Creating a permanent fund would turn $10 million into much more long-term for Rio Rancho.
Tuesday’s municipal ballot contains several proposed charter amendments, including one to create a permanent fund with $10 million and collect income from it every year.
Half of the revenue would go to the general fund to pay for city services, while the other half goes back into the fund to grow the principal so it could generate more earnings the next year.
The $10 million is one-time money received beyond the budget because of higher gross receipts tax income due to the construction boom and more local commercial spending than expected.
The city put it in a special account until the election.
Controversy is swirling around whether to spend the money now or create the permanent fund.
The permanent fund would give us more money and thus more services in the long run.
The city has needs now, but $10 million accomplishes a limited amount.
With residential roads costing $1.5 million a mile to build or rebuild, $10 million reconstructs 7-10 miles, City Manager Matt Geisel said at the Feb. 10 governing body meeting.
And that’s if water lines under the street are solid enough not to break soon, so we don’t have to tear up the brand-new road to fix the leak.
The city has more than 400 miles of residential roads, about 320 miles of which are paved, with a little more than 100 miles eligible for reconstruction, Geisel said.
So, $10 million will pave or repave 1.7-2.5 percent of Rio Rancho’s residential roads, meaning you have a 98.3-97.5 percent chance of seeing zero benefit from it.
We can’t increase employee pay, hire more public-safety workers or take on other recurring expenses because we can’t depend on the same level of gross receipts taxes every year.
But annual income from a permanent fund would benefit everyone sooner or later.
Some say money is worth more now than in the future.
We’re not comparing $10 million now to $10 million later. We’re comparing $10 million now to millions more into perpetuity, although it’ll take time to reach that level.
Such plans have greatly benefited New Mexico.
For example, the state has seven permanent funds, including the Land Grant Permanent Fund.
The Land Grant Permanent Fund was established in 1912 and has grown via investments returns and leases and royalties from non-renewable natural resources – mainly oil and gas, according to the New Mexico State Investment Council website.
It produces more than three-quarters of a billion dollars — yes, billion with a B — a year for public schools, universities and other beneficiaries.
That’s even with the fund having weathered economic downturns.
Other governments, universities and nonprofits also have permanent funds.
Ordinances lay out rules for all city investments. You can see them at codepublishing.com/NM/RioRancho/ under Title III, Chapter 36, starting in Section 36.55.
City investments must be managed according to the Uniform Prudent Investment Act, which you can read at the Federal Deposit Insurance Corporation website.
The Financial Services director acts as treasurer to manage investments, with advice from the Investment Advisory Group.
That group encompasses elected officials, city staff members and residents with expert knowledge or professional experience in public finance or investing public funds.
The city also has outside financial advisors contracted under state and local procurement regulations, Deputy City Manager Peter Wells told me.
Plus, information about the permanent fund’s returns and how they’re used would be public by state statute.
The city projects an annual return of 6.5 percent, ranging from $677,000-$1 million each year for the first 13 years, with an average of $883,000 a year during that time.
According to city forecasts, the permanent fund would earn $10 million after 13 years and all earnings afterward would be above the amount of investment.
Let me repeat what I said last year: We have a golden nest egg.
We can hatch a goose that lays more golden eggs or make one omelet out of it.