Public Project Revolving Fund Bonds
Public Project Revolving Fund (PPRF) bonds are issued to fund infrastructure projects in the State of New Mexico. The New Mexico Finance Authority (NMFA) began issuing PPRF bonds in 1995. The PPRF has loans outstanding to 250 municipal entities with 11 different pledged revenue types of which 10 are tax based. Through the NMFA’s Investor Relations website, NMBondFinance.com @ BondLink, interested parties are able to download bond specific information about PPRF bonds including the
- Official Statements for PPRF Senior Lien and Subordinate Lien Bonds
- PPRF Bond Debt Service Schedules
- PPRF Bond Coverages
- PPRF Bond Redemption Notices
- Rating Agency Reports for PPRF Bonds
- PPRF Loan Portfolio at Most Recent Month’s End with Key Attributes and Debt Service
- PPRF Loan Portfolio Attribute Summary
- PPRF Loan Portfolio Revenue Concentration
- PPRF Loan Portfolio Largest Borrowers
- PPRF Loan and Bond Monthly Update of Key Financial Information including the Common Debt Service Reserve Calculation
- PPRF Dedicated Governmental Gross Receipts Tax (GGRT) Monthly Update
- NMFA Annual Reports to the Governor
- NMFA Annual Audited Financial Statements / CAFRA
There are several factors that lead to the AAA/AAA Aa1/Aa2 ratings for PPRF bonds. PPRF loan revenues pledged to PPRF bonds exceed bond debt service in every year, in part because NMFA makes PPRF disadvantaged loans at 0% and 2% and other equity loans that are not pledged to specific PPRF bond issues but the revenues from which can be used to pay PPRF bond debt service. In addition, the PPRF program receives 75% of all Governmental Gross Receipts Taxes (GGRT) generated in New Mexico.
GGRT is used as a credit enhancement and has never been used for debt service. GGRT comprises approximately 20% of PPRF revenue each year. After senior lien bond debt service and subordinate lien bond debt service is paid in June of each fiscal year, up to 35% of GGRT is appropriated by the New Mexico State Legislature to fund planning grants, water programs and other designated uses in statute. The remaining GGRT and all excess loan revenues flow through to NMFA to be used for such purposes as funding reserves and making new loans.
NMFA funds two types of reserves from flow-through revenues:
The Common Debt Service Reserve Fund is established in the senior lien indentures governing the PPRF funds. The required CDSR funding level is based on senior lien loan revenues with pledged revenues categorized into three risk groups for calculation purposes. CDSR funds are available to make senior lien bond debt service payments should loan revenues and GGRT not be sufficient to do so. The CDSR’s funding level is approximately 25% of PPRF senior lien bond debt service in the maximum debt service year.
The Supplemental Credit Reserve Fund is established in the subordinate lien indentures governing the PPRF funds. The required SCRF funding level is set at an amount equal to the Common Debt Service Reserve Fund, which is calculated as of July each year. SCRF funds are available to make subordinate lien bond debt service payments should subordinate lien loan revenues, excess senior lien loan revenues and GGRT not be sufficient to do so. The SCRF’s funding level is approximately 50% of PPRF subordinate lien bond debt service in the maximum debt service year.
NMFA takes a number of structuring steps to ensure the credit quality of the underlying PPRF loan portfolio. These steps include:
For lower-rated borrowers, individual debt service reserve funds may be required for individual loans. These individual debt service reserve funds, when added to CDSR funds, are almost 50% of maximum year PPRF bond debt service payments due.
About 60% of loan revenues due to NMFA in any year are subject to intercept by the New Mexico Department of Taxation and Revenue or contingent intercept by the Department of Finance and Administration for school districts. Intercept means that funds collected by Tax and Rev – usually taxes – are paid first to NMFA to meet loan obligations before funds are sent to the borrowing entity.
General Obligation bonds issued by school districts and purchased by NMFA as part of its PPRF loan portfolio are subject to a memorandum of understanding (MOU) with the New Mexico School District Enhancement Program to intercept funds of individual school districts prior to
default and are classified as contingent intercepts.
About one third of all NMFA loans (and about 3% in dollar amount) are funded by State Fire Protection Funds and Law Enforcement Protection Funds, which are paid directly to NMFA a year in advance of when the loans are due.
In its history, no PPRF loan has ever had a payment default in part due to strong PPRF credit structuring standards.
New Mexico Department of Transportation (NMDOT) Bonds
Since 2004, the New Mexico Finance Authority has issued bonds on behalf of the New Mexico State Transportation Commission and the New Mexico Department of Transportation (NMDOT) under the GRIP * program. NMDOT bonds are issued to fund transportation infrastructure projects in the State of New Mexico for such projects as highways, bridges, and the Rail Runner commuter train. Previously, the State Transportation Commission and NMDOT issued New Mexico State Highway Commission bonds and these carry over bonds into the GRIP program are designated as Closed Lien bonds.
Through NMFA’s NMDOT Investor Relations website, NMDOTBonds.com @ BondLink, interested parties are able to download bond specific information about NMFA NMDOT bonds including the following information:
- Official Statements for NMFA NMDOT Senior Lien and Subordinate Lien Bonds
- NMDOT Bond Debt Service Schedules
- NMDOT Bond Coverages
- NMDOT Bond Redemption Notices
- Rating Agency Reports for NMDOT Bonds
- NMDOT Annual Audited Financial Statements
While NMDOT GRIP bonds are issued by NMFA as New Mexico Finance Authority State Transportation Revenue bonds, GRIP bonds are issued at the direction of the State Transportation Commission and the State of New Mexico. No NMFA assets or revenues are pledged in support of the GRIP bonds. Pledged revenues are the sole source of repayment of the bonds. Pledged revenues include State Road Fund revenues and certain federal revenues.
State Road Revenues include revenues from Gasoline Excise Taxes, Special Fuel Excise Tax, Weight Distance Tax, Motor Vehicle Registration Fees, and, through the New Mexico Highway Infrastructure Fund, Lease Vehicle Gross Receipts Taxes and Tire Recycling Fees. The State Road Fund does not receive General Appropriations from the State as a component of Pledged Revenues. Further information about State Road Fund pledged revenues and about Federal revenues that can be used for GRIP bond debt service can be found in NMFA NMDOT bond Official Statements.
NMFA GRIP bonds are rated AA+/AA and Aa1/Aa2.
Questions about NMDOT infrastructure development plans, plans to issue or modify GRIP bonds outstanding, and future revenue projections are best addressed to the Department (NMDOT).
* Governor Richardson’s Investment Partnership (GRIP) was created with enactment of House Bill 15 during the 2003 special legislative session. This partnership – between the Department of Transportation and NMFA – is a $1.6 billion statewide transportation expansion and infrastructure improvement initiative financed by the issuance of tax-exempt bonds into the Municipal Capital Markets. While most GRIP funds have been used for highway projects, implementation of Rail Runner Commuter Rail service between Santa Fe and Albuquerque and Belen has been an important GRIP initiative in upgrading New Mexico’s transportation infrastructure.