Officials hope public-private plan speeds Red River flood project

Flood wall construction in Fargo
Flood wall construction work is ongoing east of Fargo City Hall in downtown Fargo. This and other levee and flood wall projects in town are intended to protect against a 100-year flood and complement the flood diversion project.
Ann Arbor Miller | MPR News

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.

Chair Darrell Vanyo
Darrell Vanyo, chair of the Fargo-Moorhead Diversion Authority, makes a point during a finance committee meeting last week at Fargo City Hall. Local officials, including Vanyo, are pushing for a public-private partnership to help finance a nearly $2 billion flood diversion project.
Ann Arbor Miller | MPR News

"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 Sidestreet Grille & Pub
The Sidestreet Grille & Pub, a fixture in downtown Fargo, moved to a new location earlier this fall. The building that housed the Sidestreet and a hotel were purchased to accommodate flood wall work.
Ann Arbor Miller | MPR News

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.

A levee's future location
This home on 33rd Street South is one of many that will be removed in the next eight months. A stake notes a levee's future location.
Ann Arbor Miller | MPR News

"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.

Awaiting demolition
The 122 units of the Park East apartments in Fargo sit vacant and will be torn down to make way for a new levee to protect the downtown from severe flooding. Apartment residents moved out mid-summer and cabinets, fixtures and other building materials were salvaged by Habitat for Humanity.
Ann Arbor Miller | MPR News

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.

Floodwall construction in Fargo, N.D.
Officials are pursuing an innovative approach to build a nearly $2 billion flood diversion project in the Fargo-Moorhead area. A public-private partnership would allow local officials to ask for substantially less federal funding and speed up project construction.
Ann Arbor Miller | MPR News

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.

Awaiting removal for a levee
The city of Fargo bought both of these homes in the 3200 block of 39th Avenue South, framed by a backyard fence. The houses are among those that will be removed in the next eight months to make way for an earthen levee.
Ann Arbor Miller | MPR News

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.