The discussion on how to fund the local share of flood protection — about $336 million — is finally happening. Personally, I’m frustrated by the fact that we’re six years removed from the high water and just now talking about how to pay for the plan. But frustration alone doesn’t typically deliver better outcomes. So, in the hopes of moving us toward a solution, I’m going to serve up an idea.
But before I get there, here’s some context for the discussion. Our new City Manager, Tom Barry, and Finance Director, Dave Lakefield, inherited the responsibility to solve this problem. They have a combined 7-months on the job; that’s an important point to consider that I’ll circle back to later.
Now, Mr. Barry and Mr. Lakefield have gotten started by sharing some sobering news — funding flood protection for the region under our current framework that allocates a half-cent of sales tax revenue toward the project is laughable. Funding the project with a revenue bond secured by a full penny of city sales tax doesn’t do the job either; it only completes the first four phases in Minot.
And if our willingness to tax ourselves and reallocate current resources stops at a full penny, that would — seemingly — leave only couple options.
We could always put the whole plan on the shelf and hope we don’t flood again. But if we do that, we need to start fueling up the trucks so they can haul all our flood insurance dollars off to Washington D.C. I don’t like that option.
We could build a smaller version of the plan. But our engineers put together a document exploring that option. What they found was that if we reduce the protection level to 10,000 CFS (about a 60% reduction in protection), we can save ourselves about 6% of the total project cost. If we flip that equation, it sounds like 40% of the protection for 94% of the cost. Whichever way I look at it, that equation doesn’t make sense to me.
Another option is to allocate the full penny and get to work on the first four phases. Finishing those phases is a great place to start, but who’s volunteering to tell everyone on the East side of town, in Burlington, and in rural areas that we don’t have local funding for them? Not me.
We could always raise taxes. Sales tax is already the funding mechanism of choice; putting another half-cent in place from the assumed full penny allocation (to make it 1.5 cents total) would make the math easier. But that would put the City’s tax structure further askew of the unincorporated parts of the county and other towns like Burlington and Velva that also benefit from the project.
Let me explain that last point a bit further. Say you were going to open a business selling fidget spinners and you were wondering where to locate it. If Minot added another half-cent of tax, within Minot city limits, your fidget customers would pay 8% sales tax. But outside city limits, they’d only have to pay 5.5% tax. Knowing that, where would you be more likely to open your business? You got my point, right? You might think twice about locating in Minot when the tax structure was that much better outside city limits. And if our goal is funding flood protection through a tax on business and commerce, then we don’t want a tax policy that drives businesses out of Minot. That’s bad.
Now, I’ve offered up some of the funding pathways I see in front of us, and I’ve also shot them all down. In other words, I still don’t have a plan to get to $336 million. So, for the sake of putting something on the table that we can pick apart, that’s what I’m going to do next.
Funding flood protection is like eating an elephant. That’s the analogy Minot’s City Manager used at last week’s Sales Tax Committee meeting. It’s appropriate. But funding flood protection with only a City of Minot sales tax is like trying to eat that elephant with a fork with one tine.
But what if we had a whole fork? Rather, what if we had a coalition of political subdivisions that had a vested interest in funding flood protection? What if everyone that benefits from flood protection such as Minot, Burlington, Sawyer, and the unincorporated parts of the county all had an equal stake in eating their share of the elephant?
Step One: Repeal & Implement
Here’s how we do it; the first step is in two parts. First, we have an election where — at the same time — we repeal 1-cent of City of Minot sales tax and implement a Ward County 1-cent sales tax exclusively dedicated to flood protection. Um, did I mention this was going to be controversial?
Here’s why I like this step. First, it spreads the burden of paying for flood protection over the area that benefits from flood protection. Second, it’s not all that different than the current plan. In 2016, a 1-cent sales tax in Minot generated about $10.8 million. A full cent from Ward County would have generated about $12 million. Minot is clearly the regional economic center. So, it’s still a vast majority of the commerce that’s taking place in the City of Minot funding the project, but now everyone just outside city limits is also contributing to the effort. And businesses aren’t incentivized to locate outside of Minot because of flood protection funding.
Yes, I know there are folks out in Kenmare, Ryder, and Berthold mumbling to themselves saying, “I don’t benefit from flood protection, why should I pay?” To them, I ask, what happens to their share of property taxes if the value of property in Minot goes down by 10-20% because of another flood or flood insurance?
My point, another flood or rising flood insurance rates are like a big rock thrown into our little, regional, economic pond. The financial ripple effect of either will hit pocket books located many miles from the Souris River. My bigger point: we’re all in this together — Minot and the rural parts of the county — whether we like it or not.
And yes, I know my Minot opinion means little out in Kenmare, Berthold, and Ryder. That’s why we need the coalition. That’s why here in Minot we need our elected leaders to put their hat in hand and head out to humbly discuss our funding plan and the challenges we face with our rural neighbors. And it won’t hurt to take our friends at the County Commission and the elected leaders from the other small towns that do directly benefit from building the project.
And yes, I also understand this idea is terrifying to everyone with a stake in building the flood protection plan because it requires repealing our current funding mechanism. That means there’s a chance that the voters say no and then we’re left with nothing — not even the tax we currently have. Like I said, that’s why we need a strong coalition of elected leaders. We can’t fail.
But, once we’re successful with the vote and we have our funding mechanism in place with a full penny of county-wide sales tax dedicated exclusively to flood protection, we move onto the second step.
Step Two: Get a Strong Consignor
We empower the Souris River Joint Board or the Ward County Water Resources Board to create a special assessment district that extends basically from Burlington through Minot and down the valley. That district needs to capture properties with the most direct benefits from the project including properties on the hills in Minot.
But here’s the kicker, we don’t assess the properties. We just use the special assessment district as kind of a cosigner for the bond. Having the project secured by that assessment district allows us to get better terms on the bonds we have to sell to build the project. That means we may have the option of extending the bond term. That means we’re likely to get better interest rates.
If we build our coalition and take those two steps, I think we’ll be on our way to funding all $336 million of our local obligation. But if we’re short, our fall back plan would be to implement an additional quarter or half cent sales tax in Minot to complete the job. But I think we’d have a few years to see how things were going before we had to make that choice.
And finally, circling back to why this plan is unlikely to come out through the City’s Sales Tax Ad Hoc Committee. Our City Manager and Finance Director are new on the job; that means they’re still earning our trust and building their political capital. And more importantly, in their roles with the City of Minot, it would be inappropriate for them to advance an idea that required a coalition of political subdivisions. That idea, if it has merit, would have to come from an elected leader or someone who wasn’t an employee.
As I said, I know my funding mechanism is controversial. And I know there are a lot of little details missing. But here we are six years later, and we still don’t have a plan on the table. At least now we have something to chew on. Here’s what I know for sure, the elephant isn’t going to eat itself and one bite at a time never happens fast. We’ve waited long enough, it’s time to get to it!