FARGO — Eagle Pointe is one of the housing developments sprouting from the prairie on the city’s southern periphery. Lots selling for $50,000 to $90,000 are arrayed around a pond, and developers tout its proximity to schools and access to 25 miles of recreation trails.
The brochures don’t mention it, but builders, real estate agents and developers are keenly aware that neighborhoods in far south Fargo like Eagle Pointe have a lot at stake in the completion of the $2.75 billion Fargo-Moorhead flood diversion.
“I think the diversion project as a whole is going to be a huge benefit to the home industry and to the whole community,” said Nate Anderson, a broker for Thomsen Homes, which is building homes in the $220,000 to $400,000 range at Eagle Pointe and nearby Bison Meadows.
Until it wins a permit from Minnesota regulators and overcomes legal challenges, however, the diversion remains a paper project. Thousands of homeowners, business owners and others are counting on its completion, especially in south Fargo, much of which is vulnerable to flooding.
Less obviously, all property owners and residents have a big stake in the diversion winning regulatory approval. Without the project, which would split the flows of the Red River during extreme floods, premiums for flood insurance will spike for property owners in flood-prone areas.
Without the diversion, many homeowners eventually could be paying $3,000 to $5,000 per year in flood insurance, said John Gunkelman, president of Dakota Construction, which builds and remodels homes.
“Some of them are paying that now,” he said.
Actually, in Cass County alone, without the diversion 11,000 homeowners face the possibility of having to pay flood insurance of $5,000 to $6,000 per year, said Mary Scherling, a Cass County commissioner and Diversion Authority board member. The spike would come when federal officials revise the flood plain map.
Without the diversion, the area in a revised flood plain would expand significantly, officials said.
That would have ripple effects throughout the metropolitan area’s housing market, added Scherling, a real estate broker. “Your house value would just plummet,” she said.
In fact, ripple effects already are being felt in the housing market, said Rocky Schneider, a public affairs consultant who works on the diversion project. Many homeowners have contacted the Diversion Authority to ask when the project will be approved, saying they are reluctant to sell until then because they worry their property values are being suppressed by the uncertainty.
'A lot of dirt'
Home building costs in Fargo also have been driven up by the lack of flood protection, Gunkelman and Anderson said.
Especially in many newer developments, dirt often must be hauled in to raise the level of the lot before a home can be built, a way of keeping the property out of the flood plain. In some cases, lots for entire developments must be elevated.
“We’ve brought a lot of dirt into Fargo,” said Gunkelman, a member of the Fargo Planning Commission. “It easily adds 5 to 10 percent” to the cost of a home.
Moorhead Mayor Del Rae Williams said contacts with the Minnesota Department of Natural Resources, which will decide whether to grant a permit for the project, have been promising.
“We’ve had some good conversations,” she said. “Governor (Mark) Dayton wants this as part of his legacy.”
Because Minnesota refused to approve the diversion’s original design, the project was revised under what’s called “Plan B” to shift more impacts to North Dakota — a revamp largely responsible for the mushrooming cost for the $2.75 billion project, up from the $2.2 billion estimated cost in 2015.
“I’m feeling pretty good about the fact that Plan B will be a go,” Williams said.
Once approval comes, assuming it does, Fargo Mayor Tim Mahoney said he expects building and development will get a nudge, since it would remove the cloud of uncertainty.
“I’m having people come in with plans,” he said. For years, national companies have asked for assurances that Fargo will get permanent flood protection. “They’re usually asking when is this thing going to get done,” he said.
Distribution companies are increasingly looking at Fargo, Mahoney said, because of its strategic location at the crossroads of two interstate highways and its air service. “They really like that,” he said.
$18 billion in property
Meanwhile, as approval for the diversion has dragged on, the value of the property the flood project would protect continues to increase, with Cass County valuation growing at the rate of $500 million per year, Scherling said.
Fargo now has $18 billion in property, generates $4.35 billion in annual wages and more than $2.7 billion in annual taxable sales, underscoring the importance of flood protection, Mahoney said.
After the record 2009 Red River flood, officials estimated that an extreme flood could cause more than $10 billion in damages in the Fargo-Moorhead area.
Building in developments, including Eagle Pointe, has continued because many have faith that the project, despite its difficult history, will proceed, Anderson and Gunkelman said.
“The diversion project would remove a huge cloud from the market and create a more straightforward path to homeownership,” Anderson said. That, in turn, would have other positive effects, including spurring school enrollments.
“I think developers are waiting to see what happens with the diversion,” Gunkelman said. Even once approved and fully funded, it will take years to build the diversion.
It will be critical, Mahoney said, to build the diversion as quickly as possible to keep costs down. Inflation already has increased the price tag of the project by $150 million. Officials will push to complete construction in 6½ years.
“The cost savings are in the build,” he said, “so the faster you build it, the better the cost.”
Securing additional funding — the Diversion Authority is seeking an additional $300 million each from the state of North Dakota and federal government — will be critical in the year ahead, said Fargo City Commissioner Tony Grindberg.
“Now we’ve got to sell this to the legislative body,” said Grindberg, a former state senator. “That’s where the rubber meets the road.”