The fourth and last tranche of the $3 million in general obligation bonds was approved by the Truth or Consequences city commission at their July 8 meeting.
City residents approved the $3 million G.O. bond at the November 2022 polls, with $2 million going to water and/or wastewater capital projects and $1 million going to repair roads after tear up.
The three prior tranches were each for $790,000. This fourth tranche will be $630,000, with $190,000 going to roads and $440,000 going to water/wastewater.
The prior three tranches were all bought by the New Mexico Finance Authority at about 2 percent interest, which is known as a “private placement.”
Mark Valenzuela of Bosque Advisors and Chris Muirhead of Modrall Sperling law firm have been the city’s financial advisors and consultants on the G.O. bond.
Now that the city commission has approved a resolution stating their intention of issuing a fourth tranche and giving authority to its financial advisors and the city manager to negotiate the financing, NMFA will be approached again and will hopefully buy up the $630,000 at a similar 2 percent interest rate over 20 years.
The city’s website states that the total cost of the four issuances, with interest, banking administration and consulting fees, will be $3.55 million, which is 18.33 percent of the face value of the bonds. If this estimate is correct, then this is an expensive way to borrow money.
The G.O. bond resulted in a new municipal debt service property tax above and beyond the nearly 1.50 mill levy that is collected to pay for city operations. In fiscal year 2024 the debt levy was 4.50 mills, but in fiscal year 2025 it was reduced to 3.50 mills. With this fourth issuance, the mill levy will stay the same, Valenzuela predicted.
The tax, at the 3.50 rate, brings in about $430,000 a year, Valenzuela said.
City Manager Gary Whitehead said there is a little money left over each year and by 2028 there should be enough excess to pay the city’s general fund back the nearly $300,000 it paid in 2023 in debt to NMFA. The general fund had to be tapped because the state didn’t impose the requested new tax, so the city missed out on a year of tax revenue.
Whitehead said the money from the bonds has mostly been used as match money to make the city eligible for state agency grants/loans. The four tranches will have “leveraged” about $10 million in projects, he said, as well as partially paying for other projects, such as the purchase of smart water meters.
A complete summary of how the $3 million was used will be presented to the public in 2027 when the city commission will ask them to approve another $3 million G.O. bond, Whitehead said.
The city commission is considering expanding the uses of the money beyond water, wastewater and road projects. During May and June discussions of what to include in the yearly update of the Infrastructure Capital Improvements Projects, the city commission was amenable to funding a pool/recreation center partially with G.O. bond money.
The city commission approved a resolution that allows Whitehead, Muirhead and Valenzuela to approach the NMFA. It also approved publication of an ordinance concerning the issuance of the fourth tranche, which will go to public hearing in August. September will likely be when the fourth tranche is issued.
For information on prior issuances, please see: