MN: State watchdog: Changes needed on troubled Southwest light-rail project

Lawmakers reacted to the final report from the state’s watchdog agency detailing construction-related troubles associated with the $2.9 billion Southwest light-rail line with a kind of weary wrath this week.

The 30-page report by the state’s Office of the Legislative Auditor concludes an exhaustive, nearly four-year probe of the Southwest project, the most expensive public works project in state history, which has been dogged with cost overruns and delays.

All told, the OLA released five reports, and each time, the findings generated bipartisan rancor largely aimed at the Metropolitan Council, the regional planning body that is overseeing construction of the Southwest project.

But the Legislative Auditor’s findings have failed to galvanize efforts to change the structure of the Metropolitan Council, whose members are not elected but appointed by the governor. Critics have long said that elected council members would be more responsive to the public — and their tax dollars.

“This is exactly what happens when an organization feels no pressure to be transparent, to be accountable to the public that it serves, because it doesn’t report directly to a body that is accountable to the public,” said Sen. Scott Dibble, DFL-Minneapolis, a longtime critic of the council, before the Legislative Audit Commission on Monday.

Efforts by a state task force beginning in 2023 to reform the Met Council ultimately fizzled. Steps to make the council more accountable “have been thwarted by the defenders of the status quo,” Dibble said.

A bill has been introduced this session in the House by Rep. Jon Koznick, R-Lakeville, which calls for elected officials in the metro area to serve on the council in staggered terms. Koznick was unavailable to comment on the measure.

But it’s unclear if the bill will gain any traction in a legislative session that has a compressed schedule and a mandate for lawmakers to adopt a state budget amid a dire financial outlook.

Ultimately, Dibble said the public must “rise up” and pressure elected officials if they want the council to be more accountable for the millions it collects in taxes and spends on public transportation, wastewater treatment, parks and affordable housing in the region.

When it begins service in 2027, Southwest will connect downtown Minneapolis to Eden Prairie, through St. Louis Park, Hopkins and Minnetonka. The 14.5-mile line is about 85% complete, and the testing of trains along the route will begin later this year.

Met Council Chair Charlie Zelle said many of the Legislative Auditor’s suggestions in the report have been implemented. “Overall, we accept the feedback readily and concede many areas where we can improve and are in the process of improving,” he said Monday.

The latest OLA report took issue with the Met Council’s oversight of change orders, the disposal of contaminated soil unearthed during construction, the tracking of disadvantaged businesses working on the project, and security of construction equipment along the route.

The Legislative Auditor found fault in the way the council and its general contractor, Lunda McCrossan Joint Venture (LMJV), handled change orders — revisions of original construction plans that can result in more money paid out to the contractor to get the work done.

The Legislative Auditor tested 41 change orders, which are not unusual in a project of Southwest’s size and complexity. As of March 2023, the council had paid Lunda McCrossan roughly $210 million related to 580 change orders, according to OLA testimony Monday.

The auditor’s report highlighted a change order involving the late addition of a crash wall to separate light rail and freight trains west of Target Field that ultimately ended up costing about $90 million.

The council initially estimated the wall would cost about $37 million, while McCrossan put the figure at $82.6 million, a difference of approximately $45 million. Ultimately, the council agreed to pay $83.4 million for the mile-long wall.

Without established guidelines to compare estimates for change orders, “it is difficult to determine if the council received fair and reasonable costs for project change orders,” the report states.

Zelle said the council has hired a new consultant to help with change orders.

“What I’m hearing is that there was a $45 million mistake and it wasn’t put out for rebidding. [It] is completely unacceptable,” said Rep. Steven Jacob, R- Altura.

The Legislative Auditor says that the council overpaid Lunda McCrossan $330,000 to dispose of contaminated soil in a landfill, a charge the Met Council denies.

The council distributed blank, pre-approved forms to the contractor to deal with the soil removal; some 130,000 truckloads of tainted dirt were removed during construction, Zelle said. As a result, there was no efficient way for the council to appropriately track the removal, the report states.

Zelle said there were carbon copies of the completed forms, but the process is now done electronically.

“This is a disaster,” said Rep. Patti Anderson, R- Dellwood. “Where are the 130,000 carbon copies, in a box somewhere?” Zelle replied that he wasn’t sure.

Because Southwest received nearly $1 billion in federal funds to build the line, federal law requires that the Met Council hire disadvantaged businesses — usually run by women, military veterans and people of color. Zelle estimated that disadvantaged businesses completed about 22% of the work on Southwest totaling $300 million.

The Legislative Auditor recommended that the Met Council step up monitoring efforts of these businesses.

Likewise, the report calls for the Met Council and Lunda McCrossan to do a better job securing construction areas, such as adding cameras and fencing around expensive equipment.

No one from Lunda McCrossan attended Monday’s hearing, but in a letter sent to Legislative Auditor Judy Randall, a company representative did not dispute the findings about security.

“Theft is solely at the contractor’s risk,” wrote Dale Even, senior vice president of Lunda Construction Co. The contractor never requested the council pay for any stolen materials or asked for additional time to compensate for losses, he said.

Meanwhile, Republicans have introduced a bill at the Capitol that would halt funding for the Blue Line extension between Minneapolis and Brooklyn Park until Southwest begins service.

This could seriously affect the Blue Line project, since the council estimates a two-year delay would add an additional $200 million to its $3.2 billion budget.

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