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Property owners’ ‘co-sign’ for diversion to double

FARGO – A new proposal by proponents of a $1.8 billion metro-area flood diversion could double the project’s potential special assessments for Cass County property owners, though diversion officials still say those fees will never be assessed.

To fast-track the massive flood-control project, diversion officials had previously floated the idea of using a $450 million bond, with the loan backed by a special assessment district covering 40,000 benefitting parcels across the county.

Members of the Diversion Authority’s finance subcommittee decided this week to assume that loan would actually be $900 million, which also would double the cost of the special assessment district being set up to back it.

The diversion board has not made any official decisions on borrowing. But the $900 million figure will be used to calculate estimates of special assessment fees that will be shared in public meetings in the local cities and townships that would be affected.

Under the proposal, homeowners in northern West Fargo would be assessed the most. A $200,000 home there would be assessed a one-time payment of $14,114 or an annual payment of $720 for 30 years at 3 percent interest.

South Fargo would have the next highest assessments. An owner of a $200,000 home there would be on the hook for a one-time payment of $10,586 or $540 annual payments for 30 years.

Diversion officials maintain that these assessments would never be collected. The assessment district is being set up as a kind of collateral to secure better financing on a loan, which would be paid off through sales taxes.

And raising the loan from $450 million to $900 million – which represents the total local share between Fargo and the state of North Dakota – will net even better financing options, officials said.

“We expect the sales tax to pay for debt or loan payments and we don’t expect to ever issue these assessments, but issuing the assessment district will get us better financing terms,” said Eric Dodds, a diversion consultant.

“People will never have to make these payments,” Dodds added.

Still, at a meeting Wednesday, project proponents noted the challenge of conveying that message to the public, especially if the proposed bond amount is doubled.

“When I see a bigger number there, the fear of the public seeing that there,” said Darrell Vanyo, chairman of the Diversion Authority. “If we’re doing what we’re doing, we’ve got a real issue here because all of a sudden, even though it’s being paid by these (sales tax) funds, it’s a big number out there.”

The assessments would show up on your tax bill as an “uncertified assessment,” meaning it doesn’t have to be paid, Dodds said. A special assessment is a tax for infrastructure projects levied to property owners that benefit from the project.

Dodds said the assessment figures could be lowered slightly in the near future as staff continues to work out some kinks in the data.

Even if the specials won’t be collected, they could still affect home sales, said Cass County Auditor Michael Montplaisir.

“While we’re not collecting that special assessment, it’s out there,” he said. “It’s a liability on that property.”

An actual bond amount still would have to be approved by the Diversion Authority if they choose to seek out a loan for funding. But the $900 million figure is the best to use for informational meetings with city, county and township leaders, diversion officials said, because it’s better to lower the bond later than raise it.

“It’s always easier to go down than up,” Montplaisir said.

Diversion officials plan to meet with the West Fargo City Commission on Aug. 4 and with Horace city leaders on Sept. 1. They’ve already presented to Cass County commissioners, but that was based on the $450 million bond, Dodds said.

A roughly $900 million or $1 billion loan is about all that can be covered by the current local sales taxes in place, but those taxes will likely need to be extended by 10 years, said Mark Brodshaug, chairman of the Cass County Joint Water Resources District.

Fargo and Cass County passed half-cent sales taxes to fund permanent flood relief in 2009 and 2010, respectively. Fargo voters also approved in 2012 a 20-year extension of a half-cent tax for infrastructure, part of which can be used for flood control.

Fargo City Administrator Pat Zavoral said the special assessment, if it ever were collected, would still be smaller than the flood insurance payments homeowners would face without the diversion.

New federal flood plain maps could require thousands of homes in Fargo alone to take out flood insurance at a time when the federal government is pulling back from subsidizing premiums on policies. Those new maps are expected to go into effect Jan. 1.

Though a home valued at $200,000 in south Fargo would pay about $540 each year over 30 years for a diversion-related special assessment, it could pay between $2,000 and $4,000 for a flood insurance payment, according to Diversion Authority documents.

Still, the authority has to be careful with the $900 million number because it doesn’t factor in inflation, said Bruce Spiller, a diversion consultant. The $1.8 billion cost of the diversion is in 2012 dollars and will escalate over time, he said.

“But on the other hand,” Zavoral said, “if we accelerate construction we’re going to have savings as well. All of that plays into this.”

Brodshaug said borrowing $900 million to fast-track the diversion would save the project millions of dollars in the long run.

“That’s a message, too,” he said. “We don’t need to go down this road unless we’re saving some big money. We’re asking the property owners to co-sign with us and unless there’s a benefit from saving money on it, we shouldn’t be asking them to do that.”

Readers can reach Forum reporter

Erik Burgess at (701) 241-5518