Las Cruces Council OK's $28.5M Bond

Money will pay for streets, economic development
Las Cruces >> Las Cruces city councilors approved the issuance of up to $28.5 million in debt, which will be repaid over 20 years using revenue from a 2014 tax hike. The bond proceeds will be combined with a year’s worth of unspent GRT money and directed to three types of projects: economic development, facilities improvements and city streets, city officials have said.
The item had been up for a vote in early September, but a “super majority” of the City Council — at least six people — wasn’t present for the vote on the proposed bond issuance, prompting the item to be postponed until Monday.
All six councilors and Mayor Ken Miyagishima attended Monday, and they unanimously voted to issue the bonds after a presentation by Eric Harrigan of RBC Capital Markets, the city’s bonds adviser.
Harrigan said the bond market is favorable to the city, so it should get a lower interest rate when selling the bonds, set to happen at city hall on Thursday. The city has an AA3 bond rating, which officials said works in the city’s favor.
Councilors posed questions to Harrigan, but there wasn’t debate about the decision.
Harrigan estimated the city could get about $27 million in the sale.
The exact amount of the bond package will boil down to the interest rate the city gets on the debt, said City Manager Robert Garza after the meeting. “On Thursday, investors compete for the sale by proposing various interest rates,” Garza said in an email. “Low rates could yield higher loan — bond — amounts. The market on that day at that moment will dictate exactly what we see in terms of attractive interest rates.” Miyagishima said it was a positive that the city’s bond rating is so strong because it means “better rates and lower cost for the public.”
A controversial 3/8 of 1 percent hold harmless gross receipts tax, which took effect in mid-2014, is the source of the money for bond repayment. Councilors earlier decided to use the approximately $36 million generated by the bond and GRT money in three areas — 45 percent (roughly $16.2 million) for street improvements; 20 percent ($7.2 million) for energy-efficiency improvements to city facilities; and 35 percent for economic development. Among the projects considered for economic development are an expansion to the convention center, a sound stage for TV and film productions, a “spec building” and incubator projects targeting small businesses.
Garza said about $1.9 million — out of an estimated $8 million per year collected from taxpayers — will be used each year to repay the bonds. Out of the remaining sales tax proceeds — roughly $6 million per year — a portion will be put into savings, while the rest will be used in the city’s general budget, Garza said.
The council is set to meet in a special meeting Thursday afternoon for a final approval after the bond sale.
Incentive awarded
Also, the council approved issuing $60,000 in economic development incentive funding for a drone company, ARCA Space Corp., to lease about 14,000 square feet of space in two hangars at Las Cruces International Airport.
The dollars will be provided to the company via the Local Economic Development Act, New Mexico’s version of a closing fund, city officials said. While LEDA projects locally have tended to combine both state and city funds, city economic development coordinator Gary Camarano said the ARCA incentive is stemming from the city only, at least for now. However, the state is considering an award as well, he said.
Camarano said a condition of the funding is that the company create at least 20 jobs within three years. And once it has created the 20 jobs, even if it’s before the three-year mark, ARCA Space Corp. must maintain them for at least two years. The company has hired 11 personnel, Camarano said. And it’s set to start light manufacturing work later this week from the airport. “It puts the project right up to speed,” he said of Monday’s approval. “We’re happy to have an aerospace company join us in Las Cruces.”
The company fits into the city’s goals for promoting economic development in that it’s both a light manufacturing operation and an aerospace business, Camarano noted. “We want to get above average paying jobs, and these jobs pay well above the median in the county,” he said. ARCA is slated to do testing at both the Las Cruces airport and Spaceport America in southeastern Sierra County, city officials said.
By: Diana Alba Soular (Las Cruces Sun-News)
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