Fair Market Value: Oxbow strikes it richer; taxpayers pick up the tab

OXBOW N.D. – Marcus Larson stops along freshly tarred Trent Jones Drive, careful not to spill his coffee swishing in a ceramic mug. He’s aware his 1991 Chevy pickup doesn’t belong amongst the neighborhood’s Porsches and Mercedes Benzes. His beat-up truck, used mostly for hauling, stands out like a prairie dinosaur among the newly built mini mansions, but he doesn’t care.

A passerby stiffens, offers a brusque response when he says hello. The cold shoulder makes Larson chuckle.

“It’s almost as if they’re trying to build a playground here for the rich and famous, but here only for the rich,” Larson said. “They could have saved 45 million bucks, they could have spent $10 million to move these houses and saved the taxpayers a lot of money.”

Affluence, multi-million dollar homes, one more grandiose than the next, backed by powerful senators, taxpayers’ dollars, and real estate agendas, has turned the once struggling town of Oxbow, population 311, into a private social club for the white and the rich, Larson said. Before the project began, few area residents ever had flood insurance.

The town, one of North Dakota’s newest and richest, was initially opposed to the F-M Area Diversion Project, but resigned themselves to fate when they discovered those that agreed had something to gain, critics said.

With an initial price tag to move 40 properties at a cost to taxpayers of $65 million, according to former Cass County Administrator Keith Berndt, the F-M Area Diversion Project in Oxbow has cost taxpayers approximately $109.2 million so far, and costs are still rising. Other initial projections in 2013 included a complete buyout of $74 million, a price much lower than currently paid. Two years into the overall project and seven years left to finish, approximately $470 million in approved contracts plus $150 million in non-taxpayer approved loans held off F-M Diversion Authority books, or 26 percent of allocated funds, have already been spent on the entire project.

F-M Diversion officials defend the buyout costs by saying the uncertainty of the Oxbow situation made houses difficult to sell, and that replacing the homes with required flood-proof basements and newer construction standards is costly.

Tall as a prairie elevator, massive American flag snapping under a brisk wind, stands one of North Dakota’s most exclusive, and expensive, golf course clubhouses, newly finished with 18 holes. 

Not far away, bulldozers hum as they hurry to complete roadside portions of the project, one of the state’s largest public works, worth more than $2.1 billion. Oxbow is slated to become North Dakota’s only town to exist within a man-made reservoir along the 36-mile project. Those living inside the ring dike had to move, and some are worried eviction notices are on the way.

Larson isn’t happy about the project, and has expressed his sentiments in writing on FMDam.org, a website he operates. “Everyone was opposed until they found out they could get something from it,” Larson said.

Larson lives north of Highway 81 in Bakke, or rural Hickson, less than a stone’s throw from Oxbow. Like his truck, his historic, three-story house juts starkly from the prairie. He’s been involved in the discussions and disputes concerning the F-M Area Diversion Project since a majority of the Metropolitan Flood Management Work Group for North Dakota and Minnesota agreed to the resolution in 2011. He was nearly arrested once, he said, for speaking out against a project he said is overkill, with flood level protections preparing for “Biblical proportions.”

“We’re a flat floodplain here,” Larson said. “Your dog could run away and you’d see it for three days here.” In the spring, a county drain south and west of his home usually floods, but rarely sneaks across the gravel road. Water shimmers in the sunlight and evaporates before his eyes, his home has never been flooded since it was moved to its current location in 1973.

The F-M Diversion Board of Authority declared in 2015 that it is supporting Oxbow, where homeowners were in the process of relocating to protected areas of a new ring levee, but a federal judge ordered work to stop until the Minnesota Department of Natural Resources, or DNR, finished reviewing the F-M Area Diversion Project.

Three years ago, the government began using taxpayer money to buy out homeowners in Oxbow at more than 300 percent their average assessed worth. Regulators state fair market value was given for the homes moved in Oxbow, but the percentage has raised eyebrows amongst critics.

“How did 40 habitable homes become an average buyout of 364.42 percent, courtesy of the taxpayers?” Larson said in one of his articles. “How did eight replacement golf course holes become an entire new 18 holes, courtesy of the taxpayers? How did a golf course $600,000 in debt receive a 967.51 percent buyout, courtesy of the taxpayers? How did a city that built robust flood protection in 2010 to 2011, qualify for a ring-dike-levee for conditions that don’t exist, courtesy of the taxpayers? How, better yet, why? It all comes down to an agenda.”

According to a January 2011 letter from Oxbow Mayor Jim Nyhof to the U.S. Army Corps of Engineers Chief Terry Birkenstock, the Oxbow area did not need additional help, and the city had “substantially completed flood protection to near 500-year flood stage without substantial government participation.”

The original plan, Nyhof said, was to eliminate, or buy out, Oxbow.

The mayor’s tune changed in 2013 when “Fargo dangled the carrot,” Larson said. On January 16, 2013, Nyhof testified before a hearing on HB 1020, the bill allocating funds for the project. Nyhof later said the change of heart came because relocating Oxbow homes was cheaper than buying the town out.

“I am here today in support of HB 1020 and the proposed funding for the flood protection in Fargo and Cass County,” Nyhoff said. “I do not believe it’s an understatement when I say the potential elimination of the City of Oxbow has caused controversy with the project. However, the recently proposed ring levee concept has replaced the on-going state of ‘limbo’ for our community with a level of pure excitement about the opportunity to exist in a manner greater than we could ever provide ourselves.”

“All of a sudden they just flipped, and all of a sudden there was this big ring dike going around the city and if everyone stuck together we would all make money,” Larson said. “It was all a bizarre quick turn of events.”

The town’s major attraction is the exclusive Oxbow Golf & Country Club, now upgraded to an 18-hole golf course, courtesy of the taxpayers. Betterments adding up to approximately $1.3 million helped bring the course back to life. The golf club is private, and expensive, and is a frequent supporter of Senator John Hoeven, R-ND.

One Riverbend Road house taxed at $277,900 received a buyout of $1,250,000, and another taxed at the same price received a buyout of $610,258. Another property owned by Fargo developer Kevin Bartram, was assessed at $585,000, which the city annexed and shortly after received a buyout of $2.7 million, while a neighbor’s residence assessed at $476,800 received a buyout for $787,000. The Cass County assessed valuation of a house at 353 Schnell Drive, moved to Trent Jones Drive, was $206,300, and received a buyout of $806,556; and another originally from 843 Riverbend Drive taxed at $339,600, received a buyout of $2,298,780.

Property taxes have also decreased by nearly half for Oxbow residents that were relocated and received betterments, according to a Bylaw of the Town of Oxbow passed on June 12, 2017. Residents at 445 Trent Jones Drive paid $8,700.25 at their former address in 2016, and after moving, property taxes were lowered to $3,950.58 per year, a decrease of over 45 percent, according to Cass County Property Tax assessments.

The Diversion Authority is required by federal law under the Uniform Act, to use appraised values, not assessed values. An appraised value is an estimated fair market value, what the owner could reasonably expect to sell the house for. Then, an offer of Just Compensation is prepared for the impacted property based on the appraised value of the home, the FM Diversion Authority reported. The appraisals are conducted following federal requirements, which are more rigorous than a typical bank appraisal.

“The basis for buyouts should not be assessed values. They should be appraised values,” Darrell Vanyo, Chairman of the Diversion Authority, said. “That’s the only constant that you really have when you start dealing with multiple cities or rural areas because we all know that assessed values will take on a different look depending upon where you are.”

Another town gem, Oxbow City Park, is currently located on 1.37 acres along the Red River banks. It is simple and clean, with a basketball court, two play equipment structures, swings, a picnic shelter, a warming house, benches, and a winter skating rink. The park must be moved, and an initial relocation bid by Earthwork Services, Inc. to a slightly larger area would have cost taxpayers $620,891.80. The bid was rejected by FM Diversion Authority finance committee, and is expected to be revised and re-bid.

Cost differences for betterments would be paid for by Oxbow, according to Steven Losing, who posted on the FMDam.org Facebook page.

The bid, which includes betterments such as new play equipment, a parking lot, an enlarged picnic gazebo, a warming shelter with aluminum siding, and a water fountain, has not yet been accepted.

Full duty gear
When protesters gathered against groundbreaking ceremonies in May and June, the Cass County Sheriff’s Department geared up, according to internal emails.

“Due to a possible call out of large amounts of personnel for the Diversion, all deputies will be required to wear their uniforms with full duty gear if it has been issued to you,” Rick Majerus, chief deputy of the Cass County Sheriff’s Office, wrote in an email.

When asked for a description, Sergeant Thomas Tschida replied, saying “Whenever we receive information that a situation may require more than our minimum number of deputies on patrol, we ask all of our plainclothes staff to wear their uniforms that day. This is a very common practice within our office and not specifically focused on the diversion issue.”

The idea of sheriff’s deputies gearing up for a handful of protesters against the diversion project was puzzling to Marcus Larson, and showed him the government means business when pushing the project, he said.

The agenda of the rich
The total costs of the project are expected to exceed $2.1 billion, with $450 million coming from the U.S. Army Corps of Engineers, $570 million from North Dakota, $43 million from Minnesota, and $1.1 billion from taxpayers, approved after three half-cent sales taxes to be extended through 2084.

“I’m totally happy that the taxes that we all pay are able to help the poor and the destitute people of Oxbow,” a commentator named Jerry Peterson wrote on the FMDam Facebook page. “Shows you who the real welfare queens of the world are.”

“Oxbow, ND’s elite have taken Fargo, Cass County, and the state of North Dakota for a ride,” Larson wrote as the lede to a story on November 13, 2017.

On September 7, Chief Judge John R. Turnheim of the United States District Court handed down an injunction directing all work on the Fargo-Moorhead Flood Risk Management Project to cease and desist until further notice. Agencies and government offices involved in the project in both states, North Dakota and Minnesota, have been in negotiations ever since, but building has not ceased in the Oxbow area.

“When one compares the $108.7 million spent thus far on the Oxbow project, it does beg the question why there was such a rush to spend taxpayer dollars when the future of the overall FMDA project was imperiled for lack of all the necessary permits and adequate funding,” Larson wrote.

While the real estate market has cooled in Fargo, it is booming in Fargo’s bedroom communities, according to the Home Builders Association of Fargo Moorhead or HBA. In Oxbow, taxpayer money is the main reason for the up-tick in building permits.

So far in 2017, Horace issued 18 housing permits with a total value of $6 million; Mapleton records 24 permits with a value of $6 million, and Oxbow issued 10 permits worth $8,855,303, up from 2016 with six permits issued valued at a total of $4,622,000.

Oxbow, with a median household income of $133,438, has a median housing value of $370,600 with 133 housing units, according to the United States Census Bureau 2016 statistics. Residents have been selling their houses to the government for an average of 364 percent over the Cass County Tax Valuation.

Less than 2.4 percent of Oxbow residents live in poverty. In 1990, Oxbow was considered North Dakota’s second richest community, with a median household income of $76,437.

In contrast, Fargo has a population of 120,762 with 53,410 housing units. The city’s median household income is $46,175, with males earning an average of $31,362 and females earning $22,652, according to the United States Census Bureau. Nearly 15 percent of Fargoans live in poverty, and 10 percent are without health insurance.

Senators Heidi Heitkamp, D-ND and Hoeven helped the F-M Diversion Project along by supporting the Water Resources Reform and Development Act of 2014, a bill that authorizes the federal government to help facilitate state efforts to develop programs for the safety of levees, reducing flood risks, and floodplain management.

Hoeven works closely with the Home Builders Association of Fargo-Moorhead or HBA, with his former office in Fargo listed at the same location of 1802 32nd Avenue South, Suite B. He’s pictured with HBA members when they went to meet with him in Bismarck, according to a February 2016 HBA announcement in the Plains Builder magazine.

The HBA, a nonprofit organization, is active in Oxbow. Its former director, Roz Leighton, was a staffer for Hoeven, and left her position with HBA to work for Donald Trump during his 2016 campaign.

The City of Oxbow, the Diversion Authority, and the HBA frequently work together to help builders address building issues in the ring dike area, according to the FM Diversion website.

During Hoeven’s Senate race, the Oxbow Golf & Country Club held a “Friends of Hoeven Golf Event” on August 26, 2014, which required an endorsed check of $250 per person, or $1,000 a team, according to the event’s Facebook page and Political Party Time. In return, Hoeven spent $26,686 during 2016 and 2015 at the Oxbow Country Club, according to Open Secrets, Center for Responsive Politics. Additionally, Hoeven, under the name of Friends of John Hoeven, spent $15,388 at the Oxbow Country Club in 2014.

For most elected officials, the F-M Diversion Project is about spending money now to save money in the future.

Apparent agenda
Near the 10th green at the Oxbow Country Club sits a home built by the Kochmann Brothers Homes Inc. construction firm. The house is a Parade of Homes Best of Show winner. Half owner of the construction company, Paul Kochmann, and his wife, Nancy, own the house. Nancy is one of Oxbow’s four councilpersons, and a council member for North Dakota League of Cities.

Kochmann Brothers Homes Inc. is a construction and remodeling company established in April 1991, and has been involved in up to 10 building projects in Oxbow. The company’s Facebook page has photographs and videos of projects the company has completed in Oxbow.

A quick real estate search online reveals two homes, one worth nearly half a million and another worth $1,225,000 on Century21.com. There were no homes for sale on Homes.com.

Although Oxbow Homeowners’ Association covenants contain nothing barring the less fortunate from purchasing property in Oxbow, conditions and restrictions clearly keep the area free from “riff-raff.”

The Oxbow Architectural Review Committee is responsible for approving all property plans. The Oxbow Homeowners’ Association Covenant states all buildings established must have a “quality, restricted residential district, free from objectionable or value-destroying features.” At least 20 percent of any façade must be made of brick, stone, stucco, or masonry siding, and vinyl lap siding is not an approved construction material. All windows must be made of steel or vinyl clad, no wood clad windows are permitted. All garages must be attached to the residence.

In one of the lots, a minimum lot size is 2,500 square feet for a one story rambler, and 3,000 square feet for a standard two story, with at least 1,500 on the first floor.

No multi-level, split level, or twin homes are allowed within the Oxbow city limits. Clotheslines are not allowed. All solar and wind energy conversion systems are prohibited. Above ground pools also are prohibited. All vehicles, motor homes, boats, trailers, watercrafts, snowmobiles, must be stored in garages, and not on public roads. All grass is to be kept mowed to “maintain a uniform appearance and shall not exceed four inches in height.”

The Slushers
When Jody and Karla Slusher chose a 16-acre spot near Oxbow to build their paradise in 1999, they never imagined that one day the government would want it back.

At the end of an inclined driveway sits their taxidermy office, filled with mountain lions, stuffed fish, moose, and other exotic animals. Behind their office is a pond and their house, where they expected to spend the rest of their lives.

“Land is our last connection to freedom and that dream is being fettered in every single way,” Jody said. He’s an award-winning taxidermist at J&K Taxidermy, and since he started in 1988 has had his work featured in the Cabela’s store in East Grand Forks, Minnesota, and Scheels stores across the United States. Their clients are primarily worldwide hunters, and Slushers work with wildlife mountain projects in new market areas, Karla said.

No one yet has officially approached them, but their house is slated to be the center of a new dam, Karla, the vice president and operations manager of the family-owned business said.

In 2012, area businesses opposing the project were bullied, some were threatened into submission, Karla said. Their land, their home and livelihood, built in 1999, would fall under mandatory buyout if the project continues as planned.

She agrees with Larson, the project is overkill. “The Oxbow buyout is a development project disguised as flood control,” Karla said. “It’s a mess, it makes no sense, but they tried to push it through. They call it the Grand Solution, but they put the cart before the horse and hoped to connect the dots.”

So far, Diversion authorities have not told her they must relocate, and she suspects a dam permit will not be possible.

“I don’t see how they’re going to put that southern embankment through us,” Karla said. “It has to comply with Minnesota state law. They would be flooding out parts of Minnesota, and people whose land doesn’t normally flood.

“We took care of ourselves from flooding,” Karla said. “They tried to bully it through, but came up against a roadblock. We’re in a wait and see mode. Are they going to come up with a plan, and how does that plan affect us?”