Official Newspaper of Eddy County since 1883
Official Newspaper of Eddy County since 1883
Republican lawmakers have prepared draft legislation that would tap part of North Dakota’s Legacy Fund to provide low-interest loans for large and expensive infrastructure projects. The Legacy Fund, approved by voters in 2010, is where 30 percent of state tax revenues from oil and natural gas production are deposited. The fund now holds more than $5.42 billion. In February alone, more than $50 million was deposited into the fund.
Sponsors propose using up to 15 percent of the fund’s principal every two years to provide loans at 1.56 percent interest. Administered by the state-owned Bank of North Dakota, the loan funds would be used for infrastructure projects such as flood protection, water systems and street improvements. Cities, counties and other political subdivisions such as townships would be eligible for the loans.
According to the draft bill, political subdivisions would have to borrow at least $5 million for new projects, or $1 million for refinancing debt to qualify for the program, and would have up to 50 years to pay the funds back. This is slightly different than stated in some media reports, where the minimum was listed at $10 million. School districts would not be eligible, as there is already another funding mechanism in place for school infrastructure.
Minot Republicans Sen. David Hogue and Rep. Roscoe Streyle are the bill’s primary sponsors. They told the Associated Press that creating a revolving loan fund from the state’s oil tax savings account would help complete projects sooner, save on interest and inflation costs, and would help grow the state’s economy.
“We need a funding mechanism now to help communities fund critical infrastructure,” said Streyle, a banker. “If we do this down the road, we know it is going to cost hundreds of millions more.”
The measure would need a two-thirds vote of approval from the North Dakota House and Senate in order to spend any of the fund’s principal. Even if approved, lawmakers may not withdraw more than 15 percent of the principal every two years.
The draft stipulates that all interest earnings from loan repayments would go back to the Legacy Fund and all principal payments would stay with the revolving loan fund. “The overall intent is to reduce project finance costs now paid by residents for public infrastructure, and to continue to develop the infrastructure required to build our state economy at the local level,”
District 1 Sen. Brad Bekkedahl, another of the bill’s sponsors, told the Williston Press.
Readers are likely aware that the City of New Rockford is planning a major infrastructure project of its own very soon. The proposal is to completely overhaul the city’s water and sewer infrastructure, a project that’s expected to cost approximately $7 million. The project does meet the criteria of an “infrastructure” project and is greater than the $5 minimum set in the draft. So, what do our local legislators think? Is this a good use of the legacy fund? I reached out to District 23 Sen. Joan Heckaman and Rep. Don Vigesaa to get their initial reactions.
Heckaman (D-NPL) sees the proposal as an investment. “I like revolving loan funds,” she said. “This provides opportunity for future work to be done with the payments from political subdivisions that have received loans and are now paying them back.”
She and her Democratic colleagues put bills forward during the 2017 session that would have accessed the fund’s principal, but they were defeated. As for this proposal as reported, Heckaman is concerned that the majority of the funds would be used by larger communities, and that small towns would be disadvantaged due to the minimum established for new projects.
Heckaman does see the value in using the principal of the fund, but is aware that it comes with its pitfalls. “There are many sticky parts to moving into using this fund. During the 2017-19 biennium we could have accessed even 3 percent, or 5 percent, or any percent up to 15 to shore up many agency budgets. But that was not done and now we are seeing the increase in property taxes that will continue unless we change the way N.D. looks at revenues and expenditures,” she concluded.
Rep. Vigesaa (R) is hesitant. “I’d like to see the fund grow more before using principal,” he said. Right now the balance is little more than the state’s general fund budget for the 2017-19 biennium, which totaled $4.3 billion. Also, lawmakers pledged up to $200 million of the fund’s earnings to balance the state budget in 2017, although it is unknown whether or not the funds will be needed.
He also noted that oil is a finite resource, and at some point the state’s oil reserves will be diminished. He would rather see the principal used by future generations when those oil revenues are much harder to come by than they are now.
Vigesaa said that it is hard to tell what shape the proposed bill may take between now and the 2019 legislative session. He understands that creating a loan fund with the principal could be considered an investment, but was clear that he would not make a decision to support or oppose the plan until a formal version is brought forth for a vote.
