Officials hope public-private plan speeds Red River flood project

After a record flood nearly overwhelmed levees here in 2009, local officials started a push for a massive Red River diversion, including a large dam and a big ditch more than 30 miles long to redirect floodwater around Moorhead and Fargo, N.D.

The $2 billion project won the support of Congress. Getting a multi-year commitment from Washington to spend $900 million, however, was an ongoing concern.

So Fargo-Moorhead officials changed their sales pitch. Rather than wait on a long list of unfunded federal water projects, they said: Let us try a public-private partnership, and we'll only ask for half as much federal funding.

"We are telling the government that we will take less," said Darrell Vanyo, who chairs the Fargo-Moorhead Diversion Authority.

Project leaders are willing to take a chance that a public-private partnership will be cheaper, he said, adding, it's "the best way to get the federal government moving."

The Army Corps of Engineers agrees. The Corps has chosen the Fargo-Moorhead flood diversion as a demonstration project in what may be the first public private-partnership project for the Corps.

Terry Williams, who manages the diversion project for the Corps, said she envisions a split project. The Corps will build a 12-mile-long dam designed to hold back Red River water and direct the flow into a diversion channel.

A private contractor will build a quarter-mile-wide, 30-mile-long diversion channel. The channel will require nearly two dozen new bridges for highways and railroads. There will also be two aqueducts to allow smaller rivers to flow across the diversion channel.

The aqueducts would allow excess water to flow into the diversion channel during floods, but allow fish to move up and down the streams during times of normal water flow.

"It's a unique effort but it's the best way to get the Fargo-Moorhead metro project in place to benefit the 225,000 citizens in the area and protect the regional economy," she said.

If the Corps built the entire project it would take up to 16 years because federal funding is not consistent from year to year, she said, adding that a private contractor could build the project in less than half the time because funding would be stable.

The contractor would also operate and maintain the diversion for at least 20 years after construction. Williams says that provides incentive to build it right.

"They may be able to find more innovative ways to design and build it knowing that they are going to have this operation and maintenance, and they may be willing to take a little more risk than the Corps would if we were designing and building it," she said.

The hope is those innovations will save money.

The U.S. Department of Transportation has used public-private partnerships for projects. It's more common in many other countries, including Canada. A National Conference of State Legislatures report found these efforts often cost less and are finished sooner.

The Corps hopes the idea will help reduce a big backlog of unfunded water projects.

Local officials say they've already had several large contractors inquire about the project. The process of selecting a contractor won't start for several months and will probably take about a year. The diversion authority plans to hire a law firm with experience negotiating public-private water projects in other countries.

The Red River Diversion channel would reduce a 100-year flood event from 42.4 feet to 35 feet in Fargo. The record 2009 flood hit 40.8 feet.

The project isn't technically designed to protect against a 500-year flood event, but officials say it would make such a flood manageable by reducing the river level in Fargo from 46.7 feet to 40 feet.

Public-private partnerships do carry some risk.

A World Bank report last year warned they can be more expensive if private investors foot too much of the bill because private borrowing costs are higher.

Cass County, N.D., administrator Keith Berndt understands that concern. He says the plan is to sell bonds to finance most of the local share and pay them off with a half-cent sales tax, which has already been approved by Fargo and Cass County, N.D., voters. Private investors will be expected to front less than 20 percent of the project cost.

The state of North Dakota will put about $450 million into the project.

Local officials expect to ask the Minnesota legislature for an as-yet undetermined contribution to the project. Most of the local cost is borne by North Dakota governments because the Corps determined those communities would receive most of the benefits from the project.

Berndt says now is a good time to sell bonds or borrow money for the project because interest rates are low.

The public-private plan isn't a done deal yet. Congress needs to approve funding to start the Corps part of the project. Two legal challenges need to be resolved and the Minnesota Department of Natural Resources must complete an environmental review of the project.

On Monday the two sides were expected to argue the merits of a lawsuit over whether the USACE followed federal rules when designing the project.

Williams, though, believes the legal issues will be resolved and the state environmental review should be completed next year. She anticipates construction starting in summer 2017.