Stay in the Loop

Yes, it’s a big deal that money for Southwest LRT was in the federal budget. And, yes, it could still be killed

Rendering: Courtesy of the Metropolitan Council
Proposed bridge design over the Kenilworth Channel.

By Peter Callaghan : MInnPost : 05/09/17

Was the news that the Southwest Light Rail Transit project was included in the 2017 federal budget compromise a big deal?

Or not?

How you answer might depend on which side of the Great SWLRT Debate you land on.

For supporters of the project — a 14.5-mile $1.858 billion extension of the Green Line from downtown Minneapolis to Eden Prairie — the news was cause for celebration. In a year when the president of the United States had said he wanted all rail projects excised from the budget, seeing any funding for projects next in line for federal funding, including Southwest LRT, came as a surprise.

For opponents, though, the news was dismissed as a blip in a long-running battle that is far from over. And with so many hurdles left to leap, they argued, the project’s relatively paltry allocation in the budget, $10 million, was hardly cause for a victory lap, especially if you account for the hostility of the state Legislature and the uncertainty surrounding one of the key local funding mechanisms.

 So is it possible that both sides are right? Sorta? Kinda? Maybe?

Given the complexity of the fight about light rail transit in the Twin Cities, the answer is probably: Of course. Here, then, is an explanation of why that’s the case; where things go from here, and what could still kill the project.

Why was the $10 million in the federal budget such a big deal?
Because the inclusion of the first bit of federal funding for Southwest LRT — along with projects in Washington state, California and Maryland that (like SWLRT) do not yet have final approval by the Federal Transit Administration  — was a surprise.

In March, when President Donald Trump released his first 2018 budget outline, no money for mass transit projects was included, and administration officials asked Congress to begin zeroing out the federal funding share of transit projects starting with the 2017 fiscal year budget.

That’s why the agreement recently reached by Congress — which essentially preserved a status quo transit budget — was taken as a pleasant and unexpected development by project backers. Not only was Southwest LRT listed by name and dollar amount, but the budget language orders the transportation secretary to “administer funding” for the listed projects.

But it’s only $10 million. Isn’t the feds’ share of the project supposed to be a lot more?
Yes, $929 million — but that’s for the duration of the project’s construction. Each year’s budget only allots the federal government’s share of the money needed in that given fiscal year. Even if everything goes as Metro Transit hopes, construction on Southwest won’t begin until the fall, which means there may only be a few weeks of work done before the close of the fiscal year, which ends on Sept. 30. Should the funding continue, Metro Transit would expect to get around $125 million from the feds in 2018.

Could the Trump administration still kill Southwest LRT?
Sure. Now that Trump has signed the budget agreement, the Southwest LRT project office still has to complete a lot of work before it can even apply for a full-funding grant agreement (FFGA), which locks the feds into providing their full share of big transit projects. And the administration could still make the decision not to spend the transit funds provided for in the budget.

What’s more, the secretary of transportation could still refuse to sign an FFGA, even if the staff recommends such an action. Secretary of Transportation Elaine Chao did just that earlier this year when transit staffers recommended the signing of an FFGA for a project related to commuter trains in the San Francisco Bay Area. The action came after 14 members of Congress from California wrote her urging that the agreement not be struck (one concern was that the project is connected to a controversial plan for a high-speed rail network in the state).

Metropolitan Council

The California delegation letter was the backdrop for a similar letter sent by 84 Republican legislators from Minnesota— including House Speaker Kurt Daudt — urging Chao to deny an FFGA for Southwest LRT. That missive led Gov. Mark Dayton to send his own letter to Chao urging her to fund the project and to sign the agreement when it’s presented to her.

If Chao remains disinclined to sign additional FFGAs it will become apparent later this year, well before a decision on the Southwest project is due. Should she refuse, Southwest is in trouble. Should she sign other FFGAs, it bodes well for the project.

So is construction going to start soon?
A lot still has to happen before that can happen. Let’s start with the freight rail agreements. Right now, two railroads — BNSF and the Twin Cities & Western Railroad Company — use the tracks in the right of way that are supposed to someday carry light rail trains. Metro Transit is currently negotiating shared-use agreements with the railroads that will govern how the corridor is shared.

But the state Legislature may affect those negotiations. House File 2230 would allow Metro Transit to share liability should an accident occur involving a freight line, including ethanol trains that TC&W moves through the Kenilworth corridor, between Lake of the Isles and Cedar Lake in Minneapolis. The railroad argues that since they aren’t the ones putting passenger rail in what had been a freight corridor, they shouldn’t bear the liability alone, and legislative opponents worry that a massive accident could leave taxpayers to cover all the costs of a disaster.

Met Council won’t comment on details of the ongoing railroad negotiations. But spokesperson Kate Brickman said the bill is not necessary for completion of the negotiations. “At no point before or after [Southwest submits its FFGA application] is the legislation necessary,” she wrote.

So what about the money?
Within the next few weeks, Metro Transit will submit information to the Federal Transit Administration that will allow the feds to assess whether the local agency has the financial wherewithal to complete the project and operate it in the future.

Though funding for the Southwest LRT project has been complicated by the refusal of legislative Republicans to deliver a 10 percent share of construction costs, the Met Council thinks it can show it has the money to cover half of the project’s construction costs — even without the state pitching in any more money.

As of now, the project relies on transit sales tax assessed in five metro counties to cover $516.5 million of the $929 million non-federal share. The Hennepin County Regional Rail Authority will use property tax revenue to pay $185.8 million (plus the donation of $69 million in land). The state had already provided $30.3 million.

To replace the rest of the state’s share of the construction costs — money that the GOP-controlled Legislature is unlikely to provide — the Counties Transit Improvement Board, the regional body that administers the transit sales tax, and the Met Council planned to issue what are called certificates of participation (COPs), a borrowing instrument that will be repaid with future transit revenue.

The FTA’s examination of the Metro Transit’s “financial capacity” will look to make sure that money is real. The federal government doesn’t allow a local transit agency to cannibalize existing service to pay for a light rail line, and Metro Transit is already facing an operating shortfall that may be worsened by the pending state budget.

It gets even more complicated, though. After last week’s meeting of the Counties Transit Improvement Board, commissioners struck a deal to dissolve the regional agency, which would allow Southwest LRT to abandon the COP funding mechanism (or at least shift the burden to Hennepin County). It would also absolve the Met Council of having to find money in its transit revenue to repay them, easing that shortfall and making the SWLRT finance plan look more sustainable.

If approved by the five counties — Anoka, Dakota, Hennepin, Ramsey and Washington — and CTIB, the agency could be dissolved by September 30. If that happens, counties could impose their own transportation taxes by Oct. 1.

Yet it’s still unclear what will happen with the numerous poison pills sprinkled through the most recent transportation proposal by the GOP at the Legislature, which include a ban on the use of COPs; a demand that Hennepin County hold a public vote if it wants to increase the transit tax, which is currently set a quarter of one percent; and an outright ban on the use of new money on light rail expansions unless the Legislature approves it.

Dakota County Commission Chair Mike Slavik

Dakota County Commission Chair
Mike Slavik

Both Dakota County Commissioner Mike Slavik and Hennepin County Commissioner Peter McLaughlin said they’d heard from legislators that leaders at the Capitol wanted CTIB to work things out on its own. “Some of the hope and the discussions is that with this, we would all be working together to not have those portions of the CTIB bill in a final transportation bill,” Slavik said. “It strengthens the hand of those on the hill who want to get rid of that language,” McLaughlin said.

Even if it passes the Legislature, there are doubts that Gov. Mark Dayton would sign such a bill as his support for light rail expansion has been strong.

Let’s just say all the money stuff can be worked out. What then?
The federal government puts grant applicants through a lengthy set of hoops to prove that their projects are viable, sustainable and paid for. Only then will the FTA sign the most important document for any light rail project: the Full Funding Grant Agreement.

That contract is the final step in guaranteeing that the FTA will be a funding partner for the life of the construction. It would also allow federal money to begin flowing to reimburse for money that’s already been spent on “project eligible costs.”

But just because the Southwest project is in the 2017 budget agreement recently approved by Congress doesn’t guarantee the FTA staff will recommend signing the FFGA or that the administration will allow it to go through.

Metro Transit and the Met Council hope to apply for an FFGA for Southwest LRT this summer and get a decision and a signature by the end of 2017 or early 2018. In either case, it will require that the project’s position in the 2017 federal budget remains in the 2018 budget.

What else could derail the project?
A lawsuit, for one. In August 2015, U.S. District Court Judge John Tunheim issued a ruling on a lawsuit brought by a neighborhood group called the Lakes and Parks Alliance. That suit, paid for mainly by residents along the Kenilworth Corridor, where Metro Transit planned to run light rail parallel to existing freight tracks, challenged the environmental review of the project.

Specifically, the suit alleged that Metro Transit made what was essentially the final decision on the route before it had completed an environmental review, which — if true — would have violated federal law. That’s because the agency needs to be open to changing direction if an environmental impact statement suggests that a different alignment would cause less harm.

Commissioner Peter McLaughlin

MinnPost photo by Peter Callaghan
Commissioner Peter McLaughlin

Tunheim rejected the request by the neighbors for summary judgment. He did find, however, that the Met Council got very close to prejudging the EIS and locking itself in to one particular alignment for the project. “The Court remains concerned that the Met Council has done more than express a preferred alternative,” the judge wrote, “and has ‘gone too far’ and has effectively committed itself to a specific route.”

Tunheim hung onto to the case to provide time to see how officials overseeing the project behaved going forward: how the Met Council’s revised EIS would look; how the agency went about seeking consent a second time from the cities the line passes through; and whether the neighbors who sued could find new information that would make the judge change his mind about his decision. “The Court anticipates that at the appropriate time when the record is more adequately developed, the Court will once again consider summary judgment,” Tunheim wrote.

The project’s EIS was completed and accepted by the FTA last July. In December, the FTA allowed Southwest LRT to move into the engineering phase.

But now, 21 months after Tunheim’s ruling, attorneys for the Lakes and Parks Alliance have filed a second request for summary judgment based largely on information it obtained via discovery in the suit. Filed on April 28, the motion cites emails and other communications that the plaintiffs say show Met Council officials considered the Kenilworth route irreversible. In one, current Met Council Chair Adam Duininck wrote to then-Chair Jane Hague to express unhappiness that the council sided with St. Louis Park on the issue of co-locating freight and light rail in the Kenilworth corridor. “From the first briefing I received on SWLRT, it was overwhelmingly clear where the staff recommendation was headed,” wrote Duininck in 2013, when he was a Met Council member representing Minneapolis. “That sense of it being a foregone conclusion is the primary driver of why Minneapolis believes the process has not been fair.”

Whether there is enough new in those documents to persuade Tunheim to order a new environmental review and analysis of other routes will be determined after the Met Council replies to the summary judgment filing and perhaps after another court hearing.

But in an email discovered by the neighbors but not cited in the court filing, Duininck told Dayton in early 2016 that the lawsuit remained troubling. After telling Dayton that the FTA was unlikely to sign an FFGA before President Obama left office, Duininck wrote that the reason is that the FTA “is concerned that the litigation risk is still there until Judge Tunheim rules on the Lakes and Parks Alliance case.”

Anything else that could stop it?
Yes — the Minnesota Legislature. For three sessions, backers of Southwest LRT have held on to hope that Republicans who control the Minnesota House would be open to a compromise — some sort of deal that would deliver the final 10 percent of construction money. Even selling the instruments designed to obviate the need for more state money, the certificates of participation, were delayed until this session could be completed in order to see if something could be worked out.

If anything, animus toward the Southwest LRT project and light rail, in general, has only become more intense. And many of the lawmakers who signed the letter to Chao are making decisions on transportation funding.

“The saga will continue,” McLaughlin said. “We have two weeks to go.”

Correction: This story has been updated to show that the emails that are the basis for the current court filing by the Lakes and Parks Alliance were gotten via discovery in the suit and not via the Data Practices Act.