Santa Fe Mayor David Coss wants the city to buy the College of Santa Fe campus by issuing bonds, with hopes that the debt could be repaid by selling or leasing parts of the 100 acres off St. Michael's Drive.

But with the idea still less than 2 weeks old, questions are mounting among city officials, including how much it would cost, whether the city can afford it and how exactly the property would generate money.

City Councilor Patti Bushee said she got few answers at a Public Works Committee meeting she chaired this week, and she plans try again tonight when the full council and city staffers go into a closed-door session.

"I know in the bond market, it's not the best right now," Bushee said. "We have a double-A rating, but still, who's buying debt? There's plenty of debt out there."

Coss' proposal would seek to pay for the debt-laden campus, where the private college will close next month, by issuing revenue bonds guaranteed by municipal gross receipt taxes.

The city generally issues two kinds of bonds, said city Finance Director David Millican — revenue bonds, which pledge a specified source of revenue to pay off the bondholders and don't require voter approval, and general obligation bonds, which are funded with property taxes and require approval from voters.

The city already is responsible for several revenue bond issues, which have been used to borrow money to help pay for such projects as the Railyard redevelopment, in which the city issued revenue bonds to buy the 50-acre property and collects lease fees to help repay the debt. The city is using lodgers-tax revenue to help pay off bonds that financed construction of the Santa Fe Community Convention Center.

Overall, the city is projected to have $254 million in bond debt come June 30. That number rises to nearly $303 million when other loans are included, according to city Finance Department numbers.

While revenue bonds could be issued more quickly because no election would be needed, the drawback is that the city would face "a slightly higher interest rate," Millican said.

"In this case," he said of the proposed college purchase, "we would be pledging tax revenue we already collected."

Once the council approves a negotiation with the college's creditors, it would take between 60 and 90 days to return to the governing body with a proposal for a bond issue and other accompanying agreements, Millican has said. At least another 60 days would be required before bonds could be sold, he said.

Millican sounded confident that the city could generate the revenue needed to pay off the bonds, though he acknowledged that details are far from resolved. Besides continuing to use the campus property for educational uses, options include leasing parcels to the state for office space.

Bushee wonders if it's smart to be issuing more bonds right now, given the economic climate and that gross-receipts tax revenue is down.

At tonight's meeting, Bushee wants to know more details about buying the college before approving negotiations with creditors, such as who is interested in leasing campus property and what that might generate.

"They keep saying this is not going to impact the city — it will be revenue-neutral," she said of city staffers. "But how do you do that and buy a campus with some very old buildings?"

The cost of paying off the college's debt has been put at $40.5 million, with an additional range of $20 million to $80 million in deferred maintenance, which Bushee said might generally involve anything from asbestos removal to leveling dilapidated buildings.

Bushee said the city might be able to negotiate down the $40.5 million debt and should also consider whether to let the college go into bankruptcy before trying to buy the campus.

"We don't even know the starting price," she said. "The stars and the sun and just about every planet needs to align to make this thing happen. There's a lot of creditors in this thing. It got very sticky."

Laureate Education Inc., a for-profit company that once held partnership talks with the College of Santa Fe, would be willing to operate arts-oriented programs here this fall if the city acquires the campus, according to members of a governor-appointed task force studying ideas for the college property.

Other possible tenants, such as New Mexico Highlands University or Santa Fe Community College, presumably would also have to commit to leasing property or facilities in order for the city to generate revenue to help pay off the debt.

But any attempt to acquire the campus would have to move swiftly in order for new operations to begin by the fall. Even under the best-case scenario, Coss has acknowledged, it could be mid-fall before money from any bond sale could start flowing.

Contact Doug Mattson at 986-3087 or dmattson@sfnewmexican.com.
City Council resolution on the future of The College of Santa Fe (first page is blank)