Souris River Joint Board, Minot strategize to fund flood project
SRJB, city strategize to fund flood protection
Minot’s sales tax for flood protection is just a few years away from coming up short and slowing down construction, based on a recent city budget outlook.
Flood control expenses are listed at $56 million in 2020, rising to $64 million by 2023. Revenue from the current tax levy and sales tax begins falling below the amount necessary to meet expenses in 2022.
“If we can’t get something fixed by the 2021 to 2022 time frame, then we have to re-evaluate where we are going to be at on the project because we will be essentially tapped out,” City Manager Tom Barry told council members last month. “What’s important is we have to set up and dedicate the revenues for flood control in a manner that provides assurance to the Souris River Joint Board that, as they are bidding and letting contracts, they can enter those contracts with the firm knowledge that the city is backing up the encumbrances.”
The Souris River Joint Board has organized a committee to look at long-term funding of flood control.
“The joint broad has done a lot of work in terms of establishing financing commitments from local to federal. We want to reconfirm those commitments and look at new opportunities,” said David Ashley, Voltaire, chairman of the joint board.
Ashley is chairing the new committee, which includes Minot Mayor Shaun Sipma, Minot Finance Director David Lakefield, Ward County Commission Chairwoman Shelly Weppler and Jason Zimmerman of Minot, a member of the State Water Commission.
Meanwhile, hope remains alive for a state infrastructure loan fund, which legislators rejected in the 2019 legislative session. Minot city leaders intend to work with legislators to develop and push for a similar loan fund in the 2021 session.
Lakefield and City Manager Tom Barry presented information to the council at a June budget workshop showing that a low-interest loan fund could extend the ability of the existing sales tax to pay the local share of flood protection to 2027 or 2028. It’s possible because not only would the interest rate be less than half the market rate but the bond term could be twice as long. The bill proposed last session also didn’t include a security requirement to pledge 25% beyond the actual amount needed, which bonding firms expect.
The City of Minot proposes to allocate 34% of the money generated by two pennies of sales tax for flood protection in 2020. That percentage, which should produce $6.8 million, would cover the city’s obligation for the current cost share. The allocation includes 50% of the first penny and 18% of a second penny that expires in June 2021 unless renewed. The city council has the authority to renew the tax without a public vote.
Barry told council members at the budget workshop that should the city decide to increase the percentage of sales tax going to pay off bonds, it will be locked in to that percentage by bond requirements. The amount can’t be reduced once the city takes the bonds.
“We have to be careful about what we are committing to,” he said.
Ashley said the joint board also requests up to 2 mills of property tax from each of the counties in the Souris Basin. Some counties have levied less, depending on their budget situations. For 2019, Ward County is contributing $538,470 and Renville County $40,000. McHenry and Bottineau counties also are part of the board.
The money goes to a variety of administrative expenses as well as flood protection, and Ashley said the funds don’t go far in meeting the need for design and construction of a flood control project. Rather, as the region’s hub for trade, Minot committed to funding the local share through its sales tax, Ashley said.
He said the board also is confident in the support of state legislators, who have been strong backers from the beginning. The state has promised 65% cost-sharing on the bulk of the project, although the board has lobbied for a higher percentage to match what the state has committed on some other projects.
“They want to stay at 65%, but their commitment is pretty strong,” Ashley said. “I really have to give kudos to them this past session. They have been very strong in support of us.”
State Sen. Karen Krebsbach, R-Minot, a long-time legislator and member of the Senate Appropriations Committee, said she believes the state is committed to Souris Basin flood control.
“I think the state has stepped up to the plate and taken responsibility on flood control, and I don’t see that changing in the future,” she said. “Legislators are definitely going to have to keep a close watch on this in the next session and in the future, just to be sure that we keep that project on tap and get it completed.”
Having the money available in state coffers to make commitments is always the question looking down the road, but the state does have a stable source of money with oil revenues in the Legacy Fund, Krebsbach said. She said she is hopeful Legacy Fund money might be available in the future – if not for direct funding of flood control in the state, then at least for borrowing at terms that can create considerable savings and advance projects faster.
The Legislature has indicated it expects biennium appropriations for flood protection to be spent and not banked, and the joint board has shown that it is ready to move on its project, Ashley said.
“We have gotten it done. The Legislature saw that and responded accordingly. That’s why it’s important for us to maintain a local level of funding,” he said. “The joint board has a level of concern about funding being there, but I think there are ways we can accomplish it. So I am not overly concerned at all.”
Minot officials aren’t overly concerned yet, either.
“I think there’s a growing confidence that there’s going to be some type of solution. We just don’t know what it is going to look like,” Lakefield said.
Ashley listed among options for making sure local funding is adequate:
– continue to request 2 mills from each county.
– special assess either counties or property owners who directly benefit from flood protection, although Ashley noted the benefits of flood control as well as costs of flood damage impact everyone in the basin.
– collect sales tax in communities and counties other than Minot.
However, Ashley said the amount of sales tax revenue that could be collected from the rural counties would not make a significant difference.
Gap financing is another tool that could be useful.
Gap financing is short-term funding that the flood protection project could benefit from to delay locking into long-term bond rates. Short-term funding might be needed while waiting on creation of a state loan fund.
Ashley is optimistic that federal dollars also will eventually be forthcoming for the project. The U.S. Army Corps of Engineers has identified the Maple Diversion as eligible for federal funding. The next step is to get that portion of the flood protection project authorized by Congress and included in a funding bill, he said.
He acknowledged the main financial support, though, will have to come from the state.
“That being said, one of the things the committee will look at is our options on getting some other federal funding involved through other channels,” he said. That could be the Federal Emergency Management Agency or other agencies, such as the U.S. Department of Agriculture, Fish and Wildlife or Department of Transportation.
“All along, the joint board has been trying to get the dominoes lined up so they will fall into place when the time comes,” Ashley said.
He noted the original estimate for a basinwide project was $1.2 billion, of which $250 million to $340 million is for work in the rural areas. The longer the project takes, the more inflation becomes a factor.
“That’s why it’s been the joint board’s mission to get this done ASAP,” he said. “If there’s a restriction in funding, there’s going to be a restriction in the time, and it’s going to take longer.”
The outlook at the start was for a 30-year completion, but efforts are being made to reduce that timeline to 20 years. More than seven years already have passed.
“We need to get this flood project completed as efficiently as possible and for the whole basin, and the best way to do that is on a timely basis,” Ashley said.
“The fact that we were able to move forward as fast as we have has really worked in our favor, so we want to continue that as best as we possibly can,” he added. “People don’t believe it, but it’s moved along quite fast as flood control projects go. We would love to continue that because I believe the people of the basin deserve it.”