General Obligation Bonds

Understanding the 2022 General Obligation Bond:
A Transparency Overview for Truth or Consequences

Bond 1 | Bond 2 | Bond 3 | Bond 4 | Life Cycle of a Bond

What Are General Obligation Bonds?
General obligation (GO) bonds is a type of municipal financing tool that allows the city to borrow money for public projects. They fund projects such as infrastructure improvements, water systems, and road repairs. These bonds are repaid through property taxes and must be approved by voters.

In November 2022, voters in Truth or Consequences, New Mexico approved a $3 million general obligation bond to fund critical infrastructure improvements across the city. This initiative was designed to address long-standing needs in road maintenance and water and wastewater systems.

The process began when the Truth or Consequences City Commission passed City Resolution 61 21/22, formally initiating the placement of two bond questions on the ballot for the Regular Local Election held on Tuesday, November 8, 2022. The Commission determined that it was in the best interest of residents to allow qualified voters to decide on these investments.

The Ballot Questions
Voters were asked to respond to two separate questions:

Road Improvements
“Shall the City of Truth or Consequences, New Mexico be authorized to issue up to $1,000,000 of general obligation bonds for the purpose of laying off, opening, constructing, repairing, and otherwise improving municipal alleys, streets, public roads and bridges, or any combination thereof?”
Water and Wastewater System Upgrades
“Shall the City of Truth or Consequences, New Mexico be authorized to issue up to $2,000,000 of general obligation bonds for the purpose of enlarging, improving or extending the City’s water and wastewater system?”

Election Results
The community responded with strong support for both measures:

Road Improvements (Question 1):
✅ Yes: 1,666
❌ No: 398

Water & Wastewater Improvements (Question 2):
✅ Yes: 1,731
❌ No: 342

This voter approval empowered the city to move forward with a structured, transparent plan to invest in essential infrastructure and improve the quality of life for all residents.

Bond Structure and Timeline
The $3 million general obligation bond approved in 2022 is structured to be issued in four annual installments, known in financial terms as “tranches” (pronounced “trawnch”). For clarity, you can think of these tranches as phases or installments of funding.

Bond Issuance Schedule

Bond 1: Issued in 2023
Bond 2: Issued in 2024
Bond 3: Issued in 2025
Bond 4: Planned for 2026

Each tranche is a separate financial distribution, with its own timeline for spending and compliance.

Financial Overview

Total Bond Amount: $3,000,000
Issued in Four Tranches of $750,000 Each
Estimated Total Cost Over Time: $3,550,000
$600,000 of Principal will be paid off by Year 4

This phased approach allows the city to borrow only what is needed each year, which helps reduce interest costs and improves financial flexibility. By issuing the bond in tranches rather than all at once, the city is projected to save approximately $350,000 over the life of the bond.

Spending Requirements
Early on, there was a misconception that the city had to spend each tranche immediately to receive the next. Legal counsel clarified that the city has flexibility to plan and allocate funds over time, as long as IRS thresholds are met.

To maintain the tax-free status of the bonds for investors, the city must meet IRS spending thresholds:

5% of each tranche must be spent or allocated within 6 months
85% must be spent or allocated within 3 years
The remaining 10% can be spent anytime within the 4-year window

This structure gives the city up to six years to spend the full $3 million responsibly.

Strategic and Transparent Spending
Intentional Project Planning

The City of Truth or Consequences is committed to using general obligation bond funds with intentional planning, fiscal responsibility, and public transparency. Projects funded by the bond are not chosen arbitrarily. Each is carefully selected to align with infrastructure priorities:

Water line installations are followed by road paving in the same area (e.g., Arrowhead and Cherry Lane)
Preventive maintenance is prioritized, such as repairing backup motors at wastewater stations

This ensures that bond funds are used efficiently and in ways that directly benefit residents.

Sierra County’s Role in Bond Administration
The Sierra County Assessor’s Office plays a vital role in the general obligation bond process by collecting property taxes associated with the voter-approved bond and transferring the revenue to the City of Truth or Consequences. While some residents have had questions about recent tax changes, it’s important to clarify that the county acts as the collector, not the decision-maker. The city sets the bond terms, determines how the funds will be used for public projects, and works closely with the county to ensure smooth administration. This partnership between the city and county is essential to delivering the infrastructure improvements that residents voted for, and are committed to transparency and collaboration every step of the way.

Looking Ahead: Future Bond Planning
Preparing for a New Bond Request

During the September 24, 2025 regular Commission meeting, it was revealed that by 2027, the city may ask voters to approve another $3 million bond. This request will emphasize:

No increase in property taxes
Clear documentation of how the previous bond was spent
Genuine appreciation for voter trust

Tax Rate Explanation
The current property tax rate for the bond is 3.5 mills. This rate was determined based on local property values and the amount needed to repay the bond.

Due to a previous administrative error between the City and the New Mexico Department of Finance and Administration (DFA), the correct tax rate wasn’t submitted to the county on time. As a result, no revenue was collected in 2023, and the city had to cover the first bond payment of $300,000 using its general fund.

To make up for that missed revenue, the DFA temporarily increased the tax rate to 4.535 mills for 2024. The rate is expected to remain at 3.5 mills for both 2025 and 2026.

These changes reflect the city’s ongoing efforts to work closely with DFA to manage bond payments responsibly while reducing the financial impact on taxpayers.

Mill Rate Explanation

Property Tax = (Assessed Property Value ÷ 1,000) × Mill Rate
Assessed Property Value: The taxable value of your property, as determined by the county assessor.
Mill Rate: The number of dollars of tax levied for every $1,000 of assessed value. For example, a mill rate of 3.5 means $3.50 in tax per $1,000 of assessed value.

Example Calculation

If your residential property is assessed at $100,000 and the mill rate is 3.5:
Property Tax = ($100,000 ÷ 1,000) × 3.5 = $350
So, you would pay $350 in property taxes for that year toward the G.O. bond debt.