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Published July 12 2012

Diversion board, Oxbow clash

FARGO – Fargo-Moorhead government leaders face a crossroads as to how they will deal with the properties they’ll buy out for the Red River diversion project.

Put simply: Nobody wants to be the landlord.

After much debate Thursday, members of the Diversion Authority approved a general policy for how they’ll dispose of properties they plan to purchase through their early acquisition process.

While the Diversion Authority will own the properties, local jurisdictions will have the option to lease back the bought-out homes until the land is absolutely necessary for the project.

So far, the policy only affects Oxbow, where three homeowners were approved last month for early buyouts due to medical hardship cases.

But as more early buyouts are considered down the road, other communities could be affected by the lease-back option.

Mayor Jim Nyhof said he wants to keep Oxbow intact as much as possible, given there’s no firm answer yet on whether the Red River diversion will permanently displace the community.

While Oxbow prefers to lease back bought-out homes to prospective tenants, Nyhof stressed Thursday, “We do not want to be in the property management business.”

“We don’t want the risk of maintaining the property,” he said. “We’re not willing to assume liability.”

Nyhof specifically takes issue with a proposed lease contract presented to Oxbow that – based on the Diversion Authority’s policy adopted Thursday – would put the responsibility on Oxbow to maintain the property and pay for liability insurance.

“As the contract is written, the city of Oxbow will not sign it,” Nyhof said.

Diversion Authority officials said the details of lease contracts can be revised as needed, and the board went on to unanimously approve the general policy, which includes the lease-back option.

“It’s not the contract itself; it’s the framework for how we’re going to deal with cities, like Oxbow and others,” authority Chairman Darrell Vanyo said earlier Thursday during a meeting of the board’s Land Management Committee.

Authority member Rodger Olson agreed: “I think we have to be quite broad when we set this policy and then develop the lease for particular cases.”

The policy is intended to cover all early buyouts that may be OK’d before the Red River diversion plan is authorized by Congress, a milestone that isn’t likely to come before next year.

While the details could be worked out in specific lease contracts, project consultant Jon Diebel cautioned: “I don’t want to raise any expectations that the lease agreement, with any modification, would ease the concerns of whatever entity we’re working with.”

Neither the Diversion Authority nor local jurisdictions, like Oxbow, can completely shy away from the responsibility from maintaining buyout homes.

“You have to have some liability somewhere,” Fargo City Administrator Pat Zavoral said.

If a municipality opted not to lease back bought-out property, the Diversion Authority would have say over the land, up to and including demolishing the property.

Fargo has rented out about a half-dozen homes among more than a hundred the city has purchased for flood projects, Zavoral told the Diversion Authority.

“You have some fears, but we didn’t experience them in terms of upkeep,” Zavoral said. “It was pretty clear and cut as to what responsibilities were on the homeowner. It has worked out.”

Diversion Authority officials said they’ll discuss whether to hire a property management firm, which would manage bought-out properties for them and reduce the risk for local governments.

“We have a lot of acquisitions ahead and properties to manage,” said Tom Waters, the lead project manager for the authority. “We likely may end up in property-management mode or, at least, need that skill set in our organization.”

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

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