A Conversation with Jesus Gonzalez Reyes
Tijuana's Mayor-Elect is Focusing on Municipal Bonds

Jesus Gonzalez Reyes won the election for Mayor of Tijuana on July 8 and will take office December 1. Born in Tijuana, he served in the Chamber of Deputies from 1991-94 and 1997-2000. He is keenly focused on using municipal bonds to fund much-needed public works projects in Tijuana. Standard & Poor's has been assigning ratings to Mexican cities and has awarded Tijuana an AA rating, the highest in the country, offering Mayor-elect Gonzalez a significant opportunity.

SDDR: Thank you, Mayor-elect, for taking the time for this interview. Why is the possibility of issuing municipal bonds so important to you?

Gonzalez: Right now, Tijuana doesn't have enough money to supply what people need: pavement, water, electricity, drainage and so on. Municipal bonds are one of the avenues we are going to explore to finance the public works we need. Nothing else will provide the necessary funds sooner than this.

SDDR: When do you plan to go to market with the bonds?

Gonzalez: We are working on it now. The exact time will be set in a couple of months.

SDDR: What obstacles do you face in issuing these bonds?

Gonzalez: This is something new in Mexico. It hasn't been done before. We have to talk to the financial market in Mexico, and work with the Federal and state governments. But these are not obstacles; they are simply things we have to do.

SDDR: Do you know what kind of revenue pledge you will have to make and where that will come from?

Gonzalez: That is exactly the main issue. By the end of August, we will have that figured out. Also, Federal legislative reform that will be executed by the end of August will provide more autonomy for states and municipalities, so we will have more options to explore.

SDDR: Former Tijuana Mayor Hector Osuna tried to implement tax assessment districts as a way of investing in public infrastructure, but he did not have the option of getting long-term financing on the bond market. Would you consider using tax assessment districts in conjunction with municipal bonds, that is, using the annual revenue from the tax assessment districts to pay off the bonds?

Gonzalez: We might pursue that. The legislative reform I just spoke of will affect this also.

SDDR: Do you need authorization from the Federal government for the bond package?

Gonzalez: We don't need authorization, but we do need to have the Federal and state governments involved. We have the highest bond rating for a city in Mexico (AA).

SDDR: Do you need the Federal government's credit backing?

Gonzalez: Exactly. We don't need approval, but we need the credit backing of both the Federal and state governments. This will create investor confidence in these bonds.

SDDR: Do you have priorities and specific goals to achieve with the bond revenues?

Gonzalez: Bond funding is the way to solve a lot of problems in Tijuana. We will have specific projects and priorities planned by the end of August.

SDDR: So you plan to have everything together by the time you take office: Federal support for your bond issuance, the bond package itself ready to go to market, the revenue pledge, and your list of public works priorities for using the funds.

Gonzalez: Exactly.