Senate Majority Leader Tom Bakk, DFL-Cook, gives an update on special session talks as Gov. Mark Dayton and House Speaker Kurt Daudt look on. Brian Bakst | MPR News.

Gov. Mark Dayton and leading Minnesota lawmakers inched closer to an agreement Friday that would bring the Legislature back for a mid-August special session to approve tax relief and construction borrowing packages.

While cautioning that "we're not quite there on every detail," as House Speaker Kurt Daudt put it, the group said after a closed-door two-hour meeting that some obstacles had fallen away.

Dayton, a Democrat, dropped his demand to revisit items cut or left out of a supplemental state budget and Daudt, on behalf of Republicans, backed away from proposals to create private school tax credits and to limit the power of local governments to pass their own wage and benefit ordinances. The GOP leader also expressed a willingness to make room for some construction projects Dayton wanted to a bonding bill.

"For the first time really since the end of the regular session, I believe a special session is very doable. And that there's a shared willingness to do everything possible to achieve it. We can't guarantee it," Dayton said. "Where there's a will, there's a way and I believe there's a will."

The tax-cut plan approved during the regular session fell to a Dayton veto because he said a wording error could have added dramatically to the cost. With a few wording and date changes, the leaders said that was largely ready to go. The combination construction and road spending plan got hung up in the May dash to the finish.

Daudt said the new special session drive picked up steam early last week when he and Dayton met by themselves over a BLT sandwich lunch at the governor's residence. Away from the glare of Capitol reporters and staff, they gained a better understanding of each other's bottom line.

Still to be resolved is the size of a borrowing package for public buildings and transportation projects. Republicans have insisted that the amount of general obligation debt not exceed $1 billion.

"If it's too large you lose votes," Daudt said. "If it's too small you lose votes so you have to find that kind of sweet spot."

Also, the sides are working to determine whether to authorize some form of local spending for a light rail transit line from Minneapolis to Eden Prairie. That has been a nonstarter for Daudt and fellow Republicans.

"I think we're going to find some resolution to that," Bakk said of the light-rail project, noting that the local match would unlock some federal funding for the third spoke in the Twin Cities rail transit system.

The logistics could also be tricky. Daudt and Dayton are off to their respective national party conventions in successive weeks. The House chamber is closed as part of the ongoing Capitol renovations, and a flood in the House office building has put some space off limits for weeks or more. The Senate would hold its session in its new building, but the temporary chamber is due to be converted to a hearing room starting in mid-August.

In the weeks to come, joint committees will begin meeting to work through the remaining details.