Truth or Consequences city commissioners were prepped by their municipal financial advisor at the Sept. 10 meeting for the next general obligation bond issuances.
More than 80 percent of T or C voters approved of the city issuing $3 million in general obligation bonds at the polls in November 2022.
Mark Valenzuela, managing principal of Bosque Advisors in Albuquerque, is the city’s financial advisor.
The state determines what the city’s property taxes will be each year, Valenzuela said. Before the people approved the G.O. bond issuances the city had only one property tax, which was for operations, and was about 1.47 mills for residential and 2.13 mills for commercial owners.
After the bond question passed, a tax to pay off the debt should have been added to all T or C property tax bills, which Valenzuela estimated at about 3.0 mills. But some glitch at the state level occurred and the city collected no extra tax money. It had to pay about $300,000 out of the general fund to cover the bond debt. To make up for the lack of tax money the previous year, the state set the debt tax rate at a whopping 4.535 mills last year.
Valenzuela warned that there is no cap on debt taxes for G.O. bonds. Such bonds come with nearly an iron-clad guarantee–the city’s people generally obligate themselves when they approve G.O. bonds at the ballot box to use any and all city resources to pay off the debt. “If it needed to be 10 mills, it would be,” he said.
Now is the time when the state sets local property tax rates and they contacted City Manager Gary Whitehead and Valenzuela to discuss the operations and debt tax rates. The state wanted to raise the debt tax to 5.26 mills, but Whitehead and Valenzuela convinced the state to lower it to 3.5 mills.
So far the city has issued two $790,000 tranches, which is $1.58 million principal debt, but there are bond issuance and interest charges, which are about 2 percent, which are reasonable since the New Mexico Finance Authority agreed to handle the debt and buy the bonds. Debt remaining on the first two tranches is $1.32 million, Valenzuela said.
A third issuance of $790,000 will be presented to the city commission at the Sept. 24 meeting in the form of an ordinance for their approval, Valenzuela said.
A fourth issuance of around $630,000 will complete the total $3 million in G. O. bond debt the city has been allowed by the people. No date was given for when that might happen, but Valenzuela said that when the city is ready to go to the people again for more money, they could issue another $3 million to $5 million without raising the city’s property tax for debt above the current 3.5 mills. This is because the city’s “assessed” property value increased by $2 million, he said.
“The city’s infrastructure investment is helping with growth,” Valenzuela said.
The people approved $2 million in G. O. bonds for water and wastewater infrastructure improvements and $1 million for road improvements.
Whitehead said he will lay out where the G.O. bond money has been spent and will outline where it will be spent, posting the information on the city’s and the county’s websites, “so taxpayers can see where the bond money is going.”