The vision for Bank of North Dakota to be actively involved in economic development started gaining traction with the Partnerships in Assisting Community Expansion (PACE) program implementation in 1990. George Sinner, a close friend of former Governor Bill Guy shared his dreams for expanding the Bank’s role. Sinner surrounded himself with staff who believed the same, Dick Rayl as head of the budget office and Chuck Fleming as chief of staff.
Governor Sinner described the origin of PACE in his memoir, “The program had been born out of the urgency of looking for an answer, a way to do economic development right. … Chuck Fleming and I got the idea for PACE when we were flying to Bowman one night. We went there to tell the Bowman people they needed to have an economic development tax to help new businesses, a process that was legalized and available, but few counties or cities were using to help businesses get started.”
The 1991 Legislature appropriated $2.7 million toward the program and by the end of the year, all but $500,000 was committed.
In a study that focused on PACE and Flex PACE usage and results between 2006 and 2016, it found 174 communities had benefited from the programs. The total loan value of PACE and Flex PACE programs, including bank participation, was $610,108,704. There were 611 Flex PACE and 264 PACE deals during this period. The average interest rate for Flex PACE borrowers was 1.63% and 2.21% for PACE borrowers.
The impact of an interest buydown on a business can be significant.
Interest buydowns stimulate economic development
BND’s PACE programs subsidize a portion of the interest accrued which allows businesses to begin or expand without the full weight of the debt. The suite of PACE programs can buy down the interest rate up to 5% with the borrower paying a minimum of 1%. The community must also invest in these projects. This example demonstrates a $500,000 loan with an interest rate of 6% and a 240-month amortization.
The impact of a PACE buydown on monthly payments
Projects that are eligible for PACE may receive up to $500,000 in interest buydown. Flex PACE provides a $200,000 buydown with an increase for child care facilities up to $300,000 and affordable housing up to $500,000.