Rising interest rates and design changes made to meet Minnesota permit requirements have jacked up the estimated costs of the massive Fargo-Moorhead flood diversion project by 25 percent — nearly $600 million, officials said Monday.
Minnesota denied a permit for the project in 2016, saying it shifted flooding from North Dakota to Minnesota and did not meet requirements in state law for a permit. A federal judge ruled the project needed a Minnesota permit and halted construction.
But the delay led to higher costs, most critically from rising interest rates, raising the projected expense for flood diversion from $2.2 billion to $2.75 billion, said consultant John Shockley.
"Had the project been awarded in 2016, it was a low-interest rate environment. So, not only would have the diversion authority captured lower short-term interest rates, it could have turned some of those short-term obligations in the long-term obligations and realized overall interest savings," Shockley told the diversion authority board Monday.
The increased cost means local officials will need to seek an additional $300 million in funding from federal sources, for a total of $750 million, and another $300 million from the state of North Dakota, for a total of $870 million, to make up the additional cost.
Minnesota would be asked to contribute $43 million to the overall project and another $43 million for flood mitigation in the city of Moorhead.
Voters in Fargo and Cass County, North Dakota have approved a sales tax to help pay for the project in the long term, but tax collections have been lower than expected, adding to the funding challenge for the diversion.
Some of the added costs come from changes made to accommodate concerns of Minnesota regulators.
Gov. Mark Dayton and North Dakota Gov. Doug Burgum convened a task force last year which developed a secondary plan with significant design changes in an effort to address Minnesota concerns.
The Minnesota Department of Natural Resources is considering a permit for the revised project, and costs could go even higher if the DNR requires additional changes when it reveals the permit decision in the next four to six weeks.
"Without the Minnesota permit being issued yet we don't know what conditions are contained within the permit and therefore there could be additional permits that would add cost to the project above and beyond what's being currently estimated," said Shockley.
In a statement, Diversion Authority chair and Moorhead Mayor Del Rae Williams said the communities will continue to work with state and federal partners to fund the project.
"This is a project that will protect lives, property, economies and infrastructure for generations to come. It's a big price tag, but it's worth it when you add up what a devastating flood would cost," said Williams.