FARGO-North Dakota legislators are proposing tapping the Legacy Fund to create a low-interest revolving loan fund that government subdivisions could use to build infrastructure projects.

The Legacy Fund, approved by voters in 2010, receives 30 percent of North Dakota's petroleum revenues. The fund's balance now tops $4.256 billion, with monthly deposits this year averaging $48.3 million, up from last year's $35.3 million.

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The legislative proposal, outlined in a bill draft, would allow up to 15 percent of the Legacy Fund's principal balance-now $780 million available for the 2019-21 biennium-to finance a loan program for flood control and water supply projects, wastewater treatment plants and airport authorities.

As proposed, the minimum loan amount would be $10 million for new projects and $1 million to refinance debt. Terms of the lending program, which would be managed by the Bank of North Dakota, would allow a payback of up to 50 years at an interest rate of 1.56 percent.

Sen. Gary Lee, R-Casselton, one of the idea's sponsors, said the revolving loan fund for infrastructure projects would provide a clear purpose for the Legacy Fund, which so far has gone untapped.

"It would provide a mission for the Legacy Fund and it would allow us to invest in North Dakota," he said.

Because the public works lending program would tap Legacy Fund principal, the project would require two-thirds legislative approval.

The intent of the program is to help finance large public infrastructure projects, such as the $2.2 billion flood diversion project to protect the Fargo-Moorhead metro area or the $1 billion Red River Valley Water Supply Project, that would benefit many residents, Lee said.

For example, he said, the Red River Valley Water Supply Project, a proposed pipeline that would carry Missouri River water to central and eastern North Dakota, would serve about half of the state's residents.

Fargo Mayor Tim Mahoney welcomes the infrastructure lending program. "It could help very much with the diversion and very much with other projects," he said, including water supply. "We're very encouraged by it."

Smaller communities often lack access to capital for infrastructure, but the Legacy Fund program would make them more affordable, Mahoney said. Taxpayers around the state would benefit from the low-interest borrowing rates, he said.

"This would really help rejuvenate a lot of areas in the state," Mahoney added.

Mike Nowatzki, a spokesman for Gov. Doug Burgum, said the proposal fits with the governor's philosophy of how the Legacy Fund should be used.

"He's familiar with the idea," Nowatzki said. "He does not support spending the principal of the Legacy Fund, but he's open to investing the principal in North Dakota."

Duane DeKrey, manager of the Garrison Diversion Conservancy District, which is spearheading the Red River Valley Water Supply Project, said backers will present several financing options to legislators in the 2019 session for building the project, including the Legacy Fund proposal.

A low-interest loan program could accelerate completion of the project, which water officials hope to begin construction on in 2019 or 2020. The project has a budget in the current biennium of up to $30 million, which would enable building to start.

"At the current spend rate it would take about 30 years to build it," and borrowing costs over such a long span could double the cost of the project, DeKrey said.

Ultimately, legislators will decide the best financing method for the water supply project. "We're certainly not locked into anything here," DeKrey said. "We'll take our cue from the legislature.

Schools and road projects would be excluded from the Legacy Fund program because they have their own funding sources, Lee said.