History: Resolution 17-0207, adopted on June 13, 2017, approved the assumption of certain unpaid funding commitments for the Southwest Light Rail Transit (METRO Green Line Extension) Project (County CP 1005876) (the “Project”), the assumption of 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”) for the Project, and the imposition of the 0.5% sales and use tax and $20 motor vehicle excise tax that are the primary sources of funds for Hennepin County contributions to the Project. Through these and other actions, Hennepin County agreed to take responsibility for the remainder of the 30% share of project funding formerly committed by the Counties Transit Improvement Board and the remainder of the 10% share formerly anticipated from the State of Minnesota. The Hennepin County Regional Railroad Authority (“HCRRA”) provided funding for the Project, as well, under separate grant agreements.

On May 31, 2018, the County adopted Resolution 18-0222, committing County funding to the Project in an amount up to $592,953,000, in addition to the CTIB contribution. Through July 2019, the County has paid $136.3 million towards this commitment. Resolution 18-HCRRA-0027, adopted on May 31, 2018, committed HCRRA funding in an amount up to $199,548,000. Through July 2019, HCRRA has paid $96.6 million towards this commitment. All CTIB funds have now been paid to the project. The total CTIB contribution to the project is $218.9 million.

On November 14, 2018, the Federal Transit Administration (“FTA”) granted the Council a Letter of No Prejudice (“LONP1”), allowing it to begin construction activities prior to the execution of a Full Funding Grant Agreement (“FFGA”). LONP1 authorized the Council to expend up to $187,336,000 for civil construction activities, with the potential for those construction expenditures to be treated as part of the local match required for future federal funding.

On November 15, 2018, the County adopted Resolution 18-0499, approving the work and expenditure of the amounts authorized under LONP1. It also authorized negotiation of a new grant agreement with the Council and HCRRA, Agreement PR00000689 (“the LNTP Grant Agreement”) to replace the amended CTIB Grant Agreement and to be the sole funding source for all Project activities through the end of August 2019. On the same day, HCRRA adopted Resolution 18-HCRRA-0056, likewise approving the work under LONP1, and likewise authorizing the negotiation of the LNTP Grant Agreement to replace the existing HCRRA grant agreement.

The LNTP Grant Agreement was then negotiated and executed, with a not to exceed amount of $434,901,943 in total funds from the County and HCRRA. The funded activities included the civil construction work authorized under LONP1, any pre-award activities requiring and receiving prior approval by the County and HCRRA Boards, and ongoing overhead expenses and other professional services related to the Project.

The LNTP Grant Agreement also established a number of conditions on the funding it provides. One such condition relates to any future requests for Letters of No Prejudice from the FTA. Specifically, the LNTP Grant Agreement requires that Hennepin County and HCRRA provide prior approval for the submission of a request for a LONP to the FTA and prior approval for expenditure of funds pursuant to Pre-Award Authority or an LONP.

Resolution 19-0221R1, adopted on June 4, 2019, provided the County’s prior approval, as required by the LNTP Grant Agreement, for the Council’s submission of a request to the FTA for a second LONP (“LONP2”). HCRRA adopted Resolution 19-HCRRA-0025, likewise providing HCRRA’s prior approval. The request sought Letter of No Prejudice authorization in the amount of $81.01 million for the civil construction contract and in the amount of $16.10 million for the systems contract. The Council submitted its request to the FTA for LONP2 on June 11, 2019.

On August 27, the County Board adopted resolution 19-0363, authorizing negotiation of Amendment 1 to the LNTP Grant Agreement, to extend the term of the LNTP Grant Agreement to September 30, 2019, with no increase to the grant amount. Three days later, on August 30, the Council received the requested LONP2 from the FTA.

The first three resolving clauses of this Resolution would provide County authorization, as required by the LNTP Grant Agreement, for the Council to undertake the work authorized under LONP2 and to expend Project funds for that work. This Resolution would therefore allow the Council to award the systems contract and initiate that work through a limited notice to proceed, with the assurance that these construction expenditures will be eligible for federal match at such time as the Full Funding Grant Agreement from the FTA is received. The Resolution would similarly allow the Council to issue a further limited notice to proceed to its civil construction contractor, Lunda-McCrossan Joint Venture (“LMJV”), so that LMJV can continue work through March 2020. 

The fourth resolving clause authorizes negotiation of Amendment 2 to the LNTP Grant Agreement. This amendment would extend the grant activity period from September 30, 2019, to March 31, 2020, providing funds for the period of work anticipated for LONP2. It would accordingly increase the maximum grant amount by $118,554,954 (from $434,901,943 to $553,456,897). Of this amount, staff anticipate that $94,843,963 would be provided by the County through the proceeds of its 0.5% transportation sales tax (County CP 1005876), and that $23,710,991 would be provided by HCRRA through the proceeds of its property tax (HCRRA CP 1000899). The grant disbursement schedule would be revised accordingly.

Amendment 2 would include a number of other changes, as well. It would incorporate a revised itemized project budget reflecting contingency usage authorized by the Executive Change Control Board (“ECCB”) in preparation for the Council’s application for federal funding and setting out anticipated project expenditures in greater detail. It would allow changes to this itemized budget only with mutual agreement of the Council, Hennepin County, and HCRRA. It would also modify previous commitments to allow for certain expenses related to the Kenilworth and Bass Lake Spur freight rail corridors to be paid as capital project costs.

All of the spending authorization contained in this Resolution is pursuant to the existing total Project budget and the County’s existing funding commitment. Nothing in this Resolution would increase the overall Project budget or County’s total funding commitment to the Project.

A companion resolution, 19-HCRRA-0038 is being considered by the Hennepin County Regional Railroad Authority Board of Commissioners.

Current Request: Approval of the work authorized under the federal Letter of No Prejudice, approval to expend grant funds pursuant to federal Letters of No Prejudice and federal pre-award authority, and authorization to negotiate and execute Amendment 2 to Agreement PR00000689 with the Council and HCRRA to provide funding for such work and related activities.

Impact/Outcomes: Approval of the work authorized by the FTA’s second Letter of No Prejudice will allow the Council to issue a second limited notice to proceed to its civil construction contractor, LMJV, as well as allow the Council to award the systems contract and initiate that work through a limited notice to proceed. Amendment 2 to Agreement PR00000689 will support ongoing Green Line Extension construction activities, to the extent allowable under federal Letters of No Prejudice and pre-award authority authorizations, through March 31, 2020.