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Letter: Pot of gold

Trana Rogne.jpg

Will the COVID 19 epidemic of 2020 steal the pot of gold at the end of the Diversion Authority’s rainbow? The DA needs the pot of gold because their own coffers don’t have enough money to pay for it.

We know that a year and a half ago the final cost of the diversion was estimated to be $3.2 billion. Fargo and Cass County say they can come up with a billion on their own, and the federal government is supposed to pay $750 million. North Dakota says they will throw in $750 million if Congress and the state of Minnesota appropriate funds. So far, the promises amount to $2.5 billion. It’s hard to believe anyone with a shred of financial sense believes the project’s final cost will be less than $3.5 billion, and it will likely be much higher. Using distance-learned math, project backers are easily a billion short, hence the search for the pot of gold at rainbow’s end. It’s no secret that the state of North Dakota was supposed to be the rainbow.

Now enter the North Dakota budget dilemma. Last week’s announcement that state revenue plunged after the country masked up for COVID was no surprise. The biggest hits to the current budget cycle were sales tax revenue, and of course oil. Much of the oil revenue for this biennium is front-loaded, so the real effect won’t be felt until the 2021-2022 biennium.

The real punch in the gut is that oil production in the state dropped 15% from March to April in addition to the price being cut in half. That is the largest monthly production drop on record. Active drilling rigs went from 43 to 13 by the end of May. All in all, oil and gas revenues for April were a whopping 81% below what the legislature had estimated. County officials have been advised to prepare for a 20% reduction in state funding for the next biennium. All areas of state funding will be expected to take a hit including cities, townships and highways.

Fargo’s sales tax collections since the pandemic have not been released. State sales tax revenue for April was 35% less than expected. The state’s largest city is bound to have similar numbers, given the size of the retail and hospitality sectors that closed their doors. The local share of the diversion is supposed to be paid by local sales tax. Shopper’s shift to online purchases may not change, further reducing local sales.

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The DA undoubtedly was counting on a well planned raid on the state’s Legacy Fund to make up part of the billion dollar shortfall. With legislators from western parts of the state looking for money to fix their roads and infrastructure damaged by oil drilling, and others looking to use Legacy money to encourage economic growth to replace the depleted natural resources in oil and coal country, Fargo’s shot at the Legacy loot seems as likely as finding a leprechaun’s lucky charms. Despite the regulatory and legal hurdles that the project has struggled to jump, the greatest obstacle has always been its cost. COVID may bring the final accounting.

Rogne wrote this piece with other members of the Richland-Wilkin Joint Powers Authority editorial team.

Related Topics: BUFFALO-RED RIVER WATERSHED DISTRICTFARGO-MOORHEAD DIVERSION
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