Southwest planners look to bypass state to fill $144.5M gap

Planners for the Southwest light rail transit project have unveiled a last-ditch effort to fund the last piece of the controversial $1.8 billion route through an almost equally controversial method: certificates of participation.

The proposed $103.5 million in certificates would essentially be bonds financed by the Counties Transit Improvement Board and the Metropolitan Council. The difference between certificates of participation and state bonding is that certificates often come with a higher interest rate and don’t require legislative action.

The plan, announced Thursday at a conference convened by Gov. Mark Dayton, also calls for CTIB and the Hennepin County Regional Railroad Authority to each pick up another $20.5 million of the project costs.

“I want to be very clear about this: These are bad options,” Met Council Chair Adam Duininck told legislators, business leaders and residents at the conference Thursday. “It’s a question of going back to the funders who have already given a lot.”

Planners hope to secure commitments to the proposal ahead of a deadline this year to apply for nearly $1 billion in federal funding for the line and before the project’s costs grow more.

The 14.5-mile project between Minneapolis and Eden Prairie has faced delays while waiting on the final local funding commitment, increasing the gap from $135 million to $144.5 million so far.

Certificates would be issued in July 2017, if all three local funders can get on board with the plan in the next week. If the proposal doesn’t gain traction, the only other option is to shut the project down, Duininck said.

Waiting a year to issue the bonds would give the state Legislature time to approve funding for the project and replace the certificates of participation in the coming session, Dayton told reporters after the meeting.

“We’re going to give the Legislature next year an opportunity — five months of the regular session — to interject themselves into this,” he said.

But legislators had an opportunity during the 11-week 2016 session to appropriate money to Southwest, a project that Republican leaders in the House and DFL leaders in the Senate couldn’t agree on.

Missing funding for the project caused a bonding bill to fail in the final minutes before the May 22 session deadline. It also contributed to an impasse in leadership talks that led Dayton to announce Aug. 18 there wouldn’t be a special session.

Legislators could also pass a bill next session that prohibits the use of certificates of participation, the governor acknowledged Thursday.

“Then the project won’t be able to proceed,” he said.

Rep. Tony Albright, R-Prior Lake, said the plan to use certificates of participation instead of securing funding through the state “slights the three-legged stool of the legislative process.”

Albright would like to see a special session called this year now that Southwest planners may have a work-around — an idea the Minnesota Chamber of Commerce also supports, according to a statement the group released Thursday.

Albright also noted that Duininck had said in a conversation last year that the Southwest LRT project would be stopped if the Legislature failed to fund the line in 2016. But in a press conference after the meeting, Dayton said he “overruled” Duininck’s earlier statement and would instead try to secure the certificates of participation.

“I have the right exercise what I believe is in the best interest of our constituents,” Dayton said.

Attendees speak up

Conference attendees gave more than two hours of feedback to the governor and legislators that represent areas along the line.

Some residents and legislators shared concerns about the cost of the project, safety along the line and whether the route has been appropriately vetted by the Met Council.

The regional planning authority is being sued by the Lakes and Parks Alliance, which claims the Met Council prematurely settled on a route through the Minneapolis Kenilworth Corridor.

A September 2017 court hearing has been set for the suit, and some legislators said this week they are worried the case could hold up the project even if funding issues don’t.

“I think starting on a project and then having it held up by a lawsuit … that is not an insignificant problem,” Rep. Jenifer Loon, R-Eden Prairie, said in an interview this earlier in the week.

But mayors along the route and business leaders from the TwinWest Chamber of Commerce, Minneapolis Regional Chamber of Commerce, the Minnesota AFL-CIO and the Minneapolis Downtown Council showed up Thursday to speak in favor of the project.

Not building the line is not an option, John Stanoch, interim president and CEO for the Minneapolis Regional Chamber of Commerce told legislators at Thursday’s session.

“We need to move forward to make sure we not only have a strong metropolitan economy, but a strong Minnesota economy,” he said.

Legislators split

Along the corridor, state legislators are split on whether Southwest should move forward and whether they support the proposal for certificates of participation to keep the line moving. The line will travel through Minneapolis, St. Louis Park, Hopkins, Minnetonka and Eden Prairie.

Sen. Scott Dibble, a DFLer who represents areas of Minneapolis along the route, has said in the past that he supports the project.

But his counterpart in the House, Rep. Frank Hornstein, said that while he is not against the project, he has concerns about safety where freight and light rail run near each other.

“I think there are unanswered questions around co-location of freight and light rail that need to be addressed,” he said in an interview Thursday ahead of the meeting.

Loon echoed Hornstein’s concerns about safety in freight rail corridors and added that she’s also worried about the safety of at-grade LRT crossings in Eden Prairie.

Loon acknowledges that many businesses in her district support the line, but said that support begins to fracture when talk turns to potentially paying higher taxes for the project.

“They are not united around paying more taxes,” she said. “In fact, many of them are very much opposed to that.”

Sen. David Hann, R-Eden Prairie, did not return a request for comment on the project or funding options, but has been critical of the project in the past.

Meanwhile, Rep. Cheryl Youakim, DFL-Hopkins, who represents areas along the line in both Hopkins and St. Louis Park, says her constituents strongly support the project. She’s looking to Dayton for ideas to fund the line, even if that means certificates of participation.

“It’s just important that we don’t leave this line dead on the table and lose this opportunity,” she said.

Sen. Ron Latz, a DFLer who also represents St. Louis Park and parts of Hopkins said the project is “an important piece of comprehensive transportation system for the entire state.”

Latz said he’d support using certificates of participation if it was the only way left to get the project done.

Next door, Sen. Melisa Franzen, DFL-Edina, represents the area around Minnetonka’s only planned Southwest LRT station.

“It’s a good deal for Minnesota and it’s a good return on our investment,” she said in an interview Tuesday, adding that the corridor is expected to see about 60,000 new jobs in the coming years and will need transit to support that growth.

Franzen is open to funding the line using options like certificates of participation, but she noted that she sees the certificates as a “hybrid option.”

“It would come from a different pot of money, but still come through taxpayer dollars,” she said. “In my mind, it’s not very transparent to say that we’re finding another method.”

Her counterpart in the House, Rep. Paul Rosenthal, DFL-Edina, was not available for comment.

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