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FLOOD DIVERSION BOARD OF AUTHORITY Thursday, December 13, 2012 3:30 PM Fargo City Commission Room Fargo City Hall 200 3rd Street North 1. Call to order 2. Approve minutes from previous meeting Item 2. Action 3. Approve order of agenda Action 4. Program Management Consultant (PMC) update Information/action a. Monthly report (Tom O’Hara) b. Joint technical update • Corps of Engineers monthly update (Terry Williams/Brett Coleman) • Upstream area levees status (Terry Williams/Bruce Spiller) c. Status of Authority Work Directives and Task Orders (Bruce Spiller) d. Approval of new Task Order Amendments (Bruce Spiller) Item 4d. e. Post-feasibility/NEPA actions and decisions timeline Item 4e. f. Demonstration of staging area flood impacts animation 5. Committee updates Information/action a. Retention effort update from Red River Basin Commission (Yohe) b. Land Management Committee (Dennis Walaker) • Committee report • Staging area mitigation c. Public Outreach Committee (Rodger Olson) • Committee report Item 5c. (1) d. Finance Committee (Michael Montplaisir) • Committee report • Kindred School District fact sheet Item 5d. (1) • CH2MHill contract extension Item 5d. (2) • Assignment of Cass County Joint Water Resource Item 5d. (3) District to lead development of assessment district plan • Approve Houston-Moore Group adjusted rate schedule Item 5d. (4) for 2013 6. Voucher approval Item 6. Action 7. Other Business 8. Next Meeting 9. Adjournment cc: Local Media Flood Diversion Board of Authority—November 8, 2012 1 FLOOD DIVERSION BOARD OF AUTHORITY NOVEMBER 8, 2012—3:30 PM 1. MEETING TO ORDER A meeting of the Flood Diversion Board of Authority was held Thursday, November 8, 2012, at 3:30 PM in the Fargo City Commission Room with the following members present: Cass County Commissioner Darrell Vanyo; Cass County Commissioner Scott Wagner; West Fargo City Commissioner Mike Thorstad; Cass County Joint Water Resource District Manager Rodger Olson; Fargo City Commissioner Tim Mahoney; Fargo City Commissioner Brad Wimmer; Fargo City Commissioner Mike Williams; Clay County Commissioner Kevin Campbell; and Moorhead City Council Member Nancy Otto. Also present was ex-officio member Gerald Van Amburg, Buffalo-Red River Watershed District. Staff members and others present: Cass County Administrator Keith Berndt; Fargo City Administrator Pat Zavoral; Clay County Administrator Brian Berg; Moorhead City Manager Mike Redlinger; Fargo City Engineer Mark Bittner; Fargo City Engineer April Walker; Moorhead City Engineer Bob Zimmerman; Cass County Engineer Jason Benson; Tom O’Hara, Program Manager, CH2MHill; Bruce Spiller, CH2MHill; Aaron Snyder, Branch Chief for Project Management & Development, Corps of Engineers; Brett Coleman, Project Manager, Corps of Engineers; and Terry Williams, Project Manager, Corps of Engineers. 2. MINUTES APPROVED MOTION, passed Mr. Wagner moved and Mr. Mahoney seconded to approve the minutes from the October 11, 2012, and October 23, 2012, meetings as written. Motion carried. 3. AGENDA ORDER MOTION, passed Mr. Mahoney moved and Mr. Wagner seconded to approve the order of the agenda as presented. Motion carried. 4. PROGRAM MANAGEMENT FIRM UPDATE Program manager consultant monthly report Mr. O’Hara provided an update on activities over the last month including design efforts on bridges; completion of alignment analysis and refinement on southern and western alignments; preliminary development of the Oxbow area levee option along with formation of a Corps-led project delivery team; and close out of FY2012 activities and transition to FY2013 work plan. Corps of Engineers status update Terry Williams said Corps of Engineers led-design efforts continue to be on schedule and under budget; the National Environmental Policy Act (NEPA) process to address project modifications has begun; and work continues on Phase II cultural surveys. Item 2. Flood Diversion Board of Authority—November 8, 2012 2 Western alignment decision Ms. Williams said the western alignment extends from the Sheyenne River to the Maple River and was shifted west of the Raymond interchange on I-94 and will re-route Drain 14. The alignment is offset from the existing Sheyenne Diversion channel, which resolves the technical issues while being the most consistent with the feasibility study alignment. She said a press release will be sent tomorrow with an updated map. Oxbow area ring dike/levee option Ms. Williams said a Corp-led effort has begun to address the conditions submitted from the City of Oxbow associated with a ring dike/levee concept. Ms. Williams briefly discussed other Corps of Engineers levee projects, i.e. Halstad, Minnesota; Argusville, North Dakota; and Oslo, Minnesota. She outlined the construction costs and damages prevented as a result of the levees. She said the Corps has a Levee Safety Program, which assesses the integrity and viability of levee systems. Post-feasibility alternative decision on southern alignment Bruce Spiller from CH2MHill said initially four southern alignment alternatives were studied and then narrowed down to two options, VE-13 Option A and VE-13 Option C. The program management consulting team recommends the board approve VE-13 Option A as the preferred alignment. He said fewer businesses and homes are impacted, and the overall project cost is reduced significantly. Also, this alternative reduces impacts upstream and maintains impacts downstream. MOTION, passed Mr. Wagner moved and Mr. Mahoney seconded that the Flood Diversion Board of Authority provides its position to the Corps of Engineers and endorses proposed alternative VE-13 Option A as the preferred southern alignment. On roll call vote, the motion carried unanimously. Timeline on post-feasibility/NEPA actions Mr. O’Hara discussed a timeline for board decisions regarding the western alignment, VE-13 Option A (southern alignment), and the Oxbow area levee option. He said final board board input on the Oxbow area levee is scheduled for May 2013 with the NEPA review completed and findings presented in July 2013. Mr. Campbell asked about the authorization process on the federal level. Mr. Snyder said Congress needs to take action, and Mr. Mahoney said a decision could possibly be considered by Congress in the spring of 2013. Task orders update Mr. Spiller provided an update on amended task orders with the Houston-Moore Group (HMG), which total $650,000 and involves bridge design work; post-feasibility engineering analysis; land management services; work-in-kind (WIK); and hydrology/hydraulic modeling; and a new task order with HMG for design and support for the Red River in-town levees and Oxbow area levee. Flood Diversion Board of Authority—November 8, 2012 3 Mr. Spiller also discussed an amendment to the contract with the Minnesota Department of Natural Resources to extend the period of performance required to complete the scoping phase for the Minnesota Environmental Impact Statement (EIS). The total cost for the amendment to the EIS is $115,500. MOTION, passed Mr. Wagner moved and Mr. Mahoney seconded to approve the Task Orders with HMG in the amount of $650,000. On roll call vote, the motion carried unanimously. MOTION, passed Mr. Wagner moved and Mr. Campbell seconded to approve the Minnesota EIS Amendment No. 1 to complete the EIS scoping phase in the amount of $115,500. On roll call vote, the motion carried unanimously. Mr. Spiller also updated the board on the status of existing task orders. 5. UPDATES FROM COMMITTEES Retention efforts update from Red River Basin Commission Mr. Vanyo asked for a monthly update from the Red River Basin Commission to be provided regarding upstream retention efforts. Mr. Mr. Olson said work has begun on the first phase area (upstream to Halstad) with retention site modeling to determine mainstream and regional impacts and prioritization. Land Management Committee Mr. Vanyo provided an update on topics discussed at the Land Management Committee meeting held earlier this afternoon, which include continuing analysis on the levee/ring dike concept in the Oxbow area, an update from the Agricultural Policy Subcommittee, and purchase agreements for two hardship properties. Purchase offer for hardship acquisitions Mr. Vanyo said purchase agreements were drafted and offers were made to three property owners. Two of the owners agreed upon the sale terms and the third owner is waiting on a second appraisal. The committee approved purchase agreements for two properties. There was discussion about the future of the three homes. Mr. Vanyo said they will be rented and managed by the property management firm selected by the board.MOTION, passed Mr. Wimmer moved and Mr. Campbell seconded to to approve agreements to purchase two properties determined to be in compliance with the conditions of the adopted Hardship Policy by the Hardship Review Committee. The properties will be purchased at the appraised value plus $6,000 to compensate for relocation expenses in the amounts of $217,000 and $347,000. On roll call vote, the motion carried unanimously. Flood Diversion Board of Authority—November 8, 2012 4 Public Outreach Committee Mr. Olson said the Public Outreach Committee met on November 7th, and he provided an update on topics discussed at the meeting: efforts continue with the collection and posting of public comments and questions to the website regarding the project; the enewsletter will be distributed on November 12th and will include a link to view an interactive staging area animation; a public information meeting will be held in Horace on November 14th; a fish passage project public meeting will be held on November 15th; an outreach and communications plan was prepared and will be a “living” document with regular updates added as the project continues; and NDSU hosted a four-part speaker series through their Department of Emergency Management on the diversion project. Finance Committee Mr. Montplaisir said the Finance Committee met on November 7th, and he provided an update on the following topics: Financing options The committee approved the payment of non-contract bills, which continue to be paid on a cash basis. He said short-term and long-term financing options continue to be reviewed, and different legislative options to help with financing were discussed. He said the Water Resource Districts have helped in providing information on special assessment districts, and the committee reviewed the “Schedule and Tasks for Development of a Special Assessment District” and gave preliminary approval to that document. Jon Diebel from CH2MHill prepared a FY2012 summary report with expenditures/obligations of the Diversion Board and Corps of Engineers, which were broken down into work categories. Hardship purchases The committee approved purchase agreements for two hardship properties. Kindred School District tax levy Mr. Montplaisir discussed how the Kindred School District was affected as a result of a 20% property value reduction on City of Oxbow properties. He said the financial impact amounts to $51,486, and the tax burden shifts so that Oxbow residents will pay less in taxes and the rest of the school district will pay slightly more to make up the difference. Mr. Vanyo said this issue will be formally discussed at next month’s Land Management and Finance Committee meetings, and then at the Diversion Board meeting. Mr. Berndt said that despite the 20% reduction in Oxbow values, the overall school district value increased by 7.42%. 6. VOUCHERS, Approved MOTION, passed Mr. Mahoney moved and Mr. Wagner seconded to approve the vouchers as presented. Motion carried. Flood Diversion Board of Authority—November 8, 2012 5 7. OTHER BUSINESS Mr. Vanyo thanked Mr. Wagner for his service on the board. Mr. Wagner is retiring from the county commission next month. 8. NEXT MEETING DATE The next meeting will be held on Thursday, December 13, 2012, at 3:30 PM. 9. ADJOURNMENT MOTION, passed On motion by Mr. Wimmer, seconded by Mr. Wagner, and all voting in favor, the meeting was adjourned at 4:35 PM. Minutes prepared by Heather Worden, Cass County Administrative Assistant TASK ORDER SUMMARY 12‐13‐2012.docx 1 Task Order Summary Date: December 13, 2012 Houston‐Moore Group Task Order Summary Increased Amount ($) Task Order No. 1‐Amendment 1 Project Management 36,000 Task Order No. 5‐Amendment 3 Post‐Feasibility Engineering Analysis ‐10,000 Task Order No. 8‐Amendment 3 Work‐In‐Kind 0 Task Order No. 9‐Amendment 3 Hydrology and Hydraulic Modeling 55,000 Task Order No. 13‐Amendment 1 Levee Design and Design Support 150,000 Total of Task Orders 231,000 Item 4d. TASK ORDER SUMMARY 12‐13‐2012.docx 2 Task Order Summary for Houston‐Moore Group Task Order No. 1 – Amendment 1 Increase $36,000 Project Management No Schedule Extension Description: This amendment to Task Order No. 1 adds the following scope of work: prepare project presentation materials, project animation, and project presentation to be given at requested public events, in particular for the In‐Town and Upstream Staging Area Levees. Background: Provide additional public involvement assistance to USACE in design support services for design of ring levees in the upstream staging area. Task Order No. 5 – Amendment 3 Decrease $10,000 Post‐Feasibility Engineering Analysis No Schedule Extension Description: Scope for basin‐wide retention support has been removed from Task Order No. 5 and will be added to Task Order No. 9 – Hydrology and Hydraulic Modeling. Background: Basin‐wide retention support primarily involves modeling and is more aligned with Task Order No. 9 – Hydrology and Hydraulic Modeling. By moving this portion of the scope to another task order, Task Order No. 5 can be closed at the end of the year. Task Order No. 8 – Amendment 3 No Change in Cost Work‐In‐Kind No Schedule Extension Description: Task Order No. 8 provides Work‐in‐Kind services as requested by USACE. This amendment defines scope under On‐Call Services : Subtask E.IV Geomorphology Consulting: Provide senior engineer for ongoing engineering consultation, preparation for workshop with the Minnesota Department of Natural Resources (MN DNR), and workshop participation. Background: USACE requested the Diversion Authority to assist with the MN DNR workshop. The work is creditable as Work‐in‐Kind. $207,000 is currently available for On‐Call Services under this Task Order No. 8. Amendment 3 will be allocated $15,000 and the On‐Call Services allowance will be decreased $15,000. Therefore, no change to the contract amount for Task Order No. 8. TASK ORDER SUMMARY 12‐13‐2012.docx 3 Task Order No. 9 – Amendment 3 Increase $ 55,000 Hydrology and Hydraulic Modeling No Schedule Extension Description: Task Order No. 9 provides Hydrology and Hydraulic (H&H) Modeling services. It adds additional scope under Subtask F. On‐call Services and Subtask G. Basin‐wide Retention Support. F.VI. Update HEC‐RAS Model Update the HEC‐RAS model geometry for the revised western alignment from the Maple River to the Sheyenne River and the proposed upstream staging area ring levees; and provide on‐going hydrology and hydraulic modeling services as requested in order to keep HEC‐RAS model consistent with project features. Background: USACE requested the Diversion Authority to provide the above described work as creditable Work‐in‐Kind assistance. Cost of Subtask F.VI. = $36,000 $65,900 is currently available for On‐Call Services under this Task Order No. 9. Amendment 3 will be allocated $36,000 and the On‐Call Services allowance will be decreased by $36,000. G. Basin‐wide Retention Support Assist Owner with developing a method of evaluating existing, planned, or potential regional retention projects potential benefits of the Diversion Project. Provide technical assistance to the RRBC in its study “Halstad Upstream Retention (HUR) Modeling – Phase 1”. Evaluate up to two (2) proposed retention projects. Background: The Diversion Board has authorized up to $25 million for Basin‐wide Retention Projects that are compatible with, and provide benefits for, the Diversion Project. An initial study is underway by the Red River Basin Commission (RRBC). This subtask is not creditable by USACE. Cost of Subtask G. = $55,000 Task Order No. 13 – Amendment 1 Increase $ 150,000 Levee Design and Design Support No Schedule Extension Description: The Diversion Authority has requested additional design and design support assistance for ring levee and non‐structural improvement evaluations in the upstream staging area, in addition to the Oxbow, Hickson, Bakke area, including Comstock, Christine, Wolverton, and individual structures in areas where staged water impacts are expected to be less than one foot in depth. Background: As part of Work‐In‐Kind, provide assistance to USACE in design and design support activities for design of ring levees in the upstream staging area in the Oxbow, Hickson, Bakke area. The USACE has not yet determined the creditability of this work. Cost = $150,000 Item 4e. Item 5c. (1) Item 5d. (1) Item 5d. (2) DP-00021 -ASSESSMENT DISTRICT.DOCX PAGE 1 OF 2 FM AREA DIVERSION PROJECT Diversion Project Assessment Committee DECISION PAPER NO.: DP-00021 Date: 12/13/2012 RECOMMENDED FOR DIVERSION AUTHORITY BOARD ACTION: That the Diversion Board of Authority assign the Cass County Joint Water Resources District (CCJWRD) the responsibility of developing an assessment district for the North Dakota local cost share of the FM Area Diversion Project. SUMMARY OF DECISION TOPIC: Funding of the North Dakota local share of the FM Area Diversion Project is expected to come from sales taxes in the City of Fargo and Cass County. The voters of Fargo and Cass County have already given their approval for their sales taxes to be used for this purpose. During the initial planning and design phases of the Project the incoming sales tax will be sufficient to keep up with costs being incurred by the Diversion Authority. However, as the Diversion Authority expenditures increase to meet the required pace of design, land acquisition, and especially to fund construction, incoming sales taxes will not be sufficient to keep up with expenses. As such, one or more bond issues will become necessary to maintain proper cash flow for the FM Area Diversion Project. Staff is currently looking at options on how to get the most funding at the lowest interest rate utilizing the two sales taxes. One bond financing option available is for both the City of Fargo and Cass County to issue sales tax bonds. However, there are several challenges associated with sales tax bonds. As such, for a variety of factors, it is recommended to pursue development of an assessment district backed by general obligation bonds. The attached article titled “Methods of Financing the North Dakota Local Cost Share of the Diversion Project” by Brian Neugebauer provides details of the challenges associated with sales tax bonds and advantages of utilizing the CCJWRD to develop an assessment district and issue general obligation improvement bonds. One of the primary benefits is to reduce the cost of financing while still utilizing sales tax proceeds as the funding source. The CCJWRD maintains certain statutory rights under North Dakota Century Code to administer an assessment district of this sort. CCJWRD proposed to exercise these rights on behalf of and as a key member of the Flood Diversion Authority. The CCJWRD will form a Diversion Project Assessment Committee (DPAC) comprised of its Board Members as well as to be determined appointees from Cass County, City of Fargo, and City of West Fargo for the purposes of soliciting input to the process of developing the assessment district. The CCJWRD has established the attached suggested schedule of duties associated with forming the DPAC and developing the assessment district. The schedule of duties identifies the tasks for the CCJWRD and the Diversion Authority Finance Committee. CCJWRD shall lead the DPAC and secure input from the Finance Committee, Public Outreach Committee, and Technical Advisory Staff, and work throuth the Finance Committee for reporting to the Diversion Board of Authority. Attachment 1-Methods of Financing Article Attachment 2-Schedule of Duties Item 5d. (3) DECISION PAPER DP-00021 -ASSESSMENT DISTRICT.DOCX PAGE 2 OF 2 Submitted by: 12/13/12 Tom O’Hara CH2M HILL Program Manager Fargo-Moorhead Area Diversion Project Date Brian C. Berg, Clay County Administrator Michael J. Redlinger, Moorhead City Manager Concur: 12/07/12 Non-Concur: Concur: 12/05/12 Non-Concur Keith Berndt, Cass County Administrator April Walker, Fargo City Engineer Concur: 12/05/12 Non-Concur: Concur: 12/07/12 Non-Concur Unavailable (12/07/12) Mark Bittner, Fargo Director of Engineering Pat Zavoral, Fargo City Administrator Concur: 12/07/12 Non-Concur: Concur: Non-Concur Unavailable (12/07/12) David Overbo, Clay County Engineer Robert Zimmerman, Moorhead City Engineer Concur: Non-Concur: Concur: 12/05/12 Non-Concur DP-00021 Attachment #1 Date: 12/13/2012 Methods of Financing the North Dakota Local Cost Share of the Diversion Project By Brian D. Neugebauer, Southeast Cass Water Resources District Bond Counsel, Ohnstad Twichell Attorneys July 2012 “Diversion Dialogue” e-newsletter article Although no final decisions have been made by the Diversion Authority on exactly how to fund the North Dakota local share of the Diversion Project, it is expected that sales taxes in the City of Fargo and Cass County will fund a lion’s share of that cost. The voters of Fargo and Cass County have already given their approval for their sales taxes to be used for this purpose. During the initial design phases, the incoming sales tax has been sufficient to keep up with costs being incurred by the Diversion Authority. However, as the Diversion Authority expenditures increase to step up the pace of design, to start land acquisition, and especially to fund construction, incoming sales taxes will not be sufficient to keep up with expenses. As such, one or more bond issues will become necessary to maintain proper cash flow for the Diversion Project. Staff is now looking at options on how to get the most funding at the lowest interest rate utilizing the two sales taxes. The most obvious method is for both the City of Fargo and Cass County to issue sales tax bonds for that purpose. However, there are four problems with sales tax bonds. First, in order to be marketable, there must be substantial coverage for the proposed debt service. As a simple example, if the debt service on a sales tax bond was $500,000 a year, there may be a need for $725,000 of sales tax receipts a year. That is, to be marketable in the first place, many financial advisors suggest having 1.5 coverage for sales tax bonds. The reason for this is that bond buyers are concerned that the amount of sales tax receipts may go down in the future, so they want extra coverage to insure being paid. With the recent recession, many cities across the nation have had significant declines in their sales tax collections, which have made bond buyers even more concerned about coverage than in the past. The proper coverage requirement can be debated, but the higher the coverage provided, the lower the interest rate, and the lower the coverage provided, the higher the interest rate, until reaching a point where the bonds are not even marketable. The second problem with sales tax bonds is that bond buyers also require that there be a reserve fund of about 10% of the issue size. Buyers are again worried about sales tax fluctuations, and the reserve fund gives them that protection. However, it also reduces by 10% the amount of bond proceeds available to pay the local share of the Diversion Project. The third problem is that the market does not let the issuer take advantage of the sales tax receipts climbing during the term of the bond. For the same coverage reasons set out above, the market will only size a bond issue on past sales tax receipts, not projected sales tax receipts in the future, thus reducing the size of the bond issue. The fourth problem is that sales tax bonds are not backed by the full faith and credit of the Issuer. When Fargo sells refunding improvement bonds, under North Dakota law, the bonds are backed by the full faith and credit of the City, and as a result, the interest rate is lower on those bonds than if Fargo issued sales tax bonds. With a higher interest rate, more sales tax receipts would be required to pay interest, making less revenue available to pay the local share of the Diversion Project. With these factors in mind, staff has discussed another possible financing vehicle which would still use the two sales taxes of the City and County, but avoid the problem areas discussed above. That vehicle would be the issuance of an improvement bond by the Cass County Joint Water Resource District. Without getting into the details of such an issue, the Water Resource District does have the authority to issue an improvement bond and assess all benefitting property their proper proportion of the Project. That bond would be a general obligation of Cass County whose full faith and credit would be pledged for the payment of the bonds. As part of the documentation, the two sales taxes would be pledged as additional security for the payment of the Bonds, and in fact would be the sole, or at least primary, source of payment of the bonds. In that the bonds would be a general obligation of the county, the coverage issue and need for a reserve fund go away. In that the bonds are a general obligation of Cass County, the interest rate would be lower than a sales tax bond. Finally, the size of the issue could be based on a projection of future increases in the sales tax receipts over the entire term of the bonds, thus increasing the potential size of the bond issue. For those outside the benefitting area of the Diversion Project, there is really almost no risk of Cass County ever having to levy a general tax on all property in the county to make up a deficiency in a bond payment. That is because the issue would be sized to be paid with the sales tax receipts. If for some reason they were insufficient, the full amount of the issue is also secured from special assessments from benefitting property. Those assessments would not be levied as long as sales tax receipts meet projections, but if the projected sales tax collections for the next year would not be sufficient to make bond payments, the Water Resource District could actually certify enough assessments to meet the shortfall. In effect, there would be double coverage on the Bonds, so the County general fund is really not at risk. There are two other advantages of having the Water Resource District issue the bonds in the manner proposed above. First, after the project is constructed and the two sales taxes to pay for that construction end, there will still be a need to finance the operation and maintenance of the Diversion Project. The Water Resource District, under State law, can levy an ongoing maintenance levy for that purpose, and would be in a position to do so. Secondly, although again, no decisions have yet been made by the Diversion Authority, if more funding was required over and above what the two sales taxes could generate, a portion of the bonds could actually be paid by assessments. It is likely, therefore, that in the future, the Diversion Authority will discuss the possibility of having the Water Resource District issue bonds for the Diversion Project in order to get lower interest rates, and to maximize the amount of the local share of the Diversion Project that can be paid with bond proceeds. DP-00021 Attachment #2 Date: 12/13/2012 Suggested schedule of duties to develop an assessment district and bond sale by Cass County Joint Water Resource District (CCJWRD) for the North Dakota Local Cost Share of the FM Area Diversion Project CASS COUNTY JOINT WATER RESOURCE DISTRICT (CCJWRD) Tasks: • CCJWRD will form a ND FM Diversion Project Assessment Committee (DPAC) to consider and recommend a proposed assessment methodology, and to conduct public information meetings to prepare for an assessment vote to assist with financing for the ND local costs of the FM Area Diversion Project. • CCJWRD will retain AE2S to serve as consultant engineer regarding assessment process. AE2S would prepare information for DPAC meetings and to conduct public information meetings regarding the proposed assessment district. AE2S will also assist CCJWRD in preparation of other documents necessary for the assessment process. AE2S would cooperate with CCJWRD staff (including consultants Moore Engineering and