Finance Committee - November 10, 2025

The Regular Meeting of the Finance Committee of the City of Fargo, North Dakota, was held in the Commission Chambers at City Hall at 10:00 a.m., Monday, November 10, 2025.
Commissioners present or absent were as follows:
Present: Kolpack, Piepkorn, Strand, Turnberg, Mahoney.
Absent: None.

Staff attending: Finance Director Susan Thompson, Assistant Finance Director Jamie Bullock and City Engineer Tom Knakmuhs.

Mayor Mahoney presiding.

Order of the Agenda:
Commissioner Kolpack moved the Order of the Agenda be approved. Second by Strand. There was unanimous approval.

Minutes:
Commissioner Strand moved the Minutes from the August 27, 2025 meeting be approved. Second by Kolpack. There was unanimous approval.

Sales Tax Update:
Finance Director Susan Thompson provided an update on Fargo’s year-to-date sales tax revenue, which is still in the negative but showing progress. She said the decrease has narrowed from around 3% to slightly under 2%.

General Fund Financials and Projections:
Ms. Thompson said a strong August is reflected in the funds received in October with hopes for continued strong months to close out the rest of the year. In response to a question raised regarding the 5-year sales tax average, particularly for the Diversion fund, she said in 2022 it was 4.28%, in 2023 4% and last year just under 1% growth. She said she estimates a 5-year average is likely to be around 2%. The financial model's sales tax growth assumption was discussed and Ms. Thompson said current modeling for the financial model to work started at 1.5% and is now at 2.5%. She said she uses 2% for internal purposes, noting that the Diversion's specific modeling number is an open question. She stated September’s status (reflected in October packet) year-to-date (YTD) for the General Fund is approximately break-even relative to budget versus actuals with year-end projections remaining consistent. She said several variable months are ahead with cold weather and snow.
Commissioner Kolpack asked if they were reading the Public Safety Sales Tax correctly regarding the "Transfers In" being approximately $240,000.00-$250,000.00 over budget and Ms. Thompson clarified and confirmed they were following the data correctly.

2026 Capital Improvement Plan:
City Engineer Tom Knakmuhs presented the Engineering Capital Improvement Plan (CIP) and outlined the proposed 4-year plan (2026-2029) for preserving, rehabilitating and replacing City-owned infrastructure, which includes water/sewer mains, storm sewer, pavement, street lights and flood control assets. The pavement network alone is vast, he said, covering more than 10 million square yards. He said project selection is coordinated with multiple City departments and prioritized based on pavement/utility condition, risk of failure and public safety. The 4-year plan is divided into several categories, Locally funded and programmed projects which includes core neighborhood street reconstruction and utility replacement, pavement preservation, storm sewer utility and sidewalk improvements; Federal Aid Projects, which include arterial reconstruction, pavement rehabilitation, shared-use paths, bridges and safety improvements; Prairie Dog/Flex Fund, the City determines project locations and are possible only with these funds; Flood Control is overseen by the Engineering Department with funding from the Diversion Authority; and new development/alley paving, which is typically, 100% special assessed based on owner requests. The Engineering CIP is funded exclusively by dedicated sources, no General Fund revenues are used, he said. Those sources include the infrastructure sales tax , which helps keep utility rates and special assessments lower; however, it is set to expire in December 2028. He said an informational meeting to discuss a potential extension in anticipated for early 2026. Utility Funds from Storm Sewer, Water, Water Reclamation and Street Light/Traffic utilities; Prairie Dog/Flex Funds: and Federal Funds, which are distributed to MetroCOG and allocated by the Policy Board. He said Special Assessments are capped by City policy (street reconstruction averages 17.4% special assessed) to manage property owner costs. He said projected infrastructure needs are outpacing sales tax revenues, leading to a diminishing fund balance, which requires staff to scale projects to prevent a negative balance. Engineering will seek approval from the City Commission on November 24th for 2026 projects, he said. A proposed revision to the Infrastructure Funding Policy is being considered to change the special assessment term to save property owners money, he stated.

Auditor’s Office Restructure:
Ms. Thompson discussed the impending retirement of City Auditor Steve Sprague and a proposed restructuring of the Auditor's office duties to improve efficiency and align responsibilities with specialized departments. She said the interim plan is Deputy Auditor Angie Bear will cover the Auditor's duties following Mr. Sprague's medical leave and eventual retirement in January. The Auditor's role has become a hodgepodge mix of duties, she stated, and the goal is to move specialized tasks to more appropriate departments, mirroring the Grand Forks model. She said accounting duties (special assessment, debt payments, banking) will move from Auditor's to the Finance Department, leveraging the expertise of Finance specialists. Records requests will move from the Communications Department to the Auditor's Office, she said, aligning with the staff that manages the City's records. The proposal requests the Commission appoint the Finance Director as the new City Auditor upon Mr. Sprague's retirement to prevent a vacancy, she said. The Auditor's office name will remain, she said; however, it will function under the Finance Department's umbrella, with Ms. Bear staying as Deputy Auditor and assuming supervisory responsibilities. The Finance Director will oversee the accounting duties, she said, not personally absorb them and other efficiencies gained from automated meters (AMR) will free up one-meter reader to be absorbed into the Auditor's office for clerical support. She said existing Finance employees who are project accounting experts will handle the special assessment work. Staff will map all responsibilities, assess the cost implications (pending HR grading of new job descriptions) and seek Commission approval to move forward with the reorganization on a trial basis, she said, with an agreement to report back on its effectiveness.

2025 Refunding Improvement Bond (RIB) and Moody’s Rating:
Ms. Thompson discussed the City’s $56.5 million fall improvement bond sale and the financial fallout from the recent Moody's credit rating downgrade from AA2 to AA3, still considered high-quality debt. She said the credit downgrade will cause the City to pay slightly more interest on the upcoming bonds, estimated at 10-15 basis points. The primary factor for the downgrade cited by Moody's was the City's low available fund balance ratio, she said, currently just under 9%, with 15% being the required minimum to avoid a downgrade. The leverage ratio (debt) was a secondary concern, she stated, and Moody's assigned a continued negative outlook.
Commissioner Piepkorn urged the City to immediately stop spending more, focus and impose a hiring freeze, dismissing arguments that Moody's changed its rules.
The Mayor and Commissioner Kolpack said chasing a high reserve fund (25%) through drastic rate hikes is not fiscally balanced, calling the recovery a marathon, not a sprint. They stressed continuing to look for efficiencies and new revenue sources such as land sales.
Ms. Thompson said the primary solution to restore the rating is to increase the fund balance by reducing expenses or increasing revenue/rates/fees. While the City's total debt is $1.3 billion, she said, it is divided into different buckets with designated, relatively secure revenue streams for repayment, which Moody's acknowledges given the City's growth. She proposed a workshop in January to develop a concrete recovery strategy, including setting goals/timelines and determining the split for fund balance restoration between the General and Enterprise Funds.
Commissioners requested earlier budget workshops and stronger recommendations for policy changes, such as special assessment modifications.

The meeting adjourned at 11:29 o’clock a.m.