A proposed $1.9 billion Industrial Revenue Bond (IRB) by Curry County for the Tres Amigas project doesn't pose any financial or legal liability for the county, a trio of financial experts said Monday.
County commissioners are meeting in special session at 10 a.m. Wednesday at the Clovis-Carver Public Library annex to consider adopting a resolution stating the county intends to approve the bond. Called an inducement resolution, it will enable Tres Amigas to begin ordering equipment to build its plant without having to pay gross receipts taxes, according to the county's bond attorney Duane Brown.
Brown said the IRB is a legal mechanism that allows Tres Amigas certain tax advantages — Tres Amigas wouldn't be obligated to pay property or gross receipts taxes. It is an inducement for Tres Amigas to locate its project in Curry County instead of some other state that offers tax breaks, he said.
Brown, Kevin Powers of RBC Capital Markets and the county's financial advisor Robert Burpo, spent most of Monday briefing commissioners on the IRB.
Burpo said the county won't be guaranteeing the bonds. No tax revenue is pledged and it will not affect the county's credit rating, according to Burpo.
Burpo said the IRB would be the second largest in New Mexico and would likely be the first of many for Curry County. He said as Tres Amigas takes shape with its plans to link the nation's three major power grids, it will spawn ancillary industries in the area such as solar and wind power plants.
The Tres Amigas project would give wind and solar projects a place to sell their electrical power, Burpo said.
Burpo said the county doesn't have an estimate on the number of jobs the Tres Amigas project would create. But he said the lease agreement between the county and Tres Amigas would include a "clawback" clause, providing penalties if Tres Amigas doesn't provide whatever number of jobs the two entities eventually agree on.
Those penalties could include a clause making Tres Amigas liable for paying back taxes if it doesn't provided a specified number of jobs.
Burpo said the county is still in negotiations with Tres Amigas and he expects a solid figure on the number of jobs Tres Amigas will create by Aug. 21.
Brown said the inducement resolution will not obligate the county to going through with the IRB if the two sides can't negotiate an acceptable agreement. He said the resolution is needed by Tres Amigas to begin ordering equipment to start construction.
Brown said the IRB is a legal means of getting around the state's anti-donation laws — statutes that ban public entities from using tax revenue or property to support private enterprise. Under the agreement, he said, the county would issue up to $1.9 billion in bonds and they would be purchased by a subsidiary of Tres Amigas.
Brown said the project would be owned by the county and leased back to Tres Amigas, taking it off property tax rolls because it would be publicly owned.
Brown also said the lease agreement would contain safeguards protecting the county from any legal liability caused by the project.
Powers said the IRB is a way to compete against other states not faced with anti-donation laws. Those states, such as Texas and Colorado, can simply grant tax abatements, according to Powers.
"It's a way to get a project like this started here versus someplace else," said Powers.
"This will trigger more projects (in Curry County)," Burpo said, noting that is why he, Brown and Powers are being careful to protect the county in negotiations. "We think this will be a great opportunity for Curry County."
Brown said while Tres Amigas is donating the money to pay his fees and those of Powers and Burpo, each of the three men have a fiduciary responsibility to the county, not Tres Amigas.
Brown said he expects the bond ordinance for the IRB will be ready for county approval by Sept. 18 and the county would be ready to close the deal by Nov. 1 if Tres Amigas agrees with the terms.