Flowage Easements

Eric Dodds: We’ve been working on the Phase 1 Flowage Easement Study for most of the year. Brian Field and Jeff Berg are here from Crown Appraisals to cover the meat of the study. This research is foundational for determining the value of Flowage Easements required for the project’s upstream mitigation area.

Jeff Berg (Crown Appraisals): I’ve known these acres for a long time. We utilized a hedonic regression analysis, pairing up with Tim Hodge (economist) and Doug Hodge, who specializes in before-and-after appraisals for large-scale utility and drainage projects.

Brian Field (Crown Appraisals): We looked at two separate issues: the value of the rights taken with the Flowage Easement and the change in land value due to increased flood frequency. We assembled over 2,100 sales transactions in the Red River Valley from 1992 to 2018 to ensure a statistically valid model.

Key Findings:

• Easement Rights (Missouri Study): We studied the Bird’s Point-New Madrid Floodway in Missouri. After a 2011 “aha moment” where the levee was actually blown, the market showed a reduction in value of approximately 8% to 10% for the presence of a Flowage Easement alone.
• Increased Flood Risk (Local Study): Using regression analysis in the southern valley and paired sales in the flood-prone northern valley (Grand Forks to Canada), we identified a diminution range of 7% to 25% for increased flood risk.
• Total Compensation Range: Combining these factors, we concluded a total diminution in value of 15% to 35%.

Eric Dodds (Next Steps): These findings are consistent with our current budget assumptions. Phase 2 will involve applying these foundational findings to specific land parcels using updated hydraulic modeling (Plan B) and FEMA’s CLOMR process. We anticipate presenting specific offers to property owners starting in 2020.

Eric Dodds: Introduction of Brian Field (Crown Appraisals) and Tim Hodge to present the Phase 1B study update. This update builds on the 2018 findings to serve as a backbone for evaluating flowage easements in the upstream mitigation area. Other programs mentioned include supplemental crop insurance, debris cleanup, and the dispute resolution board.

Brian Field: Two years after the initial study, the team re-evaluated market data nationwide, including the Red River Valley, Missouri, Iowa, and Nebraska. The study distinguishes between two separate impacts: the value of rights taken with the flowage easement and the change in land value due to increased flood frequency.

Market Research Findings:

• Regression Analysis: Collected over 2,000 sales transactions over a 29-year period (1992–present) within 15 miles of the river.
• Missouri Study: In the Bird’s Point-New Madrid area, research showed that prior to a 2011 “aha moment” (where a levee was intentionally breached), there was little difference in land value with or without easements. Post-2011, the market showed a reduction of 8% to 10%.
• Increased Flood Risk: Data from the northern Red River Valley identified a value diminution of 11% to 43% for more flood-prone properties.

Tim Hodge (Economist): Detailed the multiple regression analysis methodology. The study identified that flood-prone properties sold for roughly 6% to 10% less than non-flooded control groups within the first year after a flood event. This methodology has been peer-reviewed and accepted for publication in the journal Land Economics.

Conclusion: The final reconciled findings concluded a 8% to 10% diminution for the loss of property rights (easement) and an additional 7% to 25% for increased flood risk, depending on the specific depth and duration of flooding for each individual parcel.

Jody Smith (Director of Lands & Compliance): [00:00:05] Welcome to our fourth night of open houses. The goal is to connect you with your land agents to go over the Flowage Easement agreements you received. We will cover development, FAQ, mitigation zones, the appraisal process, and supplemental crop insurance.

Eric Dodds (Program Manager, Lands): [00:03:05] This process started with the Phase 1 market study in 2018. Following FEMA’s approval of the hydraulic model (CLOMR) in 2020, we moved into Phase 2 to apply research to specific properties. Offer letters were mailed in February 2022.

What is a Flowage Easement? [00:06:01] It is an agreement providing the Diversion Authority the right to periodically and temporarily store flood water. Compensation is a one-time payment made at closing, typically three to four weeks after an agreement is signed. It covers the right to store water and compensation for restricted development rights.

Impact Tables & Mitigation Zones: [00:09:24] Every property has an OIN (Owner Identification Number) to track parcels. We provide tables showing water surface elevations for 20, 50, 100, and 500-year floods, comparing existing conditions to “with project” conditions. The mitigation area is split into four zones: Zone 1 is most restrictive (buildings must be removed), while Zones 2, 3, and 4 allow development with specific height and location restrictions.

Supplemental Crop Insurance: [00:24:13] The Diversion Authority has committed to two programs provided at no cost to producers:

• Prevent Plant: Reimburses producers at the same coverage level as federal insurance if project operations prevent planting.
• Growing Season Loss: Provides up to 100% coverage if a summer operation (though historically rare) damages growing crops.

Cleanup & Dispute Resolution: [00:33:03] The MFDA will retain contractors to assist with debris cleanup (corn stalks, wheat stubble, etc.) post-operation. Additionally, an Alternative Dispute Resolution Board has been formed as an administrative process for claims related to unforeseen project impacts.

[00:38:58] For more information, visit the “Lands” section at fmdiversion.gov or contact your assigned land agent.

Jody Smith (Director of Lands & Compliance): [00:00:00] Welcome. Today we are providing a construction progress update, a status report on the flowage easement acquisition process, and a detailed overview of the supplemental crop insurance program with Alex Offerdahl.

Tom Fuchs (Senior Construction Manager): [00:01:18] Progress is being made on the Southern Embankment structures. At the Diversion Inlet, 44 precast bridge deck segments have been installed. At the Red River structure, excavation has reached nearly 50 feet deep, and 87,000 lineal feet of H-pile will be used for anchoring. Additionally, the County Road 18 interchange on I-29 has reopened.

Jody Smith: [00:04:42] We are 93% complete with property acquisition in the construction footprint. In the Upstream Mitigation Area (UMA), acquisition is approximately 25% complete.

Eric Dodds (Land Manager): [00:05:32] The UMA covers about 29,000 acres. We began flowage easement studies in 2020, and Crown Appraisals completed valuations in 2021. Offers were made to landowners in early 2022. We are approaching the end of our negotiation window and will be taking more aggressive steps, including final offers and potential eminent domain, to stay on schedule for project operation in 2027.

Alex Offerdahl (Watts & Associates): [00:12:23] The Red River Valley has the highest crop insurance participation rate in the country. Our goal is to provide a supplemental policy that bridges the gap where federal insurance doesn’t cover project-related impacts.

• 100% Value Guarantee: If the project operates and you manage to plant, the MFDA is responsible for bringing you up to 100% of the crop’s value based on spring or harvest prices.
• Prevented Plant: If project operations prevent planting, the MFDA pays the same per-acre amount that federal insurance would.
• APH Protection: We are pursuing “yield exclusion” at the federal level so flood years don’t drag down your production history. If that isn’t achieved, the MFDA is committed to calculating those losses line-by-line to compensate producers.

Q&A Session: [00:32:52] Key topics discussed included the impact of summer flood events, coverage for multiple causes of loss (e.g., hail vs. project flood), business interruption insurance for specific entities like CW Valley, and the administrative process for filing claims alongside federal crop insurance.