A financing plan involving special assessment-backed bonds on property within the Diversion alignment is being considered in order to finance the local North Dakota costs of the F-M Area Diversion Project. This plan would ultimately save taxpayer dollars.
In the event that this financing option is pursued, the funding for the local North Dakota share of the Project will still come from existing sales taxes approved by voters in Cass County and the City of Fargo. As such, property owners will not be asked to pay the assessments.
The plan is one of several financing options being considered to get beneficial bond terms for the approximately $450 million local North Dakota share. This option is being considered in order to allow funds to be available for construction more quickly than the 20-year sales taxes could by themselves. Construction costs are anticipated to outpace revenue streams, and financing has been expected to happen in order to construct the Project in a timely, efficient manner.
Under this option, a special assessment district would be created in the parts of Cass County that fall within the alignment of the Diversion channel that benefit from the Project. However, the plan does not call for the special assessment to actually be certified to properties. Instead, the special assessment district would operate as if property owners were to co-sign a loan as it would be used only as a backup payment system to receive better interest rates on a loan, with local sales taxes paying the annual payments.
Assessment districts provide better borrowing terms, with lower interest rates and lower coverage requirements. “The idea is to save taxpayers money,” said Mark Brodshaug, chairman of the Cass County Joint Water Resources District (CCJWRD). “It we have a slightly lower interest rate on the amount of dollars we’re talking about financing, it amounts to some real money. According to my estimate, if we take a quarter-point of interest off the long-term financing, it amounts to a million dollars a year. I think we have the duty to investigate that option.”
“The goal is for the potential assessment to be less than a flood insurance policy would be. It’s important for Fargo residents to consider the increasing flood insurance costs that would be seen if we do not get permanent flood protection from the Diversion Project,” said Pat Zavoral, City Administrator of the City of Fargo.
The sales tax financing plan would also provide a mechanism to pay for yearly maintenance costs of the Diversion after it becomes operational.
The CCJWRD has the ability, under the North Dakota Century Code, to administer an assessment district throughout the benefitted area in North Dakota. The CCJWRD formed the Diversion Project Assessment Committee (DPAC), which includes representatives from Fargo, West Fargo, Cass County, and the CCJWRD board. DPAC has been meeting monthly to establish a methodology to assign direct and indirect benefits across the benefiting area.
Special assessment districts are not the only financing option being considered by the Diversion Authority. Numerous other options are being weighed, such as taking-out short-term loans from local banks, or a loan from the Bank of North Dakota to provide funding for construction of the Diversion Project, which could start as early as the spring of 2015. The Diversion Authority has already sent a letter to the Bank of North Dakota requesting an operating line of credit be established to help fund flood control projects planned for 2014, including the Oxbow levee.