Commentary: Legacy Fund loan program could be a really, really big deal for North Dakota
I'll admit it. I really didn't like the idea of creating the Legacy Fund.
When the constitutional amendment was proposed during the 2009 legislative session I was opposed. When it was on the ballot in the 2010 election cycle I urged a "no" vote.
I didn't like the idea of collecting billions of dollars from the private sector and locking it away in some government fund with no defined purpose.
Most voters disagreed with me. Almost 64 percent of them voted to create the fund which is now forecasted to have a balance in the ballpark of $6 billion by the end of the current biennium.
Those billions of dollars have attracted a lot of bad ideas over the years.
During the tight post-oil boom budget cycles we've heard a lot of calls to raid the fund to prop up excessive boom-time spending. We've also seen proposals to use the Legacy Fund as a sort of piggy bank for North Dakota's bloated university system.
The first good idea I've heard for the Legacy Fund has come by way of a draft legislation — to be proposed during the 2019 session by state Sen. David Hogue and Rep. Roscoe Streyle, both Minot Republicans — which would use a portion of the fund as a loan program for North Dakota infrastructure.
The Legacy Fund is already conservatively invested in things like government infrastructure bonds. Why not invest in bonding infrastructure here in North Dakota?
If we're going to loan ourselves money to build infrastructure, why not save some money by giving ourselves a really low interest rate?
The proposed program would make 15 percent of the Legacy Fund available for loans to North Dakota political entities looking to build infrastructure. The interest on the loans would be capped at 1.56 percent, and the types of infrastructure would be limited to water projects, flood control and airports.
Though when I spoke with Streyle on my radio show, he said he's not opposed to expanding the scope. This is a draft proposal, after all.
The potential benefits, if this comes to fruition, are enormous.
The cost of infrastructure projects financed through this program would be dramatically lower.
Not only is the capped interest rate lower than the going market rates, but the underwriting and broker fees would be eliminated. Which, in turn, means these infrastructure projects are less of a financial burden on taxpayers.
It also makes the projects easier to build
This is accomplished without spending the principal of the Legacy Fund itself. These are loans. They'd be paid back. With interest.
Critics might argue about the cost of lost opportunity by using Legacy Fund dollars in these ways. The capped interest rate means these invested dollars won't get as big a return.
But is that the goal we want for the Legacy Fund? Maximized earnings? Or would we rather use these public dollars to serve the public in ways that facilitate the building of needed infrastructure and save us money along the way?