Our view: Legacy Fund idea a good plan for ND
Herald editorial board
North Dakota has infrastructure needs but it doesn't necessarily have the dollars available to fund them. A proposal floated by Republican lawmakers may help.
The plan would allow up to 15 percent of the North Dakota Legacy Fund to be used to finance loans for all sorts of public infrastructure programs.
North Dakota has a unique problem. Not far removed from the oil boom years, the state has been financially pinched by rapid downturns in the petroleum and agriculture industries. It has led to historic cuts in state funding.
Yet North Dakotans have been a thrifty bunch, siphoning off 30 percent of petroleum revenue and putting it aside to form the Legacy Fund, which soon will top $6 billion in savings.
By design, the principal of the Legacy Fund is hard to access, and we agree that it should be left alone. Likewise, we believe the proposal to use a portion for loans can do great good while still adhering to the spirit of the fund's intent.
Here's how it would work: Loans would be available to taxing entities at a rate of 1.56 percent for up to 50 years. The minimum loan amount would be $10 million for new projects. The result could be tens of millions of dollars in new and vital infrastructure in North Dakota.
Yet there is a side effect. Loaning up to 15 percent of the principal would benefit local projects, but the 1.56 percent interest on the loans would be lower than the rate the fund generates now.
A financial planner would say that's not a wise investment, and financially speaking, we suppose that's true. But the principal will be safe, because the money going out will be true loans and not gifts. Plus, only 15 percent of the principal would be eligible to be used as loans.
Speaking of investment, that's the best benefit. The state would see a direct benefit with new infrastructure projects that heretofore have been out of reach for many taxing entities.
Consider the Red River Valley Water Supply Project, designed to bring Missouri River water to central and eastern North Dakota during times of scarcity. If completed, the billion-dollar project will benefit more than 30 communities and rural water systems and protect much of the state when the next crippling drought strikes.
Backers say borrowing costs over the next three decades could double the total price tag. They also predict a low-interest loan program would accelerate the project.
The Red River Valley Water Project is needed in in North Dakota, and it's a perfect example of a project that would benefit from the loan program. Countless others exist.
Evidently, Gov. Doug Burgum is open to the loan proposal, too. His spokesman told Forum News Service the idea fits with the governor's philosophy of how the Legacy Fund should be used, noting the governor is "open to investing the principal in North Dakota."
That's precisely what this proposal would do.