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Fargo staff outlines federal grant and loan availability for lead-service-line replacements, asks commission to decide local share approach
Summary
City water staff said federal and state funding is available to replace lead service lines on the private side of connections and presented options for how much of the local share customers should pay versus the city covering; commissioners urged broad participation and noted the grant funding window is limited.
Troy, a city water staff member, briefed the commission on available grant and loan funding for lead-service-line (LSL) replacement and asked for direction on the local share the city should require homeowners to pay for private-side replacements.
Why it matters: Under the new federal/state lead-and-copper rule revisions, water systems must inventory and reduce LSL risks; staff told the commission that Fargo has roughly 2,150 known lead service lines and about 50 service lines of unknown material, concentrated in older core neighborhoods.
Funding and terms: Troy said state-administered federal funds are available now. Staff’s summary showed roughly $23.3 million in grant or principal-forgiveness funding and an estimated $11.7 million in a state drinking-water SRF loan (a combined program that would make about two-thirds grant and one-third loan available for Fargo). The SRF loan terms shown in staff materials were highly favorable: an approximate interest rate of 0.5 percent and a 30-year term. Staff estimated debt-service on an $11.7 million loan would be roughly $420,000 per year; staff said loan payments would not begin until after construction, with initial payments modeled to start in early 2031.
Program mechanics and timing: Staff emphasized the grant funding availability has a limited window (funds are currently in the state account) and that the federal grant program’s initial award timeline showed money available through 2029 absent extensions. Under the revised lead-and-copper rules, sampling and inventory requirements accelerate in 2025 and other rule provisions take effect in 2027; staff said the rule also requires replacement of lead service lines on the water system within a 10-year compliance window after the effective date, which drives a long-term replacement obligation for the utility.
Options for the local share: Staff presented illustrative options for covering the private-side replacement cost (staff used an assumed private-side replacement cost of roughly $10,000 per service line):
- Option A: Customer pays a large share (staff described customer payments in several permutations in the presentation but did not present a single preferred percentage).
- Option B: Customer pays a modest share (example discussed: customer contribution in the range of $1,000 as a portion of the private-side cost), with the city covering the balance using loan proceeds or other financing.
- Option C: City covers 100 percent of the private-side replacement cost using the combination of available grant, loan, and local funding (staff noted this approach generally yields the highest homeowner participation because other cities reported higher uptake when the city covered most or all of the work).
Commissioner reaction and next steps: Several commissioners urged maximizing participation and avoiding a scenario where many homeowners do not opt in. Commissioner Kolpak and others said they would prefer the city to cover replacements where feasible, arguing that the low-income and older-core neighborhoods should not be left paying for legacy infrastructure. Commissioner Pepcorn urged the commission to pursue state and federal funding and noted payments should be structured to minimize impacts on residents. Commissioner Turnberg emphasized that the replacement opportunity is rare and urged the city to move aggressively to capture available funds.
Staff asked the commission for near-term direction so the city can design a program in 2025; staff said the state currently holds Fargo’s allocation and the next step would be to determine the customer share and contracting strategy (staff suggested bidding larger bundles of work to achieve lower unit prices). Troy said typical on-site work can be completed quickly and that contractors told staff crews could complete several private-side replacements per day when work is organized in contract bundles.
Ending: Commissioners expressed broad support for high participation; staff will return with a proposed program design and recommended customer-share structure, financing plan and estimated timeline once the commission gives policy direction.
