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FAQ

View frequently asked questions (FAQ) for New Mexico Finance Authority Public Project Revolving Fund (PPRF).

Who are the Public Project Revolving Fund (PPRF) borrowers?

About 12% of outstanding PPRF loans are to counties and about 33% are to municipalities.  Educational institutions including school districts and higher education institutions total about 28% of the outstanding PPRF loan portfolio.  PPRF loans to the State of New Mexico are about 13% and about 7% of loans are to Native American Tribes in New Mexico.  Water, sewer and other utility districts total about 3%.  The remainder of loans are to hospitals and to special improvement districts.

What projects are funded by PPRF loans?

The PPRF only funds public projects, for capital projects.  Almost 30% of the number of loans are for police equipment and for fire equipment and fire stations, or about 3% of the loan portfolio.  School improvement loans, including loans for energy savings, total almost 25% of the loan portfolio.  The remainder of PPRF loans fund water and utility projects, public buildings, local road improvements, airport improvements, convention centers and other infrastructure needs.  The PPRF has funded all New Mexico Spaceport debt and funds State Building Bonds and Cigarette Tax Revenues healthcare projects.   The PPRF also lends for the purpose of refinancing qualifying non-PPRF loans for savings to the borrower.

How do Governmental Gross Receipts Taxes (GGRT) credit enhance the PPRF?

The most important PPRF credit enhancement is the PPRF's share of GGRT.  By statute, the PPRF receives 75% of State GGRT Tax revenues each year.  These funds, received on a monthly basis, are held by the Trustee until all PPRF bond principal and interest payments for the fiscal year have been made and then are released after June 15th to the PPRF Revolving Fund and for other purposes by legislative appropriation.  PPRF GGRT receipts in FY2020 totaled over $33 million - 19.5% of FY2020 PPRF bond debt service.

How much of the GGRT released after June 15th is appropriated by the legislature and how much is available for use by the PPRF and for what purposes?

By statute, 35% of the 75% of PPRF GGRT can be appropriated each year for programs specifically named by statute, such as to match federal water funds and to fund Local Government Planning Grants.  The other 65% - around $21.5 million each year – is used to fund disadvantaged loans at a 0% or 2% interest rate to qualifying New Mexico communities, to equity fund loans of less than $100,00, to equity fund longer-term maturities of many PPRF loans, and for PPRF portfolio management purposes.   For instance, GGRT funds are used from time-to-time to retire callable PPRF bonds with cash to ensure appropriate bond debt service coverage levels.

How does the PPRF subordinate lien benefit from GGRT?

GGRT cannot be used for any purpose other than making PPRF bond principal and interest payments until all PPRF senior lien and subordinate lien bond principal and interest payments have been made on June 1st (senior lien) and on June 15th (subordinate lien).  As PPRF loan revenues have always exceeded PPRF bond debt service obligations, GGRT has never been needed to make PPRF bond principal or interest payments.  In the subordinate lien’s maximum bond debt service year, GGRT is more than half the amount of subordinate lien bond debt service providing a substantial credit enhancement benefit to the subordinate lien.

Does the PPRF subordinate lien have any other unique aspects?

The PPRF subordinate lien is an untypical subordinate lien in that PPRF subordinate lien loan principal and interest revenues, which exceed PPRF subordinate lien bond principal and interest payments, flow directly to the PPRF bond subordinate lien and not through the PPRF senior lien.

Other than GGRT, how else is the PPRF credit enhanced?

Both the PPRF senior lien and PPRF subordinate lien have indentured debt service reserve funds that can be used to meet bond debt service shortfalls for any PPRF loan.

As part of PPRF credit structuring, lower rated PPRF loans are required to fund individual debt service reserves, which reserves in total exceed 30% of annual PPRF loan debt service obligations.   Individual PPRF debt service reserve funds are held by the Trustee and are immediately available to cover individual loan debt service shortfalls as needed.

In total, over 65% of PPRF loan revenues are subject to direct or contingent intercept by the State.  The PPRF receives directly intercepted tax revenues from the Department of Taxation & Revenue equaling loan debt service before tax funds are released to municipalities.  Only NMFA can ask the Department of Taxation & Revenue to impose direct intercepts on tax revenues in New Mexico.  Schools district General Obligation loans automatically have a contingent intercept through the Department of Finance & Administration. 

The PPRF benefits from 11 different pledged revenue sources, ten of which are tax based – see the indentured debt service reserve fund answer.

Strong credit structuring policies have translated into the PPRF never having had a PPRF loan payment default in the PPRF’s history.  All PPRF bonds are fixed rate and there are no derivatives.  PPRF loans are made on a bond basis and loan pre-payment dates of loans funded by bonds are matched to bond call dates.

How is the amount of the indentured debt service reserve funds determined?

The PPRF senior lien indentured reserve is the Common Debt Service Reserve Fund.  The CDSRF is calculated by taking the maximum loan revenue year and multiplying loan revenues in that year from Gross Receipts Taxes, General Obligation Taxes, Law Enforcement Protection Funds and Mill Levy Taxes by 20% and loan revenues in that year from Appropriation Lease Revenues, Special Assessment District Levies, Local Special Taxes, Fire Protection Funds and Enterprise System Revenues by 35%.    Governmental Gross Receipts Tax revenues and State Gross Receipts Tax revenues are not reserved against.  The CDSRF is funded at about $33 million.

The PPRF subordinate lien indentured reserved is the Supplemental Credit Reserve Fund and it is funded at no less than the CDSRF or about $33 million.

Typically, at fiscal year end when the indentured debt service amounts are set for the forthcoming fiscal year, both the CDSRF and the SCRF have been over funded.  Interest earnings remain within the two funds.

What information is included in the PPRF monthly update (available under Documents)?

The PPRF monthly update is in Excel form including:

* GGRT information in graphic form

* A credit enhancement summary

* The compete PPRF loan portfolio with key attributes and remaining debt service schedules in total and by senior and subordinate liens

* PPRF loan portfolio attributes broken out by the 11 pledged revenue categories

* Revenue concentration by borrowing entity for each of the next 10 years in total and by lien

* Largest borrowers by borrowing entity for each of the next 10 years in total and by lien

* The senior lien Common Debt Service Reserve Fund calculation, which equals the subordinate lien Supplemental Credit Reserve Fund calculation.

* PPRF coverage calculations

* The up to date outstanding and original PPRF bond debt service schedules for active PPRF bonds by bond series, in total and by lien along with a record of pre-payments for each bond series

* The PPRF current outstanding bond summary