In flood aftermath, Moorhead tries to kick-start housing market

The city of Moorhead and the state of Minnesota have spent $60 million since 2009 to buy homes along the flood-prone Red River and replace them with permanent levees and floodwalls.

Now that Moorhead has accomplished much of its plan to prepare for a repeat of the flooding that occurred over the past three years, Mayor Mark Voxland said it's critical to build the city's property tax base with new home construction. That's particularly important during a time of decreased state aid to local governments, he said.

But that's not happening, the mayor said, because people are likely worried about the economy and more flooding.

"I think the flood of 2009 stopped a lot of people in their tracks as far as wanting to build or even to move or put an addition on," Voxland said. "Everybody is kind of concerned where does it flood, where doesn't if flood. It's something that's on everybody's mind."

Moorhead officials hope to kick-start the local housing market early next year with a mix of marketing and financial incentives. They'll also tout their efforts to remove flood prone homes and build new permanent levees.

So far, however, protecting the city from water hasn't boosted the confidence of local residents. Across the Fargo-Moorhead region new housing starts are off 20 percent but in Moorhead new home construction is down 40 percent.

At the same time, the city is buying and removing dozens of flood-prone homes along the Red River, and that means less property tax revenue.

Moorhead officials say if all 170 homeowners accept the current round of buyouts, the lost property taxes would amount to $565,000. The city share of that lost revenue would be $173,000 a year.

City Manager Michael Redlinger said the city spent $10.5 million fighting floods in the past three years. Removing homes along the river will save costs of fighting future floods, so the lost property tax revenue will likely be offset by future savings in flood costs.

Moorhead hasn't done a good job of selling those changes to potential new home buyers, Voxland said.

"Part of our building slowdown has been actually our aggressiveness in protecting along the river," he said. "I think a lot of people have interpreted that as we're really concerned because we flood easily. It's not the case. We don't flood easily."

About 40 percent of Moorhead would stay dry even in a catastrophic 500 year flood, Voxland said.

Most of the new development is happening in areas far from the river, where property was once considered prime real estate in Moorhead. Starting next year, property owners along the river will see the value of their property fall by as much as 25 percent.

"That's a hard hit for somebody whose lived along the river and thought of this as premier property and now all of a sudden it's the least desirable property in Moorhead," Voxland said.

But some residents can't shake the worry about floods. Frank Hunkler, who recently moved into an apartment two miles from the Red River, considered buying a house, but decided it wasn't worth the stress.

"The thought of having a house that would flood, if even the basement would flood, would be too much," Hunkler said. "So I decided this would be the way to go and it's far enough away from the river that if something should happen I can be out of here very fast."

He's not alone. Local contractor Terry Becker said when people inquire about building a new home, often their first question is about flooding. He said three consecutive floods have a psychological effect.

"Just seeing the trucks rumble down the road and seeing the road closures and you see the sandbags loaded on trucks, it just gives you a bad feeling," Becker said. "People need to feel good to spend money."

Moorhead officials say 60 percent of flood buyout homeowners are relocating in Moorhead. Some are buying homes, some are renting and others are moving into retirement communities.

"We may not have a full appreciation until two or three years down the road to really know the true impact, after people are done constructing new homes as well as purchasing new homes, waiting for the right property to come up and leaving a rental for example," Redlinger said.

Holding back investments on new homes has an economic affect on schools, the county and the city.

Redlinger worries the budget crisis in Minnesota makes some people choose to build homes across the river in Fargo. He'd rather they think about Moorhead as part of North Dakota.

"Our economy is largely tied to and contingent upon the success of the North Dakota economy and despite a strong regional economy in the immediate Fargo-Moorhead area, despite a nearly record low unemployment rate, there still are people who kind of package Moorhead with Minnesota's woes," he said. "The facts don't bear that out. The economic woes of the metropolitan area, the Twin Cities, are not the issue here."

By offering incentives to build, city officials hope next spring to be talking about how local contractors are busy building houses, not levees.

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