Fargo City Commissioner Tony Gehrig is issuing the following statement:
There are two basic types of special assessments in Fargo: those funding new infrastructure and those replacing existing infrastructure.
Specials on new lots, sometimes called "green field expansion,” cover everything required to convert an empty lot into a fully-finished lot. Think of curbs, gutters, light poles and sidewalks. All of these things cost money and, in general, the City uses specials assessments to cover these costs. It is common to see specials reach $40,000 or more to make this transformation possible and the loan for specials comes at a higher rate than a mortgage.
Ending new infrastructure specials should be easy. Just stop doing it. Instead of the City playing the role of the bank, we can allow private banks to retake that role. In this model, the developer simply goes to the bank, gets a loan for the work and then recoups the money with the sale of the home. This is in direct contrast to the current model, which involves the City giving money to the developer to install the infrastructure and then seeing those costs passed onto the homebuyer.
Consumers benefit from my plan via the securement of a more favorable interest rate. Special assessments generally have a higher interest rate than a conventional mortgage, which can ultimately amount to an additional $100 or more a month for a homeowner. This proposed new system also reveals the true cost of the home, which is important.
The upside for the City is the notion that we would no longer need to manage public debt to sustain development. Fargo is currently in debt for about $450,000,000 due to specials. Yes, that is correct - $450 million in debt for special assessments. We simply do not need to be doing it and we should immediately stop assuming this risk on our balance sheet.
Replacing existing infrastructure is more complex, but certainly workable. Currently, we have a half-cent sales tax dedicated to support utilities, which generates approximately $14,000,000 annually. The money is earmarked for water, sewer and the landfill. This specific sales tax helps keep our utility costs low. In fact, it keeps our utility rates artificially lower than they should be. Utility bills in Fargo are much lower than other cities in North Dakota and substantially lower than cities of similar size around the nation.
One option to end the special assessments for existing infrastructure is to marginally raise utility rates and utilize the half-cent sales tax in place of special assessments. If that option does not cover the entire cost, we should consider raising the sales tax by a quarter cent, and/or charge property owners a monthly "streets" tax of about $20. Business owners could pay slightly more, considering they utilize infrastructure to a greater degree than a homeowner.
In short, we have viable options to end special assessments. I am not a fan of new taxes; however, the positive result would be a fixed monthly cost that could be budgeted, instead of being hit with an unforeseeable $20,000 special assessment like our friends and neighbors are currently experiencing along Broadway in north Fargo.
Special assessments impact real people in Fargo; they are a burden to countless families and retirees. Specials also deter new homeowners from joining the market. I see value in ending special assessments and, instead, utilizing a more predictable and equitable system for all of Fargo’s residents.