Council reviews payment obligations

STAFF WRITER

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At Tuesday night’s Portales City Council meeting, councilors scrutinized a resolution for the city to guarantee the payment of loans that the Eastern New Mexico Water Utility Authority has accumulated.

ENMWUA Executive Director Justin Howalt and RBC Capital Markets Municipal Finance Department Director Erik Harrigan attended the meeting to present to councilors a review of the resolution, which will not require action until the council’s Nov. 15 meeting.

The resolution, according to Howalt, was directly related to the Eastern New Mexico Rural Water System, a plan undertaken by the ENMWUA — made up of the communities of Melrose, Clovis, Texico, Grady, Elida, Portales and Curry and Roosevelt counties — to pump water from Ute Lake and provide water to member communities in the future.

“What the resolution is doing is it states how much existing loans the Water Utility Authority has. Then the Water Utility Authority pays the debt service on those loans through our member contributions,” Howalt said. “What the resolution itself does is states that the member community will be responsible for paying their member contribution, and if something were to happen to the authority, then the entity would be responsible for the debt service on those loans, because obviously the authority wouldn’t be able to pay them at that point.”

According to a presentation of ENMWUA’s finance plan given by Harrigan, Portales’ member contribution fees in 2017 were projected to be $336,102, which is down from the 2013 projection of $369,712. ENMWUA’s total debt service for 2017 was projected to be $215,625.

Harrigan said that member contributions are projected to disappear entirely by 2037, when Portales will be able to purchase water from ENMWUA because of the water system project.

“In the event that water is available to sell to Portales, that member contribution is going to go down by the water sales. In 2037, when the entire project has been built, and they’re delivering water, that’s why the member contribution has effectively gone away; because that member contribution is gone and instantly replaced by the purchase of water from the authority,” he said.

While Harrigan cited projections from his presentation, he said that an updated financial plan would be developed in 2019 to reflect the infrastructure at that time.

Councilor Chad Heflin expressed concerns about the city becoming entrapped by loans that they are not able to pay.

Harrigan answered by noting that while Portales must pay the loans that have already accumulated, it may create a separate resolution stating that it will not pledge revenues to any further loans.

“The way the resolution is set up is that Portales has the ability to say, ‘we are not pledging our net system revenues of our utility to that debt. We pledged it to this debt here and the prior debt, but we’re not pledging it to any future debt,’” he said.

“That’s where you’ve kind of put the handcuffs on us, because if we don’t give you the money that you need to finish the project, then what do you do? Then the authority goes under, and we’re on the hook for everything you borrowed, right?” asked Heflin.

Howalt answered by saying that because ENMWUA board members come from each member community, they would probably not make a financial decision that would put their communities at risk.

“We have a board that’s made up of each one of the member communities, and if our board didn’t think their communities could afford that, then hopefully they wouldn’t have approved that,” he said.

Mayor Sharon King reminded council members that the resolution didn’t require action until the Nov. 15 meeting.

“What I really wanted to do is give it to you in time to go over it. We have another meeting Nov. 15. We’re not looking for action tonight. We’re looking for conversation, concerns, anything else you might have,” she said.