Coversheet

Board Action Request
18-0500

Item Description:
Approval of cost increase/funding shortfall commitment for Southwest LRT project

Resolution:

BE IT RESOLVED that Hennepin County hereby commits to funding up to an additional $200.3 million to address the FTA’s requirement that the METRO Green Line Extension Project (Southwest LRT) evidence the availability of funding up to an additional 10 percent of the total project budget to cover potential cost increases or funding shortfalls, which amount is in addition to the County’s funding commitment for the capital costs contained in the Project Budget, approved in Resolution #18-0222

BE IT FURTHER RESOLVED, that Hennepin County similarly commits up to an additional 10 percent beyond the total project budget for the METRO Blue Line Extension Project (Bottineau LRT) at the budget levels approved in the County’s funding commitment resolutions for the Bottineau LRT project; and

BE IT FURTHER RESOLVED that this additional amount will be made available only upon exhaustion of all funding sources and contingency amounts identified in the project budgets.


Background: Through Resolution 17-0207, adopted on June 13, 2017, Hennepin County approved the assumption of certain unpaid funding commitments for the METRO Green Line Extension project (CP 1005876) (the “Project”), assumed the 2017 Capital Grant Agreement (Counties Transit Improvement Board #01-2017-01/Met Council #17I007) (the “CTIB Grant Agreement”) with the Metropolitan Council (the “Council”), and thereby became the sole local funder for the Project. The same resolution imposed the 0.5% sales and use tax and $20 motor vehicle excise tax that is the primary source of funds for Hennepin County contributions to the Project. This resolution and other Board Actions have allowed the Project to advance toward the beginning of construction and through the federal approvals process. The budget for the Project anticipates receiving a Full Funding Grant Agreement (an “FFGA”) from the Federal Transit Administration (the “FTA”), under which the FTA would contribute $928.8 million to the Project. In order to qualify for an FFGA, a project must undergo a financial capacity assessment, in which a Financial Management Oversight Consultant (the “FMOC”) hired by the FTA evaluates the ability of the project funders to supply sufficient resources to complete the project. In June 2018, the FMOC for the Project explained that, in order to receive an FFGA, the Metropolitan Council would need to demonstrate its financial capability to address a cost increase or funding shortfall of 10% of the total Project budget, in addition to the contingency funds already included in the budget. The FTA has since made clear that a commitment to meet a 10% cost increase beyond budget will be required of all future projects in the New Starts program throughout the country prior to award of an FFGA. This Board Action would therefore provide such a commitment for the SWLRT project and the Bottineau LRT project. Any funds related to this Board Action would be subject to all existing requirements related to the County’s funding commitments to the Projects, and would be made available only upon exhaustion of all funding sources identified in the Project budgets, including all Project contingency funds. Previous New Starts projects in Minnesota have not exceeded the required base project contingency, and controls are in place by the County and the Metropolitan Council to seek to assure that the base project contingency will not be exceeded.