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Opposition to Crosstown Funding Grows: Senator Says He'Ll Take Action Against Delayed-Payments Plan; Hatch Says Method is Illegal

Posted on: Tuesday, 16 May 2006, 12:02 CDT

By Charles Laszewski, Pioneer Press, St. Paul, Minn.

May 16--Sen. Steve Murphy said Monday he will continue to fight the Minnesota Department of Transportation's financing of the Interstate 35W-Minnesota 62 Crosstown project in light of a recent attorney general opinion and a letter from a major bonding company.

An opinion from Minnesota Attorney General Mike Hatch's office has declared the department's current method illegal, and St. Paul Travelers Bond sent a letter saying it was unlikely to provide construction companies with the necessary surety bonds.

"I don't know what the other 200 members of the Legislature are going to do, but I'm going to do something," said Murphy, DFL-Red Wing.

He declined to reveal what he had in mind, but said he would take the action early this week. As chairman of the Senate Transportation Committee, Murphy has been jousting for several weeks with the department and Republican Lt. Gov. Carol Molnau over the bidding proposal.

The problem with the $250 million construction project is that the federal government has been slow in getting its share of the construction money to Minnesota. In order to start construction this summer, instead of waiting a year, the state for the first time is requiring construction companies to front the state up to $96 million until full federal funding is available in 2008.

Molnau, who also is MnDOT commissioner, and Bob McFarlin, her assistant, have refused to budge from their plan and blasted the attorney general's opinion.

"The opinion addresses questions posed by Senator Steve Murphy that indicate a fundamental misunderstanding of the proposed contract," Molnau said in a statement, adding that the state is not borrowing money from the contractors and at the time the contract is awarded, there will be sufficient funds available.

"When you borrow money … there is a note, there is an interest rate, there is a schedule of payments and there is a loan agreement," McFarlin said in an interview. "None of that exists here. They are not giving money to the state whatsoever. We are asking the contractors to perform certain services ahead of payment. But that is no different than remodeling your house and then paying the contractor at the end."

Chief Deputy Attorney General Kristine Eiden said the request for proposal documents sent to all interested bidders contradicts Molnau.

"The RFP says contractors have to fund it," she noted. "So there is an obvious disconnect. I don't know how you can have sufficient funds and yet the contractors have to front the money."

The four-page opinion concludes that the Minnesota Constitution does not allow the department to borrow funds from contractors for highway projects. Also, the finance commissioner could not certify there is a fund with the necessary money for the project if contractors are being asked to provide up to $96 million, the opinion states.

Both Eiden and David Semerad, CEO of Associated General Contractors of Minnesota, said there is no similarity between a major road project and a home remodeling. The department is asking the contractors to carry the debt for more than a year, Eiden said, not a couple of weeks.

McFarlin conceded the letter from St. Paul Travelers Bond could be the bigger obstacle. The company's Paul Gregoire laid out numerous problems with the contract language, and "these serious concerns will affect our ability to provide bonds for the Crosstown project as currently written."

McFarlin said members of the department are reading the letter and trying to answer the questions in a way that will satisfy the company and interested bidders.

Shafer Construction Co., Ames Construction Inc. and Lunda Construction are putting together a joint bid for the Crosstown project, said George Mattson, Shafer president. However, St. Paul Travelers Bond is the surety company for two of the three partners, and "if they don't issue the surety, we will be unable to proceed," Mattson said.

If his group drops out, Mattson said, he has heard there would only be one bidder left.

MnDOT has moved the bid deadline back three weeks to mid-June and hopes to award it in late July, McFarlin said.

Charles Laszewski can be reached at claszewski@pioneer press.com or 651-228-5458.

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Copyright (c) 2006, Pioneer Press, St. Paul, Minn.

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Source: Saint Paul Pioneer Press (St. Paul, Minn.)

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