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Published May 26 2012

Fargo sales tax revenue could climb to $22M a year

FARGO – City voters have a choice to make on June 12:

• Extend a half-cent sales tax to help fund hundreds of millions of dollars in street, water, sewer and flood-control projects.

• Or reject the tax, which would give shoppers a slight tax break and force Fargo leaders to find alternative means to fund projects they consider necessary.

A half-cent sales tax will generate at least $11 million a year for the city and will cost the average household about $56 a year.

With the city’s growth, though, that tax revenue could climb to $22 million a year by 2031, resulting in a total city income of

$312 million over the life of the 20-year tax.

The tax expiring in June was initiated in 1992 to fund street and water projects. It was extended by voters in 2002 to also include funding for flood protection projects.

Fargo leaders are asking voters to extend the tax another 20 years to help pay for an array of priorities: streets, water, sewer and flood protection.

Officials have not provided a specific breakdown showing how those priorities might be funded through the sales tax.

Not all city leaders want to extend the sales tax.

Opponents, like Commissioners Dave Piepkorn and Mike Williams, argue the city can use existing revenues and prioritize projects to get them done without extending the tax.

Fargo also has a 1-cent infrastructure sales tax to fund water, wastewater, streets and city flood protection projects, plus a half-cent sales tax to pay for the city’s share of the Red River diversion.

Together, those taxes generate about $33 million a year or more in revenue.

In making the case for Fargo’s needs, proponents of the tax extension cite three priorities: flood protection, street improvements, and water and sewer projects.

Here’s a look at the projects city leaders want to pay for over the next 20 years, according to information provided by city officials:

Flood protection

By 2016, city leaders hope to fortify Fargo’s flood protection to 42.5 feet.

Building the dozens of projects necessary to achieve that goal will cost $230 million, city engineers have estimated.

The specific projects include a combination of permanent levees, flood walls and buyouts of vulnerable properties.

That cost is separate from the city’s share of the

$1.8 billion Red River diversion, which is estimated at about $250 million.

Without citywide protection to 42.5 feet, 2,300 additional properties in Fargo would be required to buy high-risk flood insurance.

The coverage could cost individual property owners nearly $3,000 annually, which would be about $19 million in insurance premiums to protect all structures in the city’s existing floodplain.

With the protection in place, Fargo would be taken out of the revised flood maps the Federal Emergency Management Agency plans to release this summer.

Street projects

Fargo officials are also banking on sales tax revenue to help fund street improvements and infrastructure replacements throughout the city.

Over the next four years, city planners have identified $65 million worth of construction projects they could pursue, in addition to the $36 million in projects they already planned to accomplish before 2016.

As crews repair and reconstruct Fargo’s roadways, they’ll also chip away at another massive chore.

Seventy-seven miles out of 144 miles of cast-iron water main still needs to be replaced.

The World War II-era water mains have been prone to failure in recent decades – once breaking 40 times on a single block within two years, Fargo Administrator Pat Zavoral said.

Additionally, city officials have more than 463.1 miles worth of roadways that are targeted for planned pavement projects.

One of the most high-profile of those is the seven-year plan to reconstruct all major streets in downtown Fargo, which is estimated to cost about $40 million.

Water, sewer infrastructure

The lowest priority for the sales tax revenue are water and sewer projects, because those are largely taken care of with existing utility fees or other sales tax income, city leaders have said.

Still, Fargo’s capital improvement plan details about $322 million worth of projects to upgrade and maintain the city’s water-based infrastructure between now and 2028.

Included in that are some hefty projects city officials are also planning for.

For instance: How to convert Fargo’s water plant to properly treat higher sulfate levels, as well as expand it to treat more water on a daily basis.

Treating the extra sulfates could cost $60 million, while expanding the facility could cost $35 million, city data show.

The extra sulfates stem from increased releases from Devils Lake into the Sheyenne River. Fargo pulls its municipal water supply from the Red and Sheyenne rivers.

City officials have also noted $293 million worth of wastewater and sewer projects planned in the city’s long-term capital improvement plan.

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Readers can reach Forum reporter Kristen Daum at (701) 241-5541