Grant County Commissioners held a public hearing on a bond issue at the regular meeting.
[Editor's Note: This is the fourth of a multi-part series of articles on the Grant County Commission work session, July 12, and regular meeting on July 14, 2022.]
By Mary Alice Murphy
The public hearing on the bond issue was first on the regular meeting agenda of the Grant County Commission on July 14, 2022.
District 1 Commissioner and Chair Chris Ponce swore in Mark Valenzuela of Bosque Advisors, county financial advisor.
Valenzuela handed out the final actions on the refinancing of the Series 2014 GRT bond. "It is contingent on the market and economic savings for the county of at least 3 percent net present value. That means that after all the transaction fees are paid, the county still gets at least 3 percent savings. The market has been all over the place, but there are always investors looking for different opportunities for different reasons at different prices. The bond rating of the borrowing entity is always a component. Most communities in New Mexico reside in the single A rating. As your advisor, part of my job is to be thinking ahead. I've been pinging the market looking for opportunities."
He noted that the county is currently paying about $342,000 to $343,000 per year on the Series 2014 bond, and the county has 22 years left to pay on the bond, out to 2044.
Valenzuela said that one option he found would make the county worse off. "That is not a deal I would recommend."
However, a second option was a commercial bank with an active presence in purchasing governmental debt. "It is offering to purchase your bonds for 3.2 percent, and they would not go out farther than 20 years. So, we structured this as a 20-year bond, which with the transaction fees put in would net you a 3.2 percent savings. This option would work. It is a bit nuanced because you would pay a bit more per years but would be shortening the duration. It would be about $13,000 more a year. The final option we ran was with the Finance Authority and it does not work. You do not have a reserve fund for paying bonds. NMFA requires a reserve fund, but your 2014 bonds don't have that. If the NMFA waived the reserve fund and shortened the term to 20 years, it would work."
District 2 Commissioner Javier "Harvey" Salas asked what the predicted Federal Reserve rate rise of 1 percent would do to this refinancing proposal.
Valenzuela said it would likely push up the rate in the structures he was showing them and would likely eliminate any savings for the county.
Salas confirmed that any transaction needed to be timely before the rate increase.
District 3 Commissioner Alicia Edwards asked what the time frame would be on the potential action by the commission at the meeting that day.
Valenzuela said if the commissioners voted to approve it at the meeting that day, the ordinance allows the county manager to take action. He said as soon as he could get an official term sheet from option 2, if the rate still holds, "we could lock in the rate early next week."
Edwards noted the interim county manager was on personal leave that day and the Financial Director Linda Vasquez was acting as county manager. Valenzuela said he believed that would work.
Browne asked if the reserve requirement did not apply to the commercial bank. Valenzuela confirmed that.
"Do we, as short-term officials, want to give up some of our resources now to benefit someone who might be in place after we're dead and will have some extra money to spend?" Browne asked. "I feel like 3.2 percent is a decent savings. I'm a tentative yes, and I want to make sure my fellow commissioners agree."
Bond Legal Counsel Luis Carrasco of Rodey Law Firm was sworn in. "As to the appropriateness of the signing by the Finance Director I think that's fine, but I can add to the language of the ordinance to make it firm."
He noted they had discussed at the prior month's meeting as well as at the work session on Tuesday about the 2 percent underwriting requirement rather than a more standard 1 percent. "I spoke with Mr. Valenzuela, and he agreed that if it were immediately refinanced, a 1 percent underwriting parameter would be fine, because there would be no need for escrow."
Vasquez noted that Valenzuela had told her the bond would also be eligible for refinancing in 10 years.
Valenzuela confirmed that and said the 10-year window could also be negotiated for a shorter call option. "Passing this ordinance today does not lock you into these opportunities."
Carrasco said: "When we get the authorization of the county manager or delegated officer, the ordinance is good for 120 days. If the option is not done in that time frame, you would have to approve the ordinance over again."
The public hearing was closed, but after a motion to approve, more discussion ensued.
Carrasco noted that adopting the ordinance would allow the financial counsel to find a better deal.
Valenzuela said he believes in markets. "If the market moves into a favorable spot, it might not necessarily be this deal, but I agree that there may be chance to find a better deal."
Carrasco also confirmed that if one of the authorized agents were to leave or retire, "it is the position, not the individual that is authorized. Part of the authority flexibility is that the commission does not have to convene to approve the deal. Yes, the commissioners should be notified, but will not have to approve it."
Edwards asked for approval with parameters, such as a stipulation that the sale does not increase the payment and to amend the language to allow the document to be signed by the county manager, interim county manager or financial director.
The amended motion was approved.
The next article will get into regular meeting reports.
For the previous articles, please visit https://www.grantcountybeat.com/news/news-articles/73119-grant-county-commission-holds-work-session-071222-part-1; https://www.grantcountybeat.com/news/news-articles/73149-grant-county-commission-holds-work-session-071222-part-2; and https://www.grantcountybeat.com/news/news-articles/73208-grant-county-commission-holds-work-session-071222-part-3 .