Alamogordo council briefed on $12.1M Flagstar loan for voter‑approved natatorium; some commissioners question transparency

City financial advisers presented the financing plan for the voter‑approved natatorium at the June 9 commission meeting, describing a committed commercial loan from Flagstar for $12.11 million with a 10‑year fixed rate locked at 4.25% and a 25‑year amortization schedule that results in a 10‑year balloon payment.

Mark Voneswell of BOS Advisors said the structure was negotiated to deliver affordability and described anticipated annual debt service of about $780,000. He said the dedicated gross receipts tax revenues estimated for debt service would produce roughly $1.1 million per year, providing coverage of about 1.4 times payments and an estimated excess cash cushion of roughly $360,000 annually. The financing includes an initial cost‑of‑issuance and professional fees component and estimated closing in the week following the meeting.

The Flagstar term provides an early call option that carries a 1.5% premium if the city pays off the financing in 2028, tapering to 0% by 2032. The adviser explained the 10‑year final maturity leaves an approximate $8.5 million outstanding that the city would need to refinance or pay off at maturity.

Advisers and bond counsel explained why other options were not selected: Bank of Albuquerque previously offered lower short‑term rates but conditioned closing on completed FY24 and FY25 audits, Capital One’s proposal covered a longer 25‑year term with different rates, and the New Mexico Finance Authority required a reserve fund that would have increased borrowing and interest costs.

Several commissioners asked about transparency after the commission’s April motion directed continued talks with Bank of Albuquerque. Commissioner Hernandez said she did not dispute the legality of the delegation used to finalize a different lender but said she did not consider the choice sufficiently transparent to the commission and public. Bond counsel said state statute permits the kind of delegation used, and advisers said locking the committed rate quickly was necessary after market movements.

No formal commission vote to accept or reject the loan terms was recorded at the meeting; staff said the transaction was to close administratively under the delegated authority.

Next steps: the city expected to close financing in the week following the June 9 meeting; staff will continue to report on the transaction and the project’s bid schedule (advertisement, pre‑bid, bid opening, and expected construction start in early 2027).