The Minnesota Office of the Legislative Auditor this morning released a new program evaluation report titled Southwest Light Rail Transit Construction: Metropolitan Council Oversight of Contractors. The report found that the Met Council cooked the books in violation of Federal rules, opening the door to potential fraud. In 70% of cases, the Met Council directed its Independent Cost Estimator (ICE) to systematically increase its project estimates to add more profit and overhead, unused equipment, and extra funding for women- and minority-owned businesses – even when none of those businesses existed or were used. In one example, the final cost was nearly three times the original ICE estimate.

The report also found the Met Council failed to hold contractors accountable, allowed schedule delays to remain unresolved, failed to limit risk for future cost increases, and paid contractors despite being unable to validate that costs were accurate.

“What we have here is a clear example of an agency that has gone rogue,” Senator Steve Drazkowski (R-Mazeppa), a member of the Legislative Audit Commission, said. “The question is why: was it ineptness? Was it corruption? Was it a combination of both? No matter what the answer, this level of mismanagement (at best) or fraud (at worst) is absolutely inexcusable.”

This session, Democrats and Gov. Walz lifted the ban on state money going to Southwest Light Rail and failed to enact systematic changes to how the Met Council administers taxpayer dollars. 

This year, Democrats also signed off on significant new funding for train lines in Minnesota, including $50 million for a Blue Line extension to be managed by the Met Council. During the hearing, Legislative Auditor Judy Randall said, “I am not convinced the Met Council is the right entity to be the responsible party for [light rail] projects.” Democrats also approved $195 million for the Northern Lights Express passenger train to Duluth, $14.5 million for a second train to Chicago; and $2 million for intercity passenger rail studies. 

ADDITIONAL FINDINGS:

• The Met Council “closed” many change orders with delays unresolved and failed to report those delays to approval bodies, despite federal requirements.

• In some instances, the Met Council paid contractors what was requested with little or no explanation that those costs were reasonable.

• The Met Council failed to adequately document decisions or track costs related to nonconformance reports.

• The Met Council’s original contract with its construction contractor did not provide sufficient mechanisms for the Council to enforce contract requirements.