Voters may need to OK using Fargodome cash: Fargo commissioners plan to use funds for convention center
FARGO — If city commissioners want to use Fargodome money to build the convention center they want downtown, 60 percent of voters here will likely need to approve it.
That’s how former city attorney Gary Stewart reads the city’s Home Rule Charter, which requires the dome’s sales tax revenue to be spent on or adjacent to the North Dakota State University campus. It takes approval from at least 60 percent of voters in a citywide election to change the charter.
“The public has to speak on this,” Stewart said. “You can’t take this kind of money and willy-nilly do it.”
The prospect of needing a vote has not come up in public discussions about potentially using half of the dome’s $38 million reserve fund to build a convention center downtown. All five city commissioners have said they prefer a downtown site to building near the dome on NDSU’s north-side campus.
Some commissioners said last week it’s too early for detailed discussions about location because the city has to first figure out if it can afford the new convention center.
But City Attorney Erik Johnson said he believes the language in the charter leaves room for interpretation, though he didn’t offer his own clear-cut legal opinion on it.
“It’s 25 years later and the NDSU campus has expanded into downtown Fargo,” he said. “What does that mean exactly? Does that allow for — even if you were to read all that to mean it has to be on or adjacent to the NDSU campus — does that it mean it can be somehow downtown? Perhaps.”
Two previous votes
For nearly a year, city and Fargodome officials have been discussing where a new convention center might go.
City commissioners want it downtown, as does Doug Burgum, the former software executive who now heads the downtown development Kilbourne Group.
Burgum pitched to the Fargo Dome Authority last June on building the new convention space downtown, arguing that it would help spur development in the area — which will in the coming years be home to a new $15 million City Hall and a $53 million floodwall. The developer, who couldn’t be reached for comment last week, would like to build a $125 million skyscraper in the same general area.
On the other hand, the Fargodome’s general manager wants the new convention center attached to the dome. The Fargo Dome Authority, an advisory board to the City Commission, hasn’t taken an official position on it, though it may on Thursday.
The fate of a new convention center downtown could come down to a few words in city law. The public voted in 1988 to amend the city’s Home Rule Charter to allow for a half-cent sales tax to build, maintain and operate the Fargodome and any “functionally related and subordinate facilities.”
Those facilities, the charter spells out, are “all to be located on or adjacent to the NDSU campus.” Proceeds from the sales tax were also invested into a reserve fund and, along with any annual operating surpluses and investment income, that fund has grown to $38 million today.
The city has twice in the last 15 years attempted to change the charter to allow the city to dip into the fund for other facilities. Both times the public said no, though both measures also involved extensions of the half-cent sales tax.
In 2000, the public shot down a five-year extension, which was meant to fund a multipurpose arena. That event center would have been connected to the dome, but like today, city leaders battled then over whether to put the center downtown or on campus.
The site-selection process didn’t get resolved until a month before the vote, in which 62 percent of voters rejected the $42 million event center.
If it had passed, the charter would have been amended to allow the city to spend dome sales tax proceeds away from NDSU, if it had the OK of the City Commission.
In 2005, voters rejected a downtown ice hockey center that would have been paid for through an extension of the dome’s half-cent sales tax for 3.5 years. Only 29 percent of voters supported the so-called Renaissance Center.
Like in 2000, if voters had said “yes,” the charter would have changed to allow dome sales tax money to be spent either on campus or at a site approved by city commissioners.
Stewart, now an assistant city attorney, said the 2005 language was added intentionally. “I felt the necessity at that time that you had to have something to authorize” spending dome reserve money away from the NDSU campus, he said.
But now that NDSU has a downtown presence, City Commissioner Mike Williams said he doesn’t think a charter amendment is needed to spend dome reserve money downtown.
Stewart said that’s a “weak argument” he would not want to defend in court.
“I really think that, even if you could somehow come up with a rationale for doing it, the public is going to say, ‘Hey, this should be voted on,’ “ Stewart said. “That’s the right way to do it.”
City Commissioner Tim Mahoney said the votes in 2000 and 2005 don’t necessarily indicate the public’s appetite to spend dome reserve money on other projects.
“Those votes were for specific projects, and what happened is, people didn’t like the projects,” he said.
“Now in 2014, the new City Hall is coming in and some other stuff is happening downtown. In 2005, we didn’t have all that energy,” Mahoney said.
Still, Mahoney said more public input is needed long before any dirt is turned.
“It could be a public vote, but I don’t think it’s far enough along to say that,” he said. “I mean, people gotta decide where they want to do it.”
When it comes to finally picking a site, Mayor Dennis Walaker said asking the public for insight will be crucial.
“There’s nothing that we’re going to do that doesn’t have input from the public,” he said.
But the mayor also said it’s too early for involved talks about the convention center because “the first thing we gotta do is we gotta build the City Hall.”
Construction of City Hall on the north side of the Civic Center parking lot is expected to start at the end of summer and would take until about November 2015.
Dome needs reserve
Some officials are concerned that pulling too much money from the reserve fund will set the dome up for failure.
The dome relies on the interest it makes on the $38 million fund to help it operate, Williams said.
He said the dome uses about $2.5 million from that interest every year for capital maintenance and improvements. A new convention center would also rely on reserves to help its annual operations, he said.
“Basically, that reserve fund is the taxpayers’ insurance that we don’t have to raise taxes to keep the thing going,” he said.
If the city takes $19 million out of the reserve to pay for a building, as suggested by a recent consultant’s report, it wouldn’t leave enough money in the pot to generate the interest needed to fund operations for the dome and the new convention center, Williams said.
The report from HVS Conventions Sports and Entertainment Facilities Consulting presented to the Fargo Dome Authority this month didn’t estimate the cost of a downtown site because of the other projects going on downtown.
Williams said he prefers a downtown option.
“But before we do anything, I think we need to show that we can come up with a sustainable funding model,” he said.
That could include bonding instead of using the reserve fund, he said. Williams floated using a 20-year loan in the amount of $15 million to $20 million.
A conservative projection has the dome reserve fund gathering 5 percent interest annually, while the city would be paying around 2.5 percent on a 20-year loan, Williams said. For him, that’s an annual net gain.
“I’m not saying that this is the only way to do it,” he said. “My major point is that we can’t afford to take a lot of capital out of that reserve fund.”
For Dome Authority President Deb Mathern, the charter language means the $38 million dome reserve fund is specifically for the Fargodome, and must be used at the current site.
“There’s no doubt in my mind that that is what it was earmarked for,” Mathern said. “But I’m going to have some people disagreeing with that.”
The dome could need a new roof or other major upgrade in the near future, Mathern said, but if too much of the reserve fund is spent elsewhere, the dome would suffer.
“It’s like having a new child and not paying any attention to that older one,” she said.
The Fargo Dome Authority meets Thursday, and could make a site recommendation to the City Commission, but Mathern said she was OK with it going to a vote, if needed.
“That’s the law, and that’s the way it’s written, so I’m completely OK with that,” she said, “and then the public will have had their say.”