Finance Committee - July 27, 2026

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, July 27, 2026.
Commissioners present or absent were as follows:
Present: Boschee, Gullickson, Peterson, Strand, Turnberg.
Absent: None.

Mayor Boschee presiding.

Staff attending: Finance Director Susan Thompson, Human Resources Director Jill Minette, Transit Assistant Director Cole Swingin, Transit Fleet/Facilities Manager Jordan Smith, City Administrator Michael Redlinger and Assistant City Administrator Brenda Derrig.

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

Minutes:
Commissioner Strand moved the minutes from the April 27, 2026 meeting be approved. Second by Gullickson. There was unanimous approval.

Discussion Topics:
City Administrator Michael Redlinger said following the last three days of productive sessions, he will provide an updated document at the conclusion of the budget discussion. He said refined over the weekend, the handout categorizes various topics into high-priority, medium-priority and long-range research items. Today's primary focus will be examining proposed utility rates alongside other top-line agenda items, he said.
Finance Director Susan Thompson said ahead of seeking approval for the preliminary budget next Monday, she provided a process update following last week's workshop and today's Finance Committee meeting, noting the budget cap is already set. Recent revisions to the general fund have restored a positive balance by incorporating a new health grant, balancing transfers, correcting part-time staffing for the Mayor and Human Resources, adding an omitted WSI premium and lowering estimated health insurance costs to 8.5%.
Human Resources Director Jill Minette said the historical trends show average COLA adjustments between 3% and 3.5%, leading to the 3% COLA currently factored into the preliminary budget to adjust the entire pay structure on January 1. She said this adjustment is critical because roughly 27% to nearly 40% of the workforce across general fund, enterprise, fire and police roles is sitting at the maximum 11th step of their pay structure, which is currently lagging behind market rates. She said that pay, benefits and staffing remain central to recruitment and retention. Using the City's Staffing for Success indicators, the budget prioritizes high-gap departments to allocate 11 FTEs in the general fund ($1.2 million) and 10 FTEs in the enterprise fund ($956,000). She pointed out that proposed market adjustments totaling additional costs across funds have not yet been pulled into the preliminary budget, leaving open a broader discussion for the Commission on how to balance COLA, market adjustments and new positions.
Commissioner Turnberg asked a question and shared her stance regarding police department staffing in the budget and pointed out that while the police requested eight positions, the current proposal appears to approve only four, two funded through public safety sales tax and two through the general fund. She said she expresses a desire to hold firm on funding all eight requested positions, getting more boots on the ground must be a top priority as the budget is finalized and said the Commission has time to figure out where to source the necessary funds, adding that the money does not necessarily need to come directly from the public safety sales tax.
Commissioner Strand asked about the status of the COPS grants previously received for funding four or six officers and asking whether those obligations were fully paid off or still requiring City funds. In response, Ms. Thompson said the grant operated on a tapering, three-year structure covering a significant portion initially and decreasing each year until the general fund fully absorbed the officers' costs. She said that only a minor trailing amount of about $14,000 remains in the budget for next January, after which the grant funds will be completely expended.
Commissioner Peterson asked for a historical context charts showing staffing, budget and total population growth over time across all City departments, rather than just Police and Fire. He said that a simple snapshot of departmental trends over time would be exceedingly helpful for new Commissioners to better understand long-term growth patterns citing how automation in solid waste created a period of staffing stagnation as an example, while clarifying this is a suggestion for next year's budget cycle rather than an immediate action item and emphasized its value for current and future new members.
Ms. Thompson said that transferring utility funds into the general fund is a 20-year-old practice that consistently makes up 13% to 14% of City revenue and noted this approach keeps local property tax mill rates lower than neighboring cities by spreading costs to utility users, including tax-exempt properties and highlighted that the City can no longer shift away from this utility transfer model because state property tax caps prevent increasing property taxes to cover the difference.
Mayor Boschee asked for confirmation on whether his characterization of the City's financial constraints was accurate and noted that previous Commissions intentionally kept property tax mills low by relying on utility transfers to balance the budget. Fargo has already used this approach for over 25 years and the City now lacks the flexibility that other communities might still have to adjust their revenue strategy especially given the new state property tax caps that prevent shifting those costs back onto property taxes; in response Ms. Thompson said by adding that state cap relief directly restricts local government flexibility in managing revenues to best fit the City's needs.
Casey McNames from KLJ presented an update on the condition and future options for the Ground Transportation Center (GTC), a 100% City-owned facility built in 1982 that includes transit facilities, municipal court and an underground parking garage. The City staff said that unlike the transit garage on 7th Avenue, the GTC is not a shared regional asset and that initial rehabilitation work beginning in 2020 aimed to extend the facility's life by 20 to 30 years through overlay maintenance. She said removing the wearing surface exposed severe structural issues across three project phases most notably hidden moisture infiltration, severe rebar corrosion and numerous loose or ruptured post-tension steel tendons. The degree of deterioration worsened with each phase, expanding from two known broken tendons in 2020 to 25 discovered last fall, plus another newly ruptured tendon uncovered just last week in a zero-load area. The project funding has been exhausted, several damaged tendons remain unaddressed and bus operations on the deck have been completely shut down as a precaution, she said. To address the deteriorating structure, said six primary alternatives ranging from temporary maintenance to full facility replacement and operating under the status quo which would require temporary shoring and an intensive $200,000 to $300,000 structural analysis offers virtually no extended life expectancy. Structural repair or partial garage infill options carry high costs, severe impacts to underground parking usability and lingering technical risks due to complex construction sequencing, she said KLJ recommends relocating the facility as the most reliable, cost-effective option for the City's long-term return on investment.
Commissioner Turnberg asked whether any viable locations had already been identified if the City decided to relocate the Ground Transportation Center facility; in response, Ms. McNames said that since a new tendon broke just days prior, staff had been working rapidly to explore immediate and long-term relocation options. For an interim solution, transit operations could potentially utilize the old Police Department building or even temporary construction trailers just up the block, while buses continue operating out of the adjacent parking lot and looking long term, she said that transit needs have evolved significantly since the building was constructed 40 years ago, when it also housed Greyhound and rather than building another large facility, the City plans over the coming year to re-evaluate how transit and Municipal Court should operate, with staff returning to the Commission soon with more concrete, expedited recommendations.
Commissioner Peterson asked questions regarding the long-term viability of repairing the deteriorating Ground Transportation Center versus relocating its operations, as well as how the City will manage the distinct needs of transit and Municipal Court moving forward and expressing doubt about the durability of structural repairs and said whether it makes more sense to avoid throwing good money after bad by instead constructing a right-sized transit facility on the adjacent south lot before winter to prevent operational disruption. He asked what the short-and long-term strategy should be for Municipal Court, suggesting that partnering with county or federal judiciary partners for shared court space could provide enhanced security in the near term while giving the Commission time to determine a permanent solution.
Mr. Redlinger said that staff are actively evaluating three potential options for temporarily relocating Municipal Court, emphasizing a two-phased approach focused on an immediate short-term move alongside broader discussions for a permanent long-term location in coordination with the City Attorney's Office and regional political subdivisions. Mayor Boschee asked whether staff were seeking formal direction from the committee and Mr. Redlinger clarified the presentation was primarily informational to establish a baseline understanding before returning with actionable recommendations in the near future. Addressing safety concerns, Mayor Boschee sought confirmation that the facility poses no immediate public or employee danger; Ms. McNames replied that daily on-site monitoring continues and there is no imminent threat, though staff are working against a recommended 30-day timeline to complete the relocation due to ongoing structural degradation.
Mr. Redlinger and Ms. Minette presented the detailed proposed 2027 utility rate adjustments for the City of Fargo, outlining how changing capital demands, operational cost spikes and long-term project commitments require a updated revenue and distribution strategy.
• Shifting Infrastructure Sales Tax & Rate Containment: Historically, Fargo’s infrastructure sales tax split funds evenly across water, water reclamation, streets, and flood control. While this tax and regional cost-sharing have kept local water bills lower than peer regional cities, evolving infrastructure priorities require an updated distribution model.
• Red River Valley Water Supply Project (RRVWSP): For the first time in its multi decade history tracing back to regional water planning in the 1950’s the RRVWSP is transitioning out of internal utility cash flows to dedicated fee support. A new $3.15 average monthly water supply fee is proposed for 2027 to cover local bond shares managed via a 40 to 60 year financial model, ensuring long-term costs are distributed equitably across future beneficiaries.
• Operational Cost Drivers & Chemical Treatment: Water treatment expenses have risen sharply due to high chemical inputs required to process the Red River’s complex source water, exposing the utility to severe market price volatility compared to surface sources like the Missouri River or Minnesota lakes.
• Rate Structure Updates & Equity: To maintain fairness across commercial and residential consumers, the city proposes adjusting its historical block rate system. Specifically, a $1.50 charge will be introduced on the first 2,000 gallons of consumption a bracket previously given minimal cost impact to ensure low-volume users contribute proportionally to system maintenance and overall rate increases.
Commissioner Strand asked why the City maintains distinct property classifications such as residential, mixed-use and commercial rather than simply billing based on total gallon usage and said the boundaries between different property types often create confusing gray areas, suggesting that charging strictly by volumetric consumption could be a simpler, more direct approach.
Assistant City Administrator Brenda Derrig said that billing strictly by total gallon usage is not a typical standard across the country, as water utilities generally maintains distinct residential, commercial and industrial rate categories to align with national bench-marking metrics. She said that many communities utilize an inclining rate structure where the cost per unit increases as consumption rises to encourage water conservation, rather than relying on declining block rates.
Mr. Redlinger acknowledged Commissioner Strand's points regarding rate structures, emphasizing that revenue adequacy and cost-sharing across residential, light commercial and industrial user classes will remain an ongoing, multi-year topic of discussion for the Commission. He highlighted that even with the proposed rate increase, a typical residential user consuming 6,000 gallons per month would experience only a modest rise in their bill while this shift places Fargo slightly above cities like Grand Forks and St. Cloud, the City's rates will remain below those of nearby regional peers and neighboring communities, including West Fargo, Moorhead and Fergus Falls.
Mayor Boschee asked for clarification regarding the rate structure slide, seeking to confirm that the presented data and proposed rate changes applied exclusively to residential water users rather than other customer classes like commercial or industrial properties.
Ms. Derrig said the initial 2,000-gallon tier is tied to the base rate exclusively for residential customers, outlining a plan to phase out that allowance by reducing it by 500 gallons annually. In response, Mayor Boschee said support for transitioning toward a tiered pay more as you use model that actively incentivizes water conservation. He said that as the City asks residents to pay a monthly $3.15 fee for the Red River Valley Water Supply Project acting as an insurance policy for future drought conditions the rate structure should simultaneously encourage responsible daily water habits, such as adjusting lawn irrigation or household water use. He highlighted that recent investments in VEPO smart metering will empower both residents and business owners by giving them direct access to real time consumption data to guide their usage decisions.
Mr. Redlinger said that the adjustment to the 2,000-gallon base allowance will be phased in incrementally over four years by reducing the tier by 500 gallons each year until users are fully integrated into the new structure and also emphasized the value of the VEPO smart metering initiative, noting that over 80 percent of Fargo properties have already adopted the upgraded meters and this high adoption rate provides residents with precise billing and real time usage data, directly empowering households to adjust their habits such as reducing lawn watering if they wish to manage and lower their monthly utility costs.
Commissioner Turnberg asked two brief questions: first, whether Fargo is increasing the rates charged to other communities that buy water from the City and second, whether Fargo itself is paying a higher rate as well.
Ms. Derrig said that regional contract communities will also experience rate increases alongside Fargo users and addressing Commissioner Turnberg’s second question regarding high-volume users versus low volume users such as seasonal snowbirds staff clarified that the volumetric rate structure naturally ensures that households consuming more water pay proportionately higher bills and while seasonal residents who are away will still receive monthly bills covering fixed base charges for City utilities like solid waste, they will not be charged for water volume they do not use, maintaining fairness based on actual consumption.
Mr. Redlinger said the upcoming rate adjustments for the water reclamation utility are necessary to accommodate rising operational expenses, address administrative building needs and support debt service for expanding the regional water reclamation facility. He said through strategic rate containment strategies utilizing the infrastructure sales tax and regionalization Fargo has historically kept rates flat, low and even reduced in certain years, resulting in a current average customer bill of just $25 for 2026 and the historic rates were kept intentionally low and flat, adjustments are now required to ensure revenue adequacy and fund long-term capital plans. He said that staff continuously monitors a robust revenue adequacy model to ensure rate increases are requested only when strictly necessary and combined with the proposed updates for water treatment and the Red River Valley Water Supply Project that these adjustments constitute the bulk of the proposed 2027 utility increases. Even after consolidating all utility rate changes, a sample residential customer using 6,000 gallons per month will see only a modest upward shift in their total bill, he said, that while Fargo will move up slightly in regional rate rankings, Fargo’s overall rates will remain among the most affordable, especially as neighboring communities like West Fargo, Moorhead and Grand Forks make their own dynamic rate adjustments in the future.
Commissioner Strand expressed concern over the sticker shock caused by the size of the proposed utility rate hikes residents feel the compounding financial impact of paying sales taxes while simultaneously facing substantial utility bill increases. He said exploring whether a larger portion of the Red River Valley Water Supply Project and other water infrastructure could be funded directly through sales tax revenues to relieve the burden on individual utility customers. In response; Mr. Redlinger said it was noted that sales tax funds are already partially allocated to the project; shifting additional sales tax dollars toward water utilities would mean reducing funding for other crucial areas such as streets or flood protection requiring the Commission to balance competing project needs within a limited revenue pool.
Commissioner Peterson requested specific data points showing the exact financial impact the dollar yield of adjusting individual utility rates or reallocating the sales tax pie. He said that while fixed commitments like the Red River Valley Water Supply Project debt cannot be avoided, understanding what a $1 rate change yields for water or reclamation is necessary to evaluate tradeoffs, slow walk rate increases or adjust funding allocations responsibly.
Ms. Thompson said that calculating the exact revenue yield of a single dollar rate change is difficult due to the many variable levers involved in the calculations and while a $14 proposed increase represents an average residential user, the complex mix of usage patterns and rates across different customer classes makes it hard to pinpoint a precise, single dollar value.
Commissioner Peterson clarified that she does not require exact figures down to the dollar, asking if staff can provide estimates within a $250,000 range; in response Ms. Thompson said it could be done and she would find the various financial levers in the model interesting, to which Commissioner Peterson reiterated that an estimate accurate within a quarter of a million dollars would be sufficient for her needs.
Commissioner Turnberg asked for clarification regarding participation in the Red River Valley Water Supply Project, specifically inquiring whether all other regional communities are contributing to its costs or if certain cities had previously chosen to opt out.
Mr. Redlinger said that the Red River Valley Water Supply Project is at a pivotal threshold as member entities finalize their commitments to debt finance bringing water from the west and that while a few communities are still contemplating whether to remain, the vast majority of original municipal partners including key regional leads like Grand Forks are locking in allocations and establishing their own revenue sources, such as utility fees or property taxes, to fund their share. Communities that opt out will not receive allocated water, leaving access to emergency supply as a separate, future policy question, he said that wholesale customer communities buying water from Fargo (such as West Fargo, Horace and Harwood) will also adjust their rates and pass costs on to their residents, though participation varies across eastern North Dakota depending on local water sources and agreed to provide the Commission with a comprehensive list of participating cities to help demonstrate to the public that Fargo is not bearing the project's financial burden alone.
Mayor Boschee said the agreement that Commissioner Turnberg is highlighting the insights he gained through his involvement with the Lake Agassiz Water Authority and suggested holding an informal brown bag session to discuss potential funding opportunities ahead of the upcoming legislative session, particularly regarding potential state and federal support that could help lower the financial burden on local rate payers.
Commissioner Strand said he has confusion over how utility rate categories are applied across different types of properties, particularly those in gray areas beyond standard single-family homes and asked for clarification on how customer classifications are determined for multi-family residences like apartment or condo buildings, as well as mixed use properties such as small downtown buildings with both commercial spaces and apartments. He said that because non-residential or commercial rates involve much higher potential cost increases, understanding these exact designations is critical to knowing the actual financial impact on occupants and property owners.
Ms. Derrig said that calculating exact rate impacts across non-residential properties is complex because assessments vary based on site-specific factors such as lot size for streetlights or impervious surface area for stormwater fees making it unrealistic to model every scenario, while municipal discussions have historically focused on residential base examples and recognized the importance of demonstrating how rate adjustments affect larger commercial and industrial users to maintain public trust and agreed to provide representative examples for different property categories.
Ms. Thompson presented an updated financial overview for the water and water reclamation utilities.
Key points from her update include:
• Net Margin and Reserve Cash: Beyond standard revenues and expenses and emphasized the importance of net margin and free cash reserves. Moody’s credit rating agency evaluates a City's total financial health, focusing heavily on available cash reserves rather than just the general fund balance (which Fargo maintains at around 25%).
• Lean Utility Operations: Fargo’s utilities have historically operated with minimal cash reserves to keep customer rates as low as possible and argued that this philosophy must be reconsidered to build a modest financial cushion for flexibility and cash funding.
• Tight Financial Margins: Under the proposed rate increases, the water utility is projected to generate $38 million in revenue and only $1.2 million in net income. Similarly, water reclamation is projected to generate roughly $1.5 million in net income and these narrow margins mean the proposed rates do not create excessive excess cash, but rather start a necessary piggy bank for debt service and operations.
• Impact of Adjusting Rates: Reiterating that staff have run roughly 75 iterations of the financial model since spring and cautioned that altering the proposed rates would have widespread ripple effects. She clarified that the proposed $14 rate increase was not an inflated starting point for negotiation rather the actual figure required to balance the utility model and avoid even larger rate hikes in subsequent years.
Commissioner Peterson acknowledged and fully understood the financial realities presented regarding utility costs, reduced general fund transfers, and necessary rate structures, however, he emphasized that the Commission still has a broader budget portfolio a giant book of other City expenses and programs that can be evaluated for cuts or reimagined to balance overall costs and he stressed that having a clear financial baseline for the utility costs is essential, as it allows Commissioners to pinpoint exactly what needs to be adjusted elsewhere in the budget to keep the City's entire financial picture whole.
Commissioner Strand asked about regional equity, asking whether partner jurisdictions are contributing their fair share to utility funds relative to Fargo and he noted past discussions across various issues where Fargo ended up carrying the majority of the financial burden while other entities contributed less and questioned whether the partner communities face rate increases equivalent to Fargo's and if the City is fully aware of and anticipating these upcoming cost increases and have been budgeted accordingly.
Mr. Redlinger addressed Commissioner Strand's equity concerns by clarifying that regional wholesale partners are aware of the upcoming rate adjustments and are actively planning for them. It was explained that member entities of the Lake Agassiz Water Authority (LAWA) are currently adjusting their own utility rates and budgets to absorb these costs, with some having already instituted dedicated utility charges, unlike Fargo and said the financial pressures facing Fargo such as rising chemical costs and operational catch ups are consistent across surrounding political subdivisions and confirmed that Fargo sets its own rate increase for wholesale services based on detailed cost modeling, while partner entities receive advance notice of these rates and remain independently responsible for setting their own local charges to cover both Fargo's rates and their own infrastructure maintenance.
Commissioner Gullickson asked how the proposed rate plan would impact the City's multi-year financial future, expressing public concern regarding the size of the current increase. Acknowledging that no one can predict the future with certainty, she sought sense of whether residents should expect additional substantial rate hikes in the coming years or if future adjustments will transition into smaller, incremental increases.
Mr. Redlinger said that staff relies on revenue adequacy modeling to project future utility costs with the goal of maintaining predictability and keeping future rate increases as modest as possible and cautioned the unforeseen expenditures outside the City's control such as the unprecedented chemical cost spikes currently impacting wastewater operations could necessitate further adjustments and to ensure the Commission is not caught off guard, he said he is committed to holding early conversations about utility trends and financial modeling during next year's budget process as these dynamic conditions evolve.
Commissioner Peterson advocated for a shift toward long-term, proactive financial and capital planning, arguing that the City leadership needs access to comprehensive five to ten year projections and he expressed concern that the City currently lacks integrated multi-year modeling for major facility needs, debt service payoff schedules and dedicated building reserve funds a gap that leads to reactive management, such as having to enter rental agreements before bonding for major projects like the law enforcement center, citing upcoming capital obligations like solid waste landfill expansions and firefighter training facilities. He said that charting out when debt matures and freed-up capital becomes available is essential, especially for newer Commissioners so the board can plan responsibly for major investments years in advance.
Ms. Thompson acknowledged Commissioner Peterson's point, saying that while certain individual departments, such as Engineering with its Capital Improvement Plan, as well as the Water and Water Reclamation utility funds, already perform long-term planning, a cohesive citywide approach is currently lacking and said that integrating these departmental models with General Fund needs to create a comprehensive, long-term multi-year projection is indeed absent and agrees that staff need to work on developing that overarching framework.
Commissioner Peterson said that a neighboring local political subdivision recently granted an 11% pay raise to its staff, which local news reported was an effort to catch up with Fargo's compensation levels. He said that satisfaction of Fargo is not proposing large market adjustments, contrasting the 11% public-sector raise with the private sector, where average workers at companies like Walmart rarely see such increases. He questioned whether the other subdivision made a mistake or if Fargo’s staff is overcompensated to the point that surrounding entities are forced to issue massive pay raises to stay competitive, urging the Mayor and Commission to consider this dynamic moving forward.
Mayor Boschee addressed the challenges political subdivisions face when collecting and comparing compensation data, noting that entities currently rely on informal exchanges and custom spreadsheets. Responding to Commissioner Peterson's points, he suggested exploring a centralized, neutral framework or entity to collect and share this data so all jurisdictions measure salary inputs and outputs consistently. He highlighted concerns raised by City employees regarding current data collection methods specifically that current approaches may not be fully comprehensive and expressed interest in collaborating with Commissioner Peterson and Human Resources Director Ms. Minette to improve the accuracy and neutrality of these comparisons.
Commissioner Peterson expressed support for working with Mayor Boschee to improve data collection, emphasizing that no one should fear accurate data and noted that if solid, un-flawed data shows City employees such as law enforcement are underpaid and fully supports raising their pay to match. He said for regional consistency and fairness, stating that keeping compensation aligned across local jurisdictions ensures employees are treated equally while protecting public resources over time.
Commissioner Strand raised two main issues regarding city operations and finances. First, he requested a clearer definition of core versus non-core mission funding to help evaluate budget priorities and second, he expressed concern over news that the Municipal Airport Authority is exploring making the airport a multi-jurisdictional entity with another government subdivision, emphasizing that Hector International Airport is a City of Fargo asset backed by City bonds and financial guarantees similar to the FARGODOME. He suggested that new revenues from major projects like the airport parking ramp should potentially offset and reduce the taxpayer mill levy contribution (roughly $1.9 million for two mills). He called for a joint meeting with the Airport Authority to discuss funding and governance, which staff noted is currently in the works, while clarifying that the initial preliminary budget model already backs out those two mills.
Commissioner Peterson asked Commissioner Strand to clarify what he was referring to regarding the Airport Authority approaching another government entity. In response, Commissioner Strand explained his understanding that the Municipal Airport Authority had engaged with the county about forming a multi-jurisdictional regional airport configuration and further clarified that the Airport Authority chair had reached out to him after being invited by the county to discuss regionalization, rather than the Authority taking unilateral action on its own and expressed hope for further in-depth discussions moving forward.
Mr. Redlinger thanked the Commissioners for their time and provided a handout consolidating all research requests raised during the recent budget workshops. These requests were categorized into three priority levels, with lower-priority items focusing on long-range topics such as vendor reviews, specific programs and miscellaneous matters that are not required for next week's preliminary budget vote. He said that staff will update the list based on ongoing input and confirmed that high-priority, immediate research requests including timely updates regarding the MetroCOG (GTC) and developing relocation plans for municipal court and other entities are being addressed urgently this week.
Mayor Boschee outlined the upcoming schedule for the preliminary budget, explaining that the draft barring minor adjustments that benefit the overall budget will be included on the agenda for the August 3rd meeting. He clarified that the Commission's vote on Monday will focus on approving the preliminary budget, including proposed rate increases, a 3% COLA and approved staffing adjustments. He thanked the Commission for the productive discussion, commended staff for their quick responsiveness and adaptability regarding facility updates.
The meeting adjourned at 11:52 o’clock a.m.