spokesperson John Schadl says it’s only fair for counties to determine where high capacity transit projects go because they’re footing most of the bill.

“It is essential for locally elected officials to determine the route and mode of major capital transit projects that will serve the communities they represent,” said Schadl. “Counties have provided the bulk of local capital funding of the current and past [light rail] and [bus rapid transit] projects and have recommended the routes and modes of those projects.”

Where is the money coming from?

Hennepin County is paying for the project from its half-cent transit sales tax they authorized in 2017, while the Met Council is paying for the project using Section 5307 federal funds earmarked specifically for Metro Transit. Every metropolitan region in the U.S. receives funds from this section to incentivize the use of transit, as well as to facilitate planning, engineering, design, evaluation, crime-proofing, replacement and rebuilding of transit infrastructure, including buses, stations, tracks and signals.

Met Council staff say allocation of Section 5307 funds will not affect how much money its contracted services, such as Metro Mobility, receive. It would also not affect how much money suburban transit providers that serve much of Carver, Dakota and Scott Counties plus the cities of Eden Prairie, Maple Grove and Plymouth receive.

Funding for the project would not come from the three-quarters cent sales tax that was passed by the state legislature this session. Lawmakers mandated the Met Council cannot spend sales tax proceeds on the Southwest Light Rail project until an ongoing audit by the Legislative Auditor concludes. They also aren’t able to use any pandemic relief funds until then.

If the project costs go up beyond the shared $350 million committed, the agreement calls for the two entities to split the costs fifty-fifty.

How was the deal crafted?

Hennepin County officials were initially hesitant to contribute more money to the project because they didn’t have to.

“Prior to this new agreement, Hennepin County had fulfilled all of its commitment to the Metropolitan Council for the project and had no further obligation to contribute any additional funds,” said Hennepin County spokesperson Carolyn Marinan.

“Hennepin County’s position was zero,” said Met Council Chair Charlie Zelle at a September meeting. “We have no existing law or financial agreement that would give them any responsibility to pay.”

The County eventually came around. “Finishing this project is critical for our region and the state. Hennepin County agreed to make an additional contribution to the Metropolitan Council for the project in the spirit of partnership to solve these challenges to realize the many significant benefits it will bring for the regional transit system and the communities and residents it serves,” says Marinan.

“So the fact that they're contributing a significant amount more than the Met Council, I think it's a great achievement,” said Zelle.

Not everyone supported the deal initially. Met Council members Deb Barber, Susan Vento and Judy Johnson all voted against the resolution supporting the deal. Vento asked for more transparency.

“I’d like for it to be completed with transparency, and I would like it to be completed in a way that lifts all of us region-wide up and that it makes us proud of the work that has been done and will continue to be done by this council,” said Vento at the Sept. 14 meeting. The three ultimately voted in support of the deal in January.

On the Hennepin County side, Kevin Anderson, who represents rural Hennepin County plus the city of Maple Grove and the northwest half of the city of Plymouth, opposed the deal.

“I hear fairly regularly from my constituents frustrations with how this project has been run [and] the opportunity costs this project has represented for other potential investments … in the region and particularly in growing areas in western [Hennepin County],” said Anderson at a January Hennepin County board meeting. “I understand completely [that] this project needs to be completed. But Hennepin County has paid its obligations. We stepped forward over a billion dollars.”