Numerous sources of funding and financing at the local, state, and national levels have come together to cover the cost of the FM Area Diversion comprehensive project. Grants, appropriations, and sales tax revenues will help fund the diversion while innovative financing sources, such as low-interest loans, will be paid back later.
A mix of federal appropriations, state grants, and local revenue sources will cover a large portion of FM Area Diversion construction expenses.
When the Metro Flood Diversion Authority partnered with the U.S. Army Corps of Engineers in 2016, they entered into a Project Partnership Agreement that provided for $750 million. Multiple appropriations allocated $313 million to the Corps through 2021. In January 2022, the Infrastructure Investment and Jobs Act allocated the remaining federal commitment of $437 million.
North Dakota committed $850 million: $435 million from a state legacy funds bonding package and $415 million in State Water Commission funds.
Minnesota committed up to $86 million, with $40 million through the City of Moorhead and $46 million through Clay County.
Local residents overwhelmingly approved multiple sales tax initiatives to fund the FM Area Diversion, including payments during construction and short- and long-term debt payments. In the City of Fargo, voters approved City 3-21 Sales Tax of 0.5% and City 3-22 Sales Tax of 0.5%. Fargo also dedicated 0.25% of the City 3-20 Sales Tax to the FM Area Diversion. Additionally, Cass County collects a 0.5% sales and use tax (County 2010-2 Sales Tax) that will contribute at least 94% of what’s collected.
Since the cash sources of funding during construction are not sufficient to pay for all construction costs, the MFDA implemented an innovative financing strategy using a variety of short-term and long-term loans backed by the dedicated Fargo and Cass County sales taxes. The sales taxes, which are in place through 2084, will be used to pay back the loans, which include:
- The U.S. Environmental Protection Agency issued a $569 million Water Infrastructure Finance and Innovation Act loan. The low-interest rate on the loan will save area taxpayers about $438 million over the life of the loan.
- The North Dakota Public Finance Agency issued about $55 million in SRF loans.
- U.S. Department of Transportation Private Activity Bonds (PABS) provided $280 million for the transportation elements of the project crossing the diversion channel.
- The P3 contract relies on a combination of milestone payments made during construction and a series of availability payments made over the course of a 30-year period, commencing after substantial completion of the Diversion Channel.
The innovative approach to financing the project has been recognized with international awards, including Americas P3 Deal of the Year from Project Finance International, the North America Water Deal of the Year from Proximo Infra, the Green Social and Sustainability Loan of the Year from Environmental Finance, the Americas Award for Public Finance from International Finance Law Review, and the North America Water Deal of the Year and Public Sector Project of the Year from IJ Global.
Operations and Maintenance Funding
The MFDA established an ongoing O&M Funding Program that will be funded by excess sales and use tax revenues, an annual maintenance district levy, and stormwater maintenance fees from Minnesota member entities. The program also will fund any unforeseen mitigation needs that may arise during operation.
The comprehensive project will follow an Adaptive Management and Monitoring Plan to monitor environmental mitigation project performance and any environmental changes after operations.
The City of Moorhead also will levy a Stormwater Maintenance Fee. Pursuant to the Joint Powers Agreement, the Minnesota member entities will contribute about 2 percent of the annual O&M costs.