by Tu-Uyen Tran, The Forum of Fargo-Moorhead (republished with permission from The Forum)
Owners of some 50,000 North Dakota properties will vote on financing the flood diversion early next year, including those who might be harmed by the project, according to a diversion official.
But most of the votes will go to local governments, which are backers of the project.
The vote is for a special-assessment district that would guarantee repayment of $725 million in bonds if the Fargo-Moorhead Flood Diversion Board of Authority fails to raise enough sales tax dollars, said Rocky Schneider, an authority staff member.
Schneider told the board last week that property owners’ liability will be similar to that of co-signers on a loan, but the ones making the payment will be shoppers paying the sales taxes.
The liability applies only to properties that benefit from flood protection, but even those that won’t benefit will get a vote as required by state law, he told The Forum.
The law also requires different properties to have their votes weighted differently, which means properties that don’t benefit may get more votes than properties that do, and local governments, elected to represent large groups of residents, will have the most votes, he said.
Ballots could be mailed out as soon at late February.
The diversion is estimated to cost $1.8 billion.
Local taxpayers are on the hook for $450 million. The Diversion Authority estimates sales taxes can raise much more, about $700 million.
The remainder of the bond could be repaid with help from the state of North Dakota, which has committed $175 million and is expected to commit another $225 million.
The federal government’s share is $802 million and the state of Minnesota’s share is $100 million.
Even though local sales taxes would be used to repay the bonds, the Diversion Authority does not want to use them to guarantee repayment because the interest rate would be higher, according to board Chairman Darrell Vanyo. Special assessments bring lower interest rates.
Investors tend to consider property taxes, such as specials, to be more secure than sales taxes; a property owner who fails to pay could forfeit the property.
The Diversion Authority is also considering another way to finance the diversion. A private company could finance, design and build the project and, over time, the authority would repay the company the cost of the work plus profit.
Schneider said it’s still good to be ready to issue a bond because that offers the authority greater flexibility.
Three voting classes
His team is still trying to work out who will get a vote and how much weight their vote will have.
In normal special assessments, those used to pay for street-and-sewer projects, benefiting properties do not have a right to vote so much as a right to protest. If enough property owners protest, the local government has to reconsider the project.
The rules are different with projects done by water districts, Schneider said. The Cass County Joint Water Resource District will be the entity creating the special-assessment district.
Think of the $725 million as 725 million votes, which are divided among two classes of voters.
One class is the owners of some 49,000 properties to be protected by the diversion. Together, they get a third of the 725 million votes. How many votes each property gets depends on its worth, how many acres it covers and the amount of benefit. More benefits means greater liability for the bond and, as a result, more votes.
The other class of voters is the cities, county and townships to be protected. They’ll get two-thirds of the 725 million votes, with those having more residents getting more votes. Cass County and the city of Fargo, both members of the Diversion Authority, will get the most votes.
Local governments get separate votes from property owners because they represent indirect benefits of the diversion, which protects streets, sewers, airports, schools and other infrastructure shared by all, according to Schneider.
A third class of voters is owners of some 900 properties potentially harmed by the diversion. This includes properties in Cass and Richland counties that would be behind a dam used to store floodwater to reduce the diversion’s impact on downstream communities and properties west of the diversion channel that might be temporarily used during construction.
Properties that could be harmed by the diversion are estimated to be worth $50 million, so they get about 50 million votes. The number of votes they get would be based on how much the harmed property is worth.
Schneider said he expects to bring a list of property owners in January to the Cass County water district. If the district Oks the list, it’ll take about a month to print the ballots and mail them and then another month to conduct a public hearing, given the notification requirements, he said.
He said property owners will have 30 days after the hearing to turn in their votes.
- Diversion Authority and MCCJPA ask City of Moorhead to Assist in Obtaining Five Property Easements — April 28, 2020
- ND State Engineer Approves Mitigation Plan for FM Area Diversion Project; Document outlines how Project will Mitigate Impacted Properties — June 2, 2020
- ND Bonding Bill Ensures Commitment to FM Area Diversion Project — January 20, 2021
- Agreement Reached to End Lawsuits and Compensate for Impacts from the Fargo-Moorhead Area Diversion Project — October 26, 2020