New Mexico Military Institute has received board approval for two bond issues of about $12 million to renovate its gymnasium and to pay for an energy performance upgrade.
“How we have structured our debt service, it allows us this particular flexibility to come to the board with two series of revenue bonds,” said NMMI Chief Financial Officer Col. Judy Scharmer.
She explained that the bonds are being issued as another debt payment is decreasing, and in a way in which savings from the energy upgrades will pay for its debt.
Three items related to sale of the bonds through the New Mexico Finance Authority were approved during Tuesday afternoon’s special meeting of the NMMI Board of Regents held on campus. All five regents participated by phone.
Scharmer said that issuing the bonds on the private market will reduce costs for the Institute.
Funding Cahoon renovation
The first series of bonds, Series 2019A of not more than $5.3 million and having a 20-year term, will help pay for the renovations to Cahoon Hall, better known by locals as the Cahoon Armory.
A historic building erected in 1928, Cahoon now houses the gymnasium, locker rooms and some offices and instructional space.
The renovation calls for bringing the building up to required codes and upgrading electrical, plumbing, fire suppression and heating, ventilation and air conditioning systems. It also would make the building compliant with Americans with Disabilities Act requirements.
As Facilities Director Kent Taylor, Chief of Staff Col. David West and President and Superintendent Maj. Gen. Jerry Grizzle explained to trustees, the estimated cost for renovation far exceeded what had been budgeted because the original plans had “all the bells and whistles.”
Staff and design teams then scaled down or removed 34 items to arrive at a “middle ground” for the renovation plan. Staff explained that some items could be added back if it were decided at a later time that enough funding is available.
While the cost-reduction planning was ongoing, Scharmer and her team, including bond specialists and lawyers, were deciding how to fund the renovations.
“What we have done is that we have leveraged all of our resources. I even made (a NMMI staff member) sell cupcakes,” she joked.
She explained that the project now will be paid for by the $5 million to be netted by the New Mexico Finance Authority bonds, but also by $12.3 million from other funds. Those other funds are $4.8 million from state general obligation bonds approved by voters in 2018, $4.5 million in NMMI reserve funds and $3 million from what remains from the Series 2013A revenue bonds, which originally were used to renovate Bates Hall.
Because the renovations costs are higher than originally approved, the new project budget must be approved by both the Higher Education Department and the State Board of Finance, NMMI officials said.
‘Self-funded’ energy upgrade
The Series 2019B bonds of not more than $6.8 million will pay for the contract with Engie Services U.S. of Rio Rancho to install LED lighting and upgrade electrical systems in about 20 buildings on campus. The project is expected to start in the fall and be completed by 2021.
“The systems are so old that we are having difficulty finding replacement parts or people that even work on these type of systems anymore,” said Larry Hopkins, assistant facilities director.
He said the real benefit is that the contract will pay for itself.
John McAllister, Engie regional sales manager, confirmed NMMI staff’s assertions that the contract guarantees that the Institute will realize utility cost savings equal to or greater than the debt service payment during the 25 years of the debt. If at some point, the savings is not as much as the debt payment, the company will pay the difference.
He said Engie has done similar contracts with several public entities, including the city of Farmington, McKinley and Sandoval counties and Albuquerque Academy.
Taylor and Kent also said that the such contracts are encouraged by the Higher Education Department and are audited by the state Energy, Minerals and Natural Resources Department.
Scharmer said that the Institute has an opportune time to issue the new bonds.
She said that the Series 2013A bonds’ debt payment had been $1.3 million in recent years, but drop to about $936,000 starting in 2019.
With the two new bonds, the Institute’s annual bond debt payment will be $1.5 million. But the utility cost savings from the energy performance upgrade is estimated at about $281,000 in 2021.
Some regents also asked about the effects on the Institute’s bond rating. Erik Harrington of RBC Capital Markets said that the debt has been arranged in a way that neither the Institute’s debt ratio or bond rating will be adversely affected.
Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 311, or at email@example.com.