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With floodwaters rising around them, Fargo officials and the Federal Emergency Management Agency faced an agonizing decision: Should they order a mandatory evacuation of the entire city?

FEMA thought the best course of action was to evacuate and not leave anything to chance. Fargo officials disagreed, saying they knew what it would take to hold back the Red River. The conversation turned heated at times, and Fargo ultimately won.

Click to view flood photos

Now that the Red River is receding and leaving only relatively minor damage, that decision looks smart. The city began returning to normal Wednesday as people went back to work, stores reopened and the river dipped to only slightly above 37 feet.

At the height of the flood, Fargo's levees held back most of the deluge, and allowing residents to stay enabled them to fill sandbags, patrol for dike leaks and monitor pumps to keep water out of homes.

But the episode demonstrates the kind of clash that can unfold between federal and local governments in an era when FEMA is intent on avoiding another failure of Hurricane Katrina proportions. It was also perhaps an inevitable result of federal bureaucrats coming head-to-head with the pride of a local community.

In this case, Fargo stood up to the government and won, showing a sturdy resolve that was apparent throughout the flood-fighting effort.

Fargo leaders including Mayor Dennis Walaker repeatedly vowed to beat back the river, to "go down swinging" as they put it. City Commissioner Tim Mahoney even ended a briefing Monday by saying, "The spirit of Fargo: Evacuation is not an option."

FEMA's response was more measured, warning of an epic disaster if the Red River burst past the levees and swamped the city of nearly 100,000 people.

The agency could point to Grand Forks, 70 miles to the north, where the same river ravaged much of the community 12 years ago. In that case, most of the 60,000 residents were forced to flee after floodwaters covered the city and a fire destroyed several buildings in the heart of downtown.

Grand Forks waged a furious sandbagging battle similar to Fargo's effort, but it was not enough. The river swiftly surged past crest projections, giving the city little time to prepare.

In Fargo, volunteers built levees to contain the river provided it did not rise above 43 feet. The water topped out at nearly 41 feet.

Fargo officials said they had a better levee system in place than Grand Forks, making the comparison irrelevant.

"You can't place a price on human life, and if you're going to err in any way, it's got to be" to save lives, said Mike Hall, FEMA's coordinating officer on the ground in North Dakota. "If it had gone to 43 feet, that's ... over the top of the levees. How do you protect for that? That's the sort of healthy discussion you have to have."

The fact that Fargo residents were even around to witness the flooding was the result of a meeting Friday in Fargo among city, state and federal officials.

Mahoney, the city commissioner, described the discussion as "heated," but said he and the mayor made an impassioned argument to dissuade the government on the evacuation issue.

"We had some losses we could take. We knew that," he said. "We're organized. We know what we're doing. We know our contingencies."

Walaker said the city faced "an awful lot of pressure" to evacuate.

Evacuations are expensive, logistically difficult and endlessly second-guessed. If a city stays and fights, and the dikes fail, blame will come as fast as the rushing water. If a city evacuates and the dikes hold, angry residents may be reluctant to leave next time.

"He certainly knew he was on the hot seat either way," Hall said. "If it had been 43 feet and people would have drowned, then they'd be all after him for that. ... He felt what they had in place could meet the challenge.

Ben Smilowitz is in charge of a group called the Disaster Accountability Project that was formed in 2007 to monitor disaster-relief efforts by FEMA in the aftermath of Katrina. He said the decision to evacuate is ultimately up to the local government, and that "a decision overruling a local government is rare. ... It would come from much higher in the food chain than FEMA."

He said FEMA is there to provide guidance and supplies for disaster-stricken communities regardless of how strongly federal authorities disagree with local governments.

"The last thing FEMA wants to do is play political games with reimbursement dollars, because that could discourage local governments from making the best decisions out of worry they won't get reimbursed," Smilowitz said.

Acting FEMA Administrator Nancy Ward, who came to Fargo to witness the threat, declined requests for an interview.

In a written response to questions from The Associated Press, FEMA spokesman Terry Monrad said the agency did discuss evacuation with state and local officials, but "the decision to evacuate any municipality is ultimately made by local officials."

In the end, Fargo leaders and FEMA officials emerged from the dispute on good terms. Walaker praised the efforts of FEMA and every other agency, and the government provided important on-the-ground assistance.

Hall said he was not worried that Fargo's decision might embolden local officials to disregard FEMA in future disasters. He said Fargo officials put a lot of time and thought into their decisions.

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FOX News' Rick Leventhal and The Associated Press contributed to this report.