WAHPETON — The massive diversion project that will protect Fargo-Moorhead from severe floods is helping to build houses in a roundabout way in towns around Wahpeton and Breckenridge.

The Metro Flood Diversion Authority agreed last fall to pay a $75 million settlement with Richland County in North Dakota and neighboring Wilkin County in Minnesota to end all legal and administrative challenges against the $3.2 billion flood-control project.

The two counties — both of which will sustain impacts and are located upstream from a dam that will be built on the Red River — have selected housing as their top priority for the settlement money.

So far, $12 million of the settlement has been dedicated, including Richland County’s $8 million share and $4 million for Wilkin County.

Both counties are combating a housing shortage and have identified home building as an effective way to stem their population declines.

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Each county is providing low-interest loans to private home builders to stimulate housing construction.

“It’s all got to be in the name of economic development to increase our tax base,” said Nathan Berseth, a Richland County commissioner and leading proponent of the housing program. “We need to boost our population.”

Both counties have experienced population declines for the past 20 years, which makes it more difficult to sustain services with a shrinking population.

“We have less people paying more taxes,” Berseth said. “How can we have more people paying less taxes?”

He added: “How do you get people if you don’t have homes?”

Nathan Berseth, Richland County commissioner. Patrick Springer / The Forum
Nathan Berseth, Richland County commissioner. Patrick Springer / The Forum

Dennis Larson, a Wilkin County commissioner, said housing is in such short supply that many homes are sold before they’re even listed, a market he knows firsthand from recently having sold his house and bought another.

“Our house never met the market,” he said. “We had it sold before we moved. That’s happening a lot. We just see that there’s a need now.”

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Despite the demand for houses, home builders in Wahpeton-Breckenridge and surrounding communities seldom build speculative housing, a problem the low-interest loan program seeks to address.

Starting this fall, Richland County plans to build 21 homes and Wilkin County plans to build at least four homes from their shares of the first installment under the diversion settlement.

Of the 21 homes planned in Richland County, 10 will be built in Wahpeton, six in Colfax, two in Hankinson and one each in Lidgerwood and Wyndmere.

The first four homes built in Wilkin County will be in Breckenridge. “We have shovel-ready lots,” Larson said.

In fact, he added, the next phase of the program likely will involve local communities preparing lots ready for homes to be built.

The Joint Powers Authority formed by the two counties to fight the diversion has been modified to oversee the settlement fund, which is being administered by the Southern Valley Economic Development Authority, a partnership of the two counties.

Officials thought it was wiser to have home builders, who are attuned to the housing market, decide where and what type of housing to build than to have government officials decide.

“It’s builder-driven,” Berseth said.

The idea of providing a subsidy to “buy down” the interest rate that home builders pay for their construction loans is similar to the popular PACE economic development lending program administered by the Bank of North Dakota.

Work continues on the Wild Rice River diversion control structure on Thursday, Aug. 12, 2021 which is part of the $3.2 billion flood diversion project. 
David Samson / The Forum
Work continues on the Wild Rice River diversion control structure on Thursday, Aug. 12, 2021 which is part of the $3.2 billion flood diversion project. David Samson / The Forum

Nearby Sargent County, which Berseth is advising as a consultant, has launched a similar program, and Berseth hopes the idea will keep spreading, if proven successful.

“I’m very curious to see if this works,” Berseth said. “It could become a statewide model.”

The two counties have received $35 million from the settlement so far. Payments of more than $1.8 million per year will continue for 33 years, adding $61 million, for a total with interest of $96 million, Berseth said.

Moorhead Mayor Shelly Carlson, chairwoman of the Metro Flood Diversion Authority, said settling the legal disputes has allowed the project to move ahead. A significant recent step was the selection of a consortium of companies to build the $1.14 billion diversion channel, work that will start early next year.

Also, delays from the protracted litigation were increasingly costly over time, with inflation driving the price tag from $2.75 billion to $3.2 billion.

In 2019, in arguing for work on North Dakota project features to resume even though the lawsuit and administrative appeal still were pending, lawyers for the diversion estimated “conservatively” that every year of delay added $70 million to the project’s cost.

“Every day those were on the books we were losing money and losing momentum,” Carlson said, referring to legal and administrative challenges. Also, payers including the federal government and state of North Dakota were uncomfortable with the ongoing uncertainty from the litigation, she said.

“There were a lot of variables that came into play” in deciding to approve the $75 million settlement, Carlson noted.