Is federal funding worth the red tape?

Listen to this article

Southwest light rail backers have identified at least four stations along the future line that could be good candidates for transit-oriented development that taps federal money sources.

But officials along the line between Minneapolis and Eden Prairie worry any development money from the Federal Transit Administration might be more trouble than it’s worth.

“This is not a trivial matter,” Hennepin County Commissioner Peter McLaughlin said Wednesday at a meeting of the Southwest Corridor Management Committee. “It could in fact hamper development.”

McLaughlin said any “federalization” of transit-related developments should be “smart and surgical” because developers are leery of federal restrictions. Among the hesitations is a land lease of up to 99 years that ultimately has the federal government assuming ownership.

Metropolitan Council member James Brimeyer echoed McLaughlin’s resistance.

“We need to be careful we don’t chase federal money just to get a project going,” said Brimeyer.

The federal involvement could do more than just pay for individual projects. Kathryn Hansen of the Metropolitan Council’s Southwest Project Office told the committee that joint development projects could enhance chances for getting additional federal support for the entire light rail transit line.

“We want to go to the next level of federal funding,” Hansen said. “We’re in competition with four or five other cities.” Hansen concedes the federal involvement would increase the total cost of any transit-related development, but she doesn’t know yet by how much.

The proposal is still in the very early stages, but the project office figures the FTA could be tapped for half the estimated $64.2 million in public capital costs to develop projects at the Royalston and West Lake stations in Minneapolis, Beltline in St. Louis Park and Blake Road in Hopkins.

The proposal anticipates at least $224 million in private investment for the four stops. Nearly a third of the estimate, or $82 million, is aimed at the West Lake station, with an early scenario envisioning as many as 120 units of high-rise housing and up to 25,000 square feet of retail and entertainment uses.

Staffers point to the $33 million Grand River Station in La Crosse, Wis., as an example of a successful joint development. The nine-story building opened in 2010 and occupies what was a surface parking lot. It includes 70 housing units and is the hub for city and regional buses. The FTA contributed $9.1 million toward the development.

Federal funds are commonly used for transit corridor costs, but tapping the federal government for transit-related projects that might include housing and retail space is relatively new.

“This is a new day with the FTA,” said Metropolitan Council Chair Susan Haigh. “It’s a sea change.”

Despite some initial resistance, at least one experienced Twin Cities developer is not immediately repulsed by the idea of working with federal grants.

“That’s an interesting dynamic,” said Norm Bjornnes, whose Minneapolis-based Oaks Properties developed two apartment buildings on Hiawatha Avenue along what is now called the Blue Line LRT. “I know a lot of developers in this market have a ‘you-have-to-own-it’ mentality … but I don’t think the land lease issue is a significant downside for me.”

Planning for joint development projects is scheduled to last through spring 2015. The final route for the Southwest LRT line still hasn’t been finalized.