CHICAGO - Officials and analysts are tallying the costs of recent Red River flooding in Fargo, N.D., and Moorhead, Minn., even as residents brace for another cresting in the next few weeks.
Initial reports suggest that Fargo, Moorhead, and North Dakota are in a strong enough financial position to handle any short-term costs from the flooding. And while potential long-term costs could increase the cities' debt burdens, federal and state reimbursements will likely eliminate the need for them to borrow to cover recovery efforts.
The Red River flooding comes as state legislators from both North Dakota and Minnesota are in the midst of crafting their budgets, which are now likely to include new money for flood recovery and possibly future flood protection. Minnesota is expected to include flood aid in its public works bonding bill now before the Legislature, while North Dakota is expected to use cash from its well-stocked general fund.
Despite expenditures expected to total in the hundreds of millions, Fargo and Moorhead, which straddle the Red River, so far have escaped major damage in the flooding. The last time the Red River flowed over its banks in 1997, the city of Grand Forks was ravaged by flood waters and subsequent fires that destroyed most of the city's downtown buildings.
But even Grand Forks' credit escaped relatively unscathed, with no rating downgrade or big impact on its fiscal position, said Moody's Investors Service analyst Henrietta Chang.
"It did impact their debt burden, but that was offset by federal aid," she said. "It didn't have any significant impact on their financial operations, and any costs expended for emergencies were then reimbursed by federal and state aid."
Fargo and Moorhead enjoy relatively strong budget reserves that are expected to allow them to cover short-term costs without having to borrow or implement deep cuts in other areas.
Fargo officials recently estimated their recovery costs could total around $200 million, according to reports. The city expects to cover 10%, or $20 million of that, with federal government aid covering 75% and 15% coming from the state.
Officials noted that their reserves were more than sufficient to cover the roughly $2 million in emergency spending they had incurred by the end of March. Double-A rated Fargo's available liquidity totals more than $68 million in cash and investments, with nearly $18 million in its general fund alone, noted Moody's in a recent report on the flooding.
Single-A rated Moorhead is expected to have sufficient reserves to cover any short-term costs from the flooding, said Chang. As of the end of fiscal 2007, the city had $14 million in its general fund reserves.
"As the floodwaters recede we will follow up and get a sense of where the cities are at," she said. "We don't expect any credit impact, but it's something we do need to monitor."
On the state level, lawmakers from Minnesota's two chambers have introduced separate flood aid measures, both built into the state's larger public works bonding bill. The Senate this month proposed $26 million in anti-flood aid, while a House proposal includes $12.7 million. Additional aid could come in another flood protection bill later this spring, according to reports.
While North Dakota sold a number of bond issues to finance flood protection projects after the 1997 flooding, borrowing is less likely this time, according to state budget director Pam Sharp.
"We do need to figure out the whole costs and who's responsible for what, and we're in the process of doing that," Sharp said. "But there's no bonding proposals on the table, and no talk of that. We're sitting in a very good position financially and we have the cash to deal with things."