Judge halts work on P3 Red River flood control project

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DALLAS -- Construction of a partially bond financed, $2 billion public-private partnership flood control project overseen by the U.S. Army Corps of Engineers is on hold due to a dispute with Minnesota.

A federal judge on Thursday blocked the continuation of construction on the project that is being billed by supporters as a permanent solution to flooding in the metropolitan areas of Fargo, North Dakota and Moorhead, Minnesota, ruling that the project cannot go forward without the necessary permits from Minnesota.

In granting the Minnesota Department of Natural Resources’ request for a preliminary injunction, U.S. District Judge for the District of Minnesota John Tunheim concluded that Minnesota “has not approved permits that are absolutely necessary for a project of this magnitude along a major border waterway, a project which clearly impacts the waters and lands of both North Dakota and Minnesota."

However Tunheim states that “communities along the Red River, particularly Fargo and Moorhead, need permanent flood protection” and strongly encouraged all parties to work to agree on a project that would serve the interests of both states and the affected communities.

Minnesota Natural Resources Commissioner Tom Landwehr said in a statement that the ruling “unequivocally” confirmed the DNR’s position that the federal legislation authorizing the project also requires state permits. However, he said, Minnesota remains committed to “enhancing flood risk protection for the developed portions of the Fargo-Moorhead area in a way that meets federal, state, and local standards.”

The flood diversion project is supposed to protect more than 225,000 residents and $14 billion of property by directing Red River floodwaters away from Fargo and other areas that suffered from a massive flood in 2009 that caused havoc in the region.

The project marks the Corps' first use of a public-private partnership, which backers say will save $400 million and reduce the project delivery timeline by more than 50% compared with traditional approaches. Approximately $900 million would be financed through the issuance of sales tax revenue bond issued by the Diversion Authority -- an entity that was created by an inter-governmental agreement among five member entities: the city of Moorhead, Clay County, Minn., Cass County, N.D., Fargo, and the Cass County Joint Water Resources District.

The federal court challenge questions the authority of the Corps to construct the southern embankment and associated infrastructure.

The Minnesota Department of Natural Resources denied a permit to build a dam across the Red River in October, arguing that emergency measures like those used during the 2009 flood and new dikes should be enough.

Fargo Mayor Tim Mahoney, who chairs the Flood Diversion Board of Authority, said he expects the ruling will be appealed. The cost of construction increases by $60 million annually, he said.

“We simply cannot live with that level of financial risk, or the risk to public safety of not having protection,” Mahoney said in a statement. We will keep working hard toward establishing flood protection for the Fargo and Moorhead communities; hopefully we can do that in partnership with Minnesota.”

Minnesota Gov. Mark Dayton called the ruling “excellent news for the safety and protection of Minnesotans.” In a statement late Thursday, he said it “upholds Minnesota’s rightful permitting authority” but said he agrees on the need for a collaborative solution.

Upon the DNR’s decision to deny the permit application last October, Dayton said that the project application failed to demonstrate sufficient measures to mitigate the negative impacts of the project on the surrounding area. Protecting Fargo and Moorhead from flooding comes at the cost of inundating land south of the metro area during severe floods of which 60% would be in Minnesota. Dayton said that the state we would receive only 14% of its benefits whereas North Dakota would receive 86% of the benefits, while hosting only 40% of the newly flooded land.

The project has three main parts: in-town levee projects; a southern embankment; and a bond-financed, 36-mile-long, 1,500-foot-wide diversion channel with 32,500 acres of upstream staging, including aqueducts, river inlets and bridges, and a dam. The southern embankment regulates water to prevent flooding of the metro area during a significant flood.

Construction has been underway since April on the Diversion Project Inlet Control Structure south of Horace, N.D.

The federal government has committed to $450 million in construction appropriations. The project has received $20 million in federal funding through the Corps work plan for fiscal year 2017. The project previously received a federal “new start” status and $5 million in federal appropriations for construction in the fiscal year 2016 Corps work plan. The fiscal year 2016 funding is being used for construction of the diversion inlet and control structure south of Horace.

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Public-private partnership Infrastructure Revenue bonds Sales tax Lawsuits Fargo-Moorhead Diversion Authority North Dakota