The Flood Diversion Authority, in fulfilling its commitment that the Fargo-Moorhead Metro Area Diversion Project serves the public, continues to strive to make the project economically feasible, technically sound, and environmentally compliant. Successful implementation of a project of this scale requires wise financial planning, along with visionary engineering and technical analysis. Funding a project of this magnitude and complexity is not a simple, straight-forward exercise. However, by utilizing an integrated funding and implementation model, the Diversion Authority is able to evaluate multiple funding scenarios, and has determined through preliminary results that the Diversion Project is locally affordable.
The Diversion Project is planned to receive funding from a range of sources–federal contributions, state funds, bonds, and tax revenue–each of which are subject to market fluctuations and public policy decisions. In total, the cost of the Diversion Project is estimated in the Feasibility Study to be approximately $1.8 billion. The project cost share agreement calls for the Federal Government to contribute $800 million to the total cost, but the actual Federal funding amounts will be determined through the annual appropriations process. The states of Minnesota and North Dakota have also planned to participate with annual contributions. The remaining debt or cash payments will be the responsibility of the local sponsors, to be paid through revenue sources such as sales tax, bank loans, bonds, special assessments, or any combination of these.
The Diversion Authority is tackling the challenge of strategic funding decision-making with carefully designed evaluations that address multiple variables, each with varying levels of uncertainty. The challenges that the model helps address include the complexity of having multiple funding sources of indeterminate amounts, dynamic and uncertain future interest rates, and uncertain tax revenues, all over the multi-year project implementation schedule. Adding further complexity is the fact that the Federal, State, and local agencies operate on different fiscal years and budgeting cycles. None of the economic and financial variables are set in stone, and this creates a myriad of complicated funding choices, any one of which could have a substantial impact upon the ultimate cost of the project. Evaluating the debt repayment period is an important local consideration, and the model accommodates scenarios that include financing over a multi-generational payback period.
The Program Management Consultant has developed the integrated funding and implementation model to analyze and illustrate the impacts of various financial decisions and assumptions on meaningful program metrics such as debt service, cost of financing, and affordability. This integrated decision-management tool provides the Authority with financial data necessary to have discussions with potential funding sources and project stakeholders, and make decisions about funding strategies.
Because of its interactive nature, the model allows the Diversion Authority to vary contribution amounts, adjust debt terms and sales tax revenues, and financing options. This allows the Authority to investigate various scenarios “both within and outside of its direct control” and examine the impacts of each. After testing various scenarios of federal and state contributions, and using available bank and bond lending rates, the model makes it clear that the Diversion Project is locally affordable, based on the assumption that the City of Fargo and Cass County sales tax revenues currently being collected (that are set to expire around 2030) are extended to the end of the debt repayment period.
By varying key factors, the model provides sensitivity analyses that will be helpful in discussions between policymakers, project engineers, city financial planners, and other stakeholders. For example, the model ca
- Diversion Authority Finance Committee and Board Chair recognize Sen. John Hoeven for Efforts to Move Low-Interest Project Funding Forward — May 7, 2020
- USACE FY 2020 Work Plan Provides $100 Million for Project — February 10, 2020
- FM Area Diversion Project Receives FEMA Conditional Letter of Map Revision — September 9, 2020
- ND State Engineer Approves Mitigation Plan for FM Area Diversion Project; Document outlines how Project will Mitigate Impacted Properties — June 2, 2020