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Published June 27, 2009, 12:00 AM

Buyout homes cost 58 percent more than median value

Being in harm’s way isn’t all that sets apart the flood-prone homes in line for government buyouts after this spring’s record flood.

By: Dave Roepke, INFORUM

Being in harm’s way isn’t all that sets apart the flood-prone homes in line for government buyouts after this spring’s record flood.

They’re also some pretty nice digs.

The average prices of the 310 homes that officials in Fargo, Moorhead and Cass and Clay counties want to buy to lessen damage in future flooding is higher than typical houses in those areas, according to an analysis by The Forum.

In Fargo, the average value of a buyout home is $212,848 as gauged by city assessment records, 58 percent more than the median value of an owner-occupied home listed in the most recent U.S. Census survey, which was figured from 2005-07.

Among the four jurisdictions, Fargo’s disparity is the greatest. Cass County’s was next-highest, with a 53 percent increase. In Clay County, buyout homes are worth 45 percent more. The lowest difference is in Moorhead, where the buyout list is only

28 percent more than a median-value home.

The average value of the Cass County buyout homes is $213,020, highest of the four. Clay County’s average is $191,457, and Moorhead’s is $163,963.

None of this is a surprise to Fargo City Assessor Ben Hushka, who said it is easy to see what the assessment figures spell out when one drives through the areas in question.

The differences are not just the added value of a nice view. Hushka attributed it to the larger houses that often sit on larger lots in the riverside neighborhoods, especially those in newer development areas.

“The 60 percent isn’t just from location,” he said.

City and county officials say the high relative cost of the houses has little effect on how to approach buyouts, which are seen as a key piece of flood mitigation efforts.

Cass County Engineer Keith Berndt, who sits on the county committee that oversees buyouts, said that while some residents oppose the program and see it as an unnecessary bailout, the cost of buying properties is cheaper in the long run than protecting them.

“Whether it’s an $80,000 house or a $500,000 house, it’s not about whether it’s an expensive home or an inexpensive home,” Berndt said. “It’s whether it’s in the taxpayers’ best financial interests to have that home removed.”

Clay County Commissioner Kevin Campbell said it would be unfair to punish homeowners who built on what they thought was dry land outside the flood-prone zones.

“Most of the properties that are going to be in the market for buyouts were not in the flood plain,” he said.

The cost of the houses inherently has some effect on buyout programs. If buyout homes were less valuable, the city could classify more as high priority, said Jim Gilmour, Fargo planning director. Of the 54 properties now set for potential buyouts, 26 are considered top priorities.

“The more expensive the homes, the less of them you’ll be able to buy,” he said.

Gilmour also said that with the priciest homes – more than 10 percent of the 310 homes, a total of 32, are valued at more than $300,000 – the big price tag for a buyout might make another measure, such as a flood wall, more feasible.

In Moorhead, the cost of a home isn’t a factor beyond how it might affect its cost-benefit ratio, said Lisa Vatnsdal, the city’s neighborhood services manager. City officials will not pick and choose what to buy based on cost alone.

“It doesn’t really work that way in mitigation efforts,” she said.

Vatnsdal said she thinks Moorhead’s buyout list has the smallest gap because there are still many older homes to purchase along the Red River on its east bank.

Though there have been nearly 200 buyouts in the metro area since the 1997 flood, Vatnsdal said Moorhead has only done 27 since 1994. Of those, 16 were in one low-lying subdivision, River Oaks Point, she said.

“We haven’t been building in the flood plain for a very long time,” she said.

Gilmour thinks the difference runs higher in Fargo because many older homes were bought after the 1997 flood.

For example, the average value of the five houses to be bought in the Oak Grove area, which was a focus in the wake of the 1997 flood, is less than $67,000. Compare that to the five homes the city wants to buy along River Drive South, which average more than $300,000.

“The cost of these 40 homes today will be much more than we spent on 90 homes in ’97,” Gilmour said.

Readers can reach Forum reporter Dave Roepke at (701) 241-5535