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Municipal Bonds could boost 

Mambulao’s funding for development projects

 

By PERCY OSTONAL

MWBuzz Marketing Director

 

The government of Mambulao can free itself from debt loans from government financing institutions (GFIs) by issuing Municipal Bonds to fund its projects and social initiatives.

The LGU may issue municipal bonds to raise funds for infrastructure, roads, airports, public markets, schools, new basketball courts, fish port, sewer canal expansion, job-making projects, and so on.

When a citizen of Mambulao buys an MB, he or she is loaning money to the LGU in exchange for a set number of interest payments over a predetermined period.

At the end of that period, the bond reaches its maturity date and the full amount in the bondholder’s original investment is returned to him plus interest income.

There is nothing new about MB as it has been used by local governments for years, but its effect could offer renewed hopes to the people and the community.

With Municipal Bonds, the mayor can spare much of his LGU’s IRA, or the Internal Revenue Allocation, from other projects he has in mind.

Instead, he can use the MB money on such equally important spending.

 LGU’s IRA share for 2022 will get 37.8 percent more on top of its current IRA. So, the increase in fund allocation is a real windfall for the LGUs infrastructure projects, not to mention fundings from MBs.

Many famous public facilities were funded through Municipal Bonds in the past that included the Caticlan Jetty Port at Boracay Resort.

Likewise, several cities and municipal governments had funded their self-liquidating and income-generating projects through MBs, such as Antipolo City, Tagaytay City, Puerto Princesa City, Lucena City, and the first-class municipality of Infanta, Quezon,

 The provincial government of Aklan floated Php40 million worth of Municipal Bond for its big-ticket projects.

The Tagaytay City Convention Center was funded by a Php220 million MB float. Likewise, the cities of Caloocan and Puerto Princesa floated unspecified amount of MBs to maintain its public utilities and infrastructures.

And the investors in MBs are assured of the stability of the Municipal Bonds, as it is backed by the LGUs IRA allocation.

The LGU cannot be in default in its loan with a government financing institution (GFI) because it wouldn’t be able to get its next IRA share allocation unless such MB debts are repaid in full at maturity.

In 1998, the Banker’s Association of the Philippines and the Development Bank of the Philippines created the Local Government Unit Guarantee Corporation (LGUGC) to facilitate LGU Municipal Bonds floatation.

The Mambulao government may issue bonds, as in Municipal Bonds, debentures, securities, collateral notes and other obligations to fund self-liquidating and income-generating projects such as shopping malls and to support livelihood projects.

As an incentive, the LGU may introduce interest income tax-exempt status for its investors.

The Mambulao government that will be installed in June 2022 may as well consider using Municipal Bonds to raise money for its development projects, as it is one funding source for it to tap.

Hence, Mambolenos investing in MBs are directly supporting their LGUs with the funds they put into the bonds.

Importantly, they are also showing their patriotism as citizens of Mambulao.