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Compromise reached on Highway 61 reimbursement debate

Concrete is poured mid-July, 2016, on the main drive lanes of northbound Highway 61 as the two-year reconstruction project continued into its final weeks. File photo

After negotiations, meetings, legislation and letters, Red Wing has a final answer on whether the state will reimburse the city for the cost overrun on the Highway 61 reconstruction project.

The state will pay $381,000 toward the remaining $968,000 cost attributed solely to trunk Highway 61 reconstruction. Including a previous payment of $500,000, the state will pay a total of $881,000, or 60 percent, of the total $1,468,000 price tag for trunk highway improvements. The city will wind up paying $587,000.

The agreement was discussed at the May 8 city council meeting after Evan Brown requested it be pulled from the consent agenda.

While nearly $400,000 is something, it's not nearly what city officials hoped for or felt was right.

"Traditionally, the state pays for trunk highway costs," said city Finance Director Marshall Hallock. "In this case, they did not."

The Highway 61 project wound up costing more than what both the city and state planned, due to contractor bids coming in higher than anticipated and the state mandating more expensive materials be used.

After the Legislature failed to pass a transportation omnibus bill last year, covering the project's extra cost was left in limbo. The city believed the state should cover the cost, while the state argued that paying more amounted to an earmark.

In recent weeks, the city reached out to local representatives to include the funding as a part of this year's transportation omnibus bill. That caught the attention of the Minnesota Department of Transportation and the Governor's Office.

"The proposed legislation remains problematic for us since it would set a precedent in terms of how we enter into cooperative agreements with Minnesota cities in the future," said Transportation Commissioner Charles Zelle.

City officials and staff met recently with Zelle, as well as Gov. Mark Dayton and his staff, to discuss the issue.

"We recommend accepting this offer," Hallock said. "We think the alternative is that we will receive zero."

Hallock said that even if a transportation omnibus bill reached the governor's desk, Dayton might use a line-item veto.

"I think the state met us fairly well in the middle," Engineering Director Ron Rosenthal said. "They realized how hard it is for a city our size to come up with that amount of money, but they're in the same boat. They're working with a tight budget, too."

While not everyone was pleased with the compromise, all parties agree the project was a huge success.

"We have a strong and positive working relationship with the city of Red Wing and agree that the project was excellent," Zelle said.

Rosenthal and Hallock pointed out that MNDOT nominated the project for a national award.

According to City Council member Peggy Rehder, the project's success was due to local control.

"I think this was more successful than other projects because our guys were running it, not the state," Rehder said. "I know we're stuck with this agreement, but I don't like it one bit. I hope we never let the state put us in this position again."

The council unanimously voted Monday night to accept the state's offer and ask that local legislators pull Red Wing's request from the transportation bill.

"This has been a learning opportunity for everybody," Hallock said. "We will certainly be taking a more detailed approach to these collaborative agreements in the future."