Good on Truth or Consequences City Manager Angela Gonzales for admitting it’s her fault the $3-million general obligation bond approved by voters November 2022 is still not collecting its new share of property taxes. One can’t correct errors until they are identified and acknowledged. I applaud Gonzales for taking responsibility and talking about it in a public meeting.
Gonzales told the city commission during the May 15 budget session that although the Department of Finance and Administration thinks the city correctly shepherded the bond through required hoops, the Department of Taxation and Revenue did not. The end result was that Sierra County didn’t change or increase T or C property taxes to cover debt payments for the bond.
Gonzales went on to say that the city owes its first payment on the debt, nearly $300,000, on August 1. Although the city doesn’t have the new tax revenue to cover the payment, “the city can’t default on its first payment,” she said, which will come out of the “debt service” fund.
She chose “not to fight the state” over the bond-tax issue, “because they just gave us $20 million,” Gonzales said. City commissioners said nothing and asked nothing.
Gonzales was referring to legislators and the governor giving $4.4 million in capital outlay and the Water Trust Board giving the city $16-million to address emergency waterline repairs. The city was informed of the awards in March.
Some background on the G.O. bond: The city hired Mark Valenzuela of Bosque Advisors and Chris Muirhead of Modrall Sperling, both located in Albuquerque, as financial and legal advisors for the G.O. bond issue.
During the Jan. 25, 2023 city commission meeting, Valenzuela said the G.O. bond would increase property taxes by 2.5 mills. Nonresidential property taxes would go from 2.225 mills to 4.725 mills. Residential property taxes would go from 1.542 mills to 3.042 mills. https://sierracountycitizen.org/truth-or-consequences-general-obligation-bonds-will-more-than-double-property-taxes-2-5-mills-increase/
Valenzuela said the city will issue $750,000 in G.O. bonds each year for four years, $500,000 for water and wastewater projects and $250,000 for road projects. The debt will cost $4.2 million total, he said, not specifying the life of the debt or the interest rate. Four issuances are about $350,000 cheaper than issuing the bonds all at once, Valenzuela added.
After four years, “$600,000 of principal will have been paid off and then we can ask the people for more, without having to raise taxes,” Valenzuela said.
During the April 12, 2023 city commission meeting, https://sierracountycitizen.org/t-or-c-city-commission-passes-a-general-obligation-bond-ordinance-far-scarier-than-it-needs-to-be/
Valenzuela and Muirhead said the $3 million G.O. bond had been “privately placed,” that is, New Mexico Finance Authority bought the debt, which is essentially a 15-year loan at 2.03 interest. They also said the first tranche will be for $790,000, not $750,000, with $520,000 going to water and wastewater projects and $270,000 going to road projects.
At the same meeting, Valenzuela said the mill levy was “still undetermined,” and property taxes could increase up to 3.0 mills.
During the April 25, 2024 meeting, Muirhead introduced the ordinance for the second $790,000 tranche of bonds.
I wrote an article decrying the lack of information on how the first tranche was used and how the second tranche is to be used.
Gonzales, during the May 15 budget session, agreed that the people have a right to know where the G.O bond tax money is going, but then failed to elaborate.
In a follow-up email, Gonzales said the city had not received $790,000 from the New Mexico Finance Authority, so the first tranche has not been spent.
Both tranches, totaling $1.58 million, will be incorporated into the upcoming budget, Gonzales said, which fiscal year starts July 1 and ends June 30, 2025.
During the budget session, Gonzales said the G.O. bond funds will go into the “Capital Reserves Fund,” which is numbered 315, claiming “we will be able to show the public and department heads what gets paid out of this line item.”
The ordinance to issue the second $790,000 tranche goes to public hearing during the May 22 city commission meeting.