​‘Dirty little secrets’ – Fargo’s special assessment debate heats up

FARGO – Nearly a week after City Commissioner Tony Gehrig announced his plan to end special assessments, challenger Tim Flakoll revealed a counter plan, saying “People with specials need real service, not lip service.”

From 2015, assessments have increased from $3.7 million to $24 million, and the city is in debt up to $450 million due to special assessments, according to city commissioner statistics.

Gehrig, an incumbent city commissioner and an Air Force captain, says all special assessments should end. Flakoll, a former state Senator, wants to lower homeowners’ burdens.

Parts of Gehrig’s and Flakoll’s plans are similar, such as passing on lower interest rates on city loans to homeowners when possible, and renegotiating the city-to-homeowner fiscal percentages.

Calling the current special assessment system a “dirty little secret,” Gehrig said the current special assessment scheme includes a 40 percent engineering and administrative fee, interest rates are too high and if and when the rates are lowered, they aren’t passed down to homeowners.

“Special assessments have been a problem for home and business owners for decades,” Gehrig said in a press release from the Fargo City Commission office on May 2. “This system allows the city to ‘mortgage’ our taxes and charge residents interest on the loan. In many cases, the interest payments are higher than the actual taxes being collected.

Earlier this week, Gehrig reinforced his plan with additional information, saying the City of Fargo is $450 million in debt due to special assessments, and placed blame on previous and current city commissioners, and Mayor Tim Mahoney for raising the special assessment split between the city and homeowners to 50/50 from 70/30 in 2015.

“There is one simple way to make sure these dirty little secrets don’t continue happening,” Gehrig said. “End all specials.”

Flakoll agreed that lowered interest rates aren’t passed down to homeowners when the city is successful in refinancing, but the similarities between Gehrig’s and Flakoll’s plans end there.

Calling Gehrig’s announcement issued a month before the primaries “lip service,” Flakoll issued a five-point plan. He plans to pay specials with sales taxes on infrastructure, crack open the state’s Legacy Fund, lower interest on infrastructure loans, place caps on future specials in older neighborhoods, and investigate options for better rates with utility companies, and using less costly materials, such as recycled plastic for paving roads.

“Approximately 24 percent of people have paid off their specials already and what Gehrig is proposing will force them to pay the specials of others,” Flakoll said. “The Gehrig scheme does nothing to get rid of specials, it simply renames them and takes money out of your left pocket instead of your right pocket. It robs Peter to pay Paul and has been described as a socialization of taxes in Fargo,” Flakoll said.

The 2015 decision to raise special assessment split was passed with yes votes from Mahoney, and current and former city commissioners Dave Piepkorn, Mike Williams, and Melissa Sobolik. Gehrig said he voted no on raising the costs to homeowners.

“It was a massive tax increase that very few people know about,” Gehrig said. “Now the mayor wants to go back to 70/30 because it turns out you noticed and aren’t happy about it.”

The engineering and administrative fee is tagged onto every project the city assesses, Gehrig said, and the fee is included because, “Well, we can,” Gehrig said.

“That means if you have a $50,000 specials, $15,000 could be nothing more than a fee from the government for no good reason, and you probably won’t know enough to ask about it,” Gehrig said. “What does it do? Nothing.”

Flakoll said if he is elected special assessment restructuring will be part of his plan for his first 100 days. His is an “Effort to get to the root of the problem with a focus on driving down project costs on the front end, in order to keep them from spiraling out of control,” he said.

“Residents are paying too much interest on their specials and in thousands of cases, the interest payment is higher than the principal payment for the project in a given year,” Flakoll said. “Fargo needs to end the practice of using overage charges on bonded projects as a slush fund to pay other operations.

“There has been no progress in the past four years to improve policies for specials,” Flakoll said. “Incumbent commissioners should focus on deadlines not headlines, so clearly a change in commissioners is needed.” 

Mayor Mahoney said Friday that the special assessment issue is dominating the 2018 city commissioners' race, and promised voters a "robust review and debate on the issue" is forthcoming after June's elections. 

"I fully intend to initiate a robust review and debate of this issue when the new City Commission is seated in July," Mahoney said in a press release. "We are aware that the current 50/50 funding model has created a handful of large assessments, namely along North Broadway and arterial projects. This is the precise reason we have placed those specific assessments on hold until we could fully study the options. I am not prepared to see Fargo regress through policies that are not fully vetted."

The city welcomes all input from the public on the special assessment debate, Mahoney said. 

"The city’s budget is extremely complicated and making a modification in one area, while seemingly simple, may cause detrimental ramifications in other areas if not fully considered," Mahoney said. "We will study all ideas and properly evaluate each aspect. Our people should be the focus and it is my hope that this guiding principle does not become lost in the current political discourse."

[This story has been updated after Mayor Tim Mahoney issued a press release on the special assessment issue.]