FARGO - North Dakota Treasurer Kelly Schmidt has come out against a legislative proposal to tap the Legacy Fund to create a revolving loan fund to finance public works projects.

The voter-approved Legacy Fund, which receives 30 percent of state petroleum revenues, has received deposits exceeding $4.25 billion since it began accumulating in 2011. Including investment earnings, the fund has a balance of more than $5.42 billion.

The legislative proposal, which will be decided by the 2019 North Dakota Legislature, would use up to 15 percent of the Legacy Fund's principal balance - now $780 million - to lend to cities, counties, water resource districts, rural water systems and airport authorities for infrastructure projects.

As proposed by Republican lawmakers, loans to political subdivisions would be available at a rate of 1.56 percent for up to 50 years. The program would have a minimum loan amount of $10 million for new projects and $1 million on refinanced debt, which can comprise 20 percent of total capital.

By Schmidt's estimate, the amount of principal available for the 2019-21 budget biennium will reach $810 million, which would translate into $1.6 billion over a decade.

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"Pulling $1.6 billion from the principal of this fund is not what North Dakotans voted for," the Republican treasurer wrote in a statement. "The principal of this fund should be left to grow for generations and the interest income used for special funding needs."

As it stands now, 2.83 percent of the Legacy Fund is invested in an infrastructure portfolio with a rate of return for 2017 of 5.85 percent, Schmidt said. The state now invests $200 million with a Bank of North Dakota matching loan program, with $63 million loaned out at a rate of 1.75 percent for five years.

Last year, the Legacy Fund earned a net return of 14.6 percent, Schmidt said. Over the past five years, the fund earned a net annualized return of 6 percent, exceeding the performance benchmark of 5 percent.

Proponents of the Legacy Fund revolving loan program have billed it as a way to invest in the state.

Supporters include Fargo Mayor Tim Mahoney, who has said the low-interest loan program could help finance the Fargo-Moorhead diversion, with a cost topping $2 billion, as well as the $1 billion Red River Valley Water Supply Project, which would be capable of supplying water to half of North Dakota's residents.

Schmidt said she could be convinced by the argument to use interest income from the Legacy Fund for current needs. In 2017, lawmakers voted to take $200 million from the Legacy Fund to balance the budget; more than $200 million in additional funding from interest earnings would be available for the next two-year budget cycle.

Schmidt said she wanted to make her position known about the Legacy Fund infrastructure proposal to become part of the public debate over the idea.

"I look forward to the discussion," she said in an interview. "I was in the room when the resolution was drafted," for the measure, approved by voters in 2010, to create the Legacy Fund.