The Rolling Stones once sang that people can’t always get what they want, but with patience and hard work, they might get what they need.
Northern New Mexico College administration wanted a residence hall, and they wanted it by August 2014. Until the Thanksgiving eve Northern New Mexico College Board of Regents special meeting, it looked like the Northern administration was indeed going to get what they wanted. At the special meeting, though, the regents expressed hesitation and discomfort at the financing of the approximately $15.2 million project. The main hesitation came from a five-year buyout placed in Monument LLC’s financial portion of their completed study.
Regent Alfred Herrera said at the beginning of the talks with Monument, he had understood the financing for student housing would be through a private-public partnership with a long-term lease, around 25 to 30 years.
“Then all of a sudden, they want to collect in five years,” Herrera said.
Board President Michael Branch and Regent Chayo Garcia were also surprised by the five-year buyout clause in Monument’s plan.
“I was surprised because of the balloon payment,” Branch said. “It seems like we’re going to be asking for forgiveness and not permission.”
Garcia suggested Northern push the timeline back for one year.
“Lets make sure we do this right and get all our ducks in a row,” Garcia said.
Northern’s Vice President of Finance and Administration Domingo Sanchez III said the change in financing options began toward the end of October. Sanchez said Monument called a variety of bond-issuing entities in the state of New Mexico.
“Over four to six weeks ago, five-years became the option that fit best. If we didn’t care about hitting the fall deadline, we’d wait. No big deal. We could go to other financing options,” Sanchez said.
However, Northern’s financial consultant Paul Cassidy was also worried about the financing options presented by Monument.
“At the last meeting, the developer was here and it was clear they didn’t have financing lined up,” Cassidy said. “They really wanted a take out within four to five years. That is it’s not permanent private capital, is the way I interpreted the discussion.”
The only way the college would be able to buy out the private investor within five years would be to use a system revenue bond. Northern would have to go through the state Higher Education Department as well as the state board of financing.
“The problem is, the state board of financing and the HED. If the Board of Regents embark on a public-private partnership today without their having prior knowledge and then four to five years you want to issue system revenue bonds, they might have heart burn over that,” Cassidy said.
If the developer brought permanent financing to the table, the overall outcome would be much better.
“Go back to the developer, I don’t know if there’s a window to do that, and say, ‘Hey, we hired you to bring capital to the table, and you really need to do that,’” Cassidy said.
“I’m very uncomfortable with five-year balloon and going through this process at this time, unless we were to go ahead and say, ‘Let’s delay this project and go this direction.’ But I’d really like to hear from Monument, as to where’s the 30-year lease you were going to provide to go through this project. And if they can’t provide it, then I feel they are not fulfilling the obligation that they promised us,” Branch said.
It was at this point in the meeting Sanchez called Monument President Tim Pitcher and placed him on speaker phone and President Rusty Barceló announced pizza was brought to the pre-Thanksgiving meeting.
“What the short-term lease does for the short-term, is allows us to start on the project immediately,” Pitcher said.
Pitcher said on Monument’s side, there were questions about Northern’s ability to enter a long-term, 25 to 30 year lease.
“Can you enter it? That’s the first thing,” Pitcher said.
No one present was able to answer the question. Pitcher said on the firm’s end, financing would not be a problem, but the legality and willingness of Northern to enter a long-term lease was a problem.
After a lengthy phone call, it was clear to the regents not everything was worked out in the proposed contract with Monument.
“I’d feel better if we figured it out first. We’d be gambling $15 million and I can’t afford it,” Garcia said.
Garcia said she understood Northern’s need for dorms, to grow the college, however, she did not see why it had to happen on such a fast timeline.
“This year or next won’t make that much of a difference,” Garcia said.
Barceló said the college had a definite need for dorms, but before building started, “the Board needs to be comfortable with the direction the school’s going.”
Currently, Northern administration and Pitcher are working at the details of a financial proposal which will be presented to the Board during a meeting Dec. 19.