City Commission approves budget policy changes

The City Commission recently approved changes to its budget policy. Finance Director Greg Welch suggested temporarily suspending the City’s funding formula for the local cost share for infrastructure projects due to funding shortfalls and removing a $500,000 cash reserve restriction in the 1% city sales tax fund.

Local cost share for infrastructure projects. The Municipal Infrastructure Fund, also known as Operation Prairie Dog or House Bill 1066, was passed during the 2019 legislative session. The bill made changes to the oil and gas gross production tax distribution formula and provided a new source of infrastructure funding for cities, counties and townships in non-oil-producing counties and airports throughout the state. The bill allocated up to $115 million per biennium to qualifying cities for essential infrastructure projects.

As a result of the projected Municipal Infrastructure Funds, in 2019, the City established a funding formula for street reconstruction projects not receiving any North Dakota Department of Transportation funding. The formula was to special assess 80% of the cost and buy down the remaining 20% with the Municipal Infrastructure Funding from the state. If less than 20% was available, the City’s share of special assessments fund and/or the 1% city sales tax fund would pay for the remaining share.

The City received the initial $2.5 million in Municipal Infrastructure Funds in December 2020. These funds were allocated to the City’s local cost share for the following street improvement projects:

  • Southside Street Improvement District ($1.5 million);
  • Northwest Street Improvement District ($236,000); and
  • Mid-Town East Street improvement District ($764,000).

The recommendation to temporarily suspend the City’s current funding formula for the local cost share for infrastructure projects stems from the City’s share of special assessments, 1% city sales tax and utility funds no longer being able to offset the lack of Municipal Infrastructure Fund revenue from the State. The change is temporary, and can be reconsidered once the City is able to adopt a funding formula that is fiscally sustainable based on the long-term financial and capital improvement plans.

Cash reserve restriction. The long-term financial projection for the 1% city sales tax fund estimates the balance to be at $870,000 by the end of fiscal year 2026. A portion of that balance, $500,000 is reserved under budget policy. Welch’s recommendation to remove the restriction is due to the City’s future funding requests for operations and infrastructure projects, and the City needing to continue to use the cash reserve for budgetary and long-term financial planning purposes.

2022 budget. The Finance Department is working on the City’s preliminary 2022 budget, which will be presented at the Aug. 3 City Commission meeting followed by a public hearing in September.

To learn more or view the revised budget policies, visit