Investing In Santa Fe: The 2018 GRT Bond
The City of Santa Fe has a well-established need to invest in its capital infrastructure. The long economic downturn that resulted from the Great Recession was sorely felt at the local level, leading to extensive deferred maintenance. As recently as 2015, the City faced a $15 million deficit in operating revenue compared to expenditures. That deficit was addressed with budget cuts and freezes, exacerbating infrastructure challenges. The lack of investment in capital infrastructure now hinders important public services, including libraries, recreation centers, public safety operations, and internal City processes.
The City has done significant work to strengthen its financial position. We have not issued a Senior Lien GRT Bond for capital improvements since 2014, at a total of$15.46 million. Since 2014, the City has been active in refunding or paying off outstanding debt to lower interest costs and debt burdens. The City has only issued one new revenue bond for capital improvement projects since 2014-the 2018 Gas Tax Bond which has funded significant road re-paving work
throughout the City. Our current bond rating from Fitch and Standard and Poor's is AA+, one of the strongest ratings in the state.
To begin addressing the City's capital infrastructure needs, the Finance Department proposes issuing a $20 million, Senior Lien Gross Receipts Tax (GRT) Bond for 2018. This bond issue would not increase taxes. The GR T Bond issue enables the City to commit future Gross Receipts Tax revenue to finance the cost of the improvements, which more fairly spreads the cost over both current and future users of the facilities and services. Bond interest rates are also currently
low, offering additional savings.
Over the past two months, City staff assembled a package of priority capital improvement projects to be funded by the GRT Bond based on the following primary criteria: City Obligation, Critical Need, Deferred Maintenance, and Leverage Matching Funds.
The staff proposal also takes into account: equity, geographical diversity, potential public reach, best use of funds potential savings and project readiness. In evaluating projects, staff took into account that 85 percent of the total $20 million should be spent within three years of the bond issuance. With a $20 million cap on the bond issue, staff has been mindful of the need to develop cost estimates for projects that are as accurate as possible, using accepted methodologies and relying
on professional engineers' expertise.
The final choice on how the funding is allocated belongs to the Governing Body. If the Body approves the bond issue at the October 31st regular meeting, the bonds could be sold as early as mid-November, with proceeds realized by mid-December.
The following charts give a quick overview of where and how the bond proceeds would be invested under the staff proposal: