Published February 05 2012
Pledges, few specifics foreshadow shortfalls to diversion fundingFARGO – If only promises, pledges and political rhetoric paid the bills, then there’d be no question how to pay for a Red River diversion.
Unfortunately for government officials, multibillion- dollar projects can’t be paid for with IOUs.
A gentleman’s agreement breaks down the $1.78 billion diversion cost among the U.S. government, the states of Minnesota and North Dakota, Cass County and the city of Fargo.
But with no binding agreement, few specific funding plans and potentially years to work out the details, government leaders are mostly just banking that all the money will be there when it’s needed.
With an immediate emphasis on city projects, Fargo leaders’ initial funding source for permanent flood protection won’t be enough to pay for the $220.5 million local share of the diversion.
After the historic 2009 flood, Fargo voters passed a half-cent sales tax for permanent flood protection, which is estimated to take in about $200 million over 20 years.
With more than $50 million already spent on flood-control projects using dollars allocated from the tax revenue, city officials will need other means to pay for the F-M diversion.
Fargo Mayor Dennis Walaker plans to float a ballot proposal to extend a half-cent infrastructure sales tax that expires this year.
The details of the extension haven’t been decided, but the tax revenue could fund a mix of needs, including flood control.
When push comes to shove, though, Fargo leaders said they’re comfortable they’ll have enough dollars for the diversion.
“There’s adequate funding for our share,” Walaker said, adding there are more obstacles to cross before the diversion is a certainty. “If we don’t get there, all of this is moot.”
Commissioner Mike Williams said Fargo’s continued growth will bring in more tax revenue, which could boost the necessary diversion funding.
The project’s cost could also fluctuate with modifications during the corps’ design process, Commissioner Brad Wimmer said.
“My hope is between the city, the county, the states and the federal government, we’ll have enough to attack it,” Wimmer said.
County leaders believe they have the means to raise their match for the diversion. If they come up short, they say alternatives could be considered in the future.
A half-cent sales tax Cass voters approved in November 2010 is projected to raise about $11 million a year over the next 20 years for flood-control projects.
The county is setting aside $10 million of the annual sales tax revenue to pay for its planned share of at least $200 million for the diversion.
Any additional dollars will be used for other flood projects, Commission Chairman Scott Wagner said.
With a local match of at least $220.5 million, Cass County leaders acknowledge they’ll need another funding source to make up the difference sales tax revenue won’t cover.
“If costs escalate and things drag out, those are things that we certainly will look at,” Commissioner Darrell Vanyo said, adding that hurdle likely won’t come until the later years of the project.
Wagner and Vanyo said another sales tax or assigning special assessments based on who benefits the most are possibilities.
“We could be looking at some mechanism for financing that might spread this financial burden out for more than one generation,” Vanyo said.
The amount Minnesota will contribute to the F-M diversion is perhaps the biggest unknown.
An engineering analysis showed 90 percent of the project’s benefits would be in North Dakota and 10 percent in Minnesota.
There’s no formal agreement in place, but officials generally see that ratio as the fairest way to split the non-federal portion of the costs. But Moorhead state Rep. Morrie Lanning said Minnesota’s portion could be as low as 6 percent.
Ten percent of the non-federal cost would be about $98 million.
In March 2010, then-Gov. Tim Pawlenty pledged Minnesota would pay its “fair share,” but he didn’t specify an amount.
His successor, Mark Dayton, is just as vague about Minnesota’s commitment. Dayton’s spokeswoman said the governor was not available to comment last week.
Local leaders in Minnesota said the state’s contribution won’t be clarified for many months.
Moorhead Mayor Mark Voxland said local officials are keeping Dayton and his staff in the loop, but “Minnesota really won’t be interested in conversing with us until we have an authorized project.”
Authorization can only be granted by Congress, and with the signing of the Army Corps chief’s report in December, that milestone could be as early as this year.
Receiving congressional authorization would show Minnesota leaders the F-M diversion has been vetted and is worth funding, Voxland said.
Legislators said Minnesota’s fiscal troubles could also hurt the state’s ability to guarantee its share of the diversion cost.
“I don’t see any money for the diversion in the near future,” Dilworth state Rep. Paul Marquart said.
The first priority for local Minnesota legislators is funding flood mitigation projects in the valley, which are already underfunded, Marquart said.
In his proposed bonding bill this year, Dayton allocated only $20 million statewide toward flood control, an amount Moorhead alone could use to pay for all of its projects.
Other factors could also stall the state dollars.
Marquart said if the diversion’s effects south of Fargo-Moorhead aren’t eased, the problem might lessen his support for the funding.
“Comstock, Wolverton: It would flood out that area,” Marquart said. “I’m not satisfied with that.”
Minnesota’s bonding process also restricts where the dollars can go, Lanning said, and “we can’t bond for improvements on the North Dakota side of the river.”
“There will have to be a negotiated agreement between North Dakota and Minnesota about that local share and who’s going to pay what,” he said.
Minnesota’s lack of financial commitment to the diversion has North Dakota officials on edge.
“We’re all concerned on this side of the river,” Wimmer said. “Somewhat their hands are tied, so we just have to be patient.”
Cass County leaders said it’s a matter of trust, but they hope to revisit the initial conversations of a 10-percent commitment to the non-federal cost.
“We’re still trying to get Gov. [Jack] Dalrymple and Gov. Dayton together to carry on that same message,” Vanyo said.
Dalrymple said he hasn’t spoken with Dayton about the diversion funding and he doesn’t plan to anytime soon.
But Dalrymple said he has extended an invitation “to speak with him whenever everyone agrees the time is right.”
“I’ve suggested the local politicians in Minnesota – Clay County and Moorhead – should be the first ones to talk to Gov. Dayton about the importance of the project,” Dalrymple said. “If he’s not persuaded by the local leaders in Minnesota, he’s not going to be persuaded by a governor from another state.”
Dalrymple said last week he stands by North Dakota’s pledge to pay half of the non-federal, non-Minnesota share of the diversion.
But if costs continue to climb, Dalrymple cautioned that North Dakota’s match won’t be limitless.
Under current figures, the state’s share is nearly $441 million and could go higher than a half-billion dollars based on the corps’ forecasts for a fully funded project.
“Nobody has asked us to say how we feel about more money,” Dalrymple said. “Are we willing to match any amount of money no matter how high it gets?”
“Well, there’s probably some level at which the State Water Commission would say, ‘That’s going too high,’ but that’s never been discussed,” he said.
Corps officials have agreed to cover half of the cost of the “federally comparable plan,” a more economically feasible diversion plan in Minnesota that’s the basis for how much the U.S. government will contribute to a Fargo-Moorhead diversion.
State and local governments must pick up the extra $540 million needed to build the “locally preferred plan” in North Dakota, which officials liked more for the greater levels of protection it would provide the metro area.
Under initial costs, the federal portion amounts to about $801.5 million.
Members of Congress on both sides of the Red River have said repeatedly they’re committed to the project and they plan to lobby their colleagues on Capitol Hill to support the federal dollars to fund it.
Readers can reach Forum reporter Kristen Daum at (701) 241-5541
Funding flood protection
Local, state and federal governments have each pledged to pay a portion of the costs to build a Red River diversion around Fargo-Moorhead. Based on the most recent cost estimates from the Army Corps of Engineers and pledged agreements among the various entities, here’s how the cost share would shake out:
Today’s cost: $1.78 billion
- U.S. government: $801.5 million
- Minnesota*: $98 million
- North Dakota: $440.9 million
- Cass County: $220.5 million
- Fargo: $220.5 million
Fully funded cost: $2 billion
Accounts for price escalation, inflation and other factors by the time construction is finished, at the earliest in 2021.
- U.S. government: $884.3 million
- Minnesota*: $112.4 million
- North Dakota: $505.6 million
- Cass County: $252.8 million
- Fargo: $252.8 million
*assuming a 10-percent cost share of the non-federal portion
Source: U.S. Army Corps of Engineers