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Belize City Council launches Municipal Bond prospectus

The Belize City Council launched the prospectus for BZ$20 million worth of bonds, which the Council will be issuing to help finance its street and drainage infrastructure program  at City Hall on Thursday morning, November 22.

Mayor Darrell Bradley explained that the thrust of the street improvement program is economic growth, as the enhanced infrastructure should stimulate business development and spawn further investment by the private sector.

Another economic benefit will be the creation of jobs, not just in the actual construction phase, but in the businesses which will spring up a result of the enhanced services and environment.

The bonds will be issued in blocks, each worth $200. Anyone who wants to invest in the bonds can pick up an application form from Central Bank, which is now accepting applications.

As Registrar for the bonds, the Central Bank will issue a Registered Certificate Bond to each bondholder, and deposit the proceeds of the sale of bonds into the Infrastructure Fund for the Council to use.

The bonds will be offered next Monday, November 26, and prospective buyers will have 28 days, up to December 24, to apply to purchase the bonds. Subscription may be closed before this day, if the bond offering is fully subscribed. The application period could also be extended until the offering is fully subscribed.

Bondholders will receive interest payments twice a year, which the Central Bank will pay from a Sinking Fund.

The Belize City Municipal Bond Act, passed by the House of Representatives in June, provides for the creation of both the infrastructure fund and the sinking fund, both of which will be managed by the Central Bank of Belize.

It also requires that the Council’s monthly subvention from Ministry of Finance and the Cruise Ship head-tax to be paid directly into the Sinking Fund. These will amount to approximately $250,000.00 per month.

The Central Bank will also repay the principal on the bond when it matures. Having the Central Bank as repayment agent takes repayment outside the Council to provide an added safeguard for bondholders.

The Council views the bond as the ideal solution, because it will allow it  to quickly generate a significant amount of capital to invest in the infrastructure improvements, from capital markets.

The Council will be able to stagger manageable payments over a 10-year period. The Council’s annual revenues have grown over the past four years with significant surplus. Annual revenue for the fiscal period April 2008 – March 2009 was $15,618,273.75, with a net surplus of $189,330.19. It has grown to $17,160,959.45 for the period April 201l – March 2012, with a net surplus of $166,223.73.

The timing also seems most favourable now, offering a unique investment opportunity at a time when local financial institutions and other institutional investors are liquid.

Although a lot of the city’s infrastructure needs immediate repair, the council has been investing very little in infrastructure. Garbage collection and street cleaning was the Council’s biggest bill: 40.6 percent of spending, while salaries accounted for 34percent.

In comparison, investment in infrastructure was only 6.57 percent of total spending: $1,051,107.13 for the period April 201l – March 2012. It was even less: $1,013,012.66 for the period up to March 2008. But recurrent revenues could not finance this type of infrastructure development.

The Belize City Municipal Bond Act also limits how the Council may use the funds: up to $2.5 million may be used to retire exhibiting debt and a maximum of $400,000 may be used to pay for legal and accounting services. The rest must be spent on infrastructure works.

At the launch, the Mayor also provided a list of 33 streets, which have been concrete-paved under the project, of which 25 have been completed. The list also gave the values of the contracts awarded for each street.

Bradley said the contracts were awarded though a public tender-bidding process, with a requirement of at least three different bids to be considered. The local firms which won contracts included M&M Engineering, MC Construction, RJB Construction, International Environments, Maheia’s Construction, Robert C Fuentes Martin Reyes, Unite Belize, and in some case, the Belize City Council elected to do the work itself.

The Council also proposes to introduce a Residential Garbage Fee of $10.00 per month per residence. This garbage fee is not new to Belize, as all the district towns except for Belize City and Corozal have such a system in place.

Since there about 13,000 homes in the city, even at a 70% collection rate, as is the case for property taxes, the council anticipates it will collect $1,092,000 per year from this garbage fee.

The Council is presently negotiating with Belize Water Services Ltd for the fee to be collected along with each household’s monthly water bill.

The Council also plans to re-assess Property Taxes, which is allowed under the Towns Property Tax Act every five years. No such revision has been done since 2002, even though the City Council did such a reassessment in 2008, which was never implemented.

The council anticipates that even at the present 70% collection rate it will generate $1,400,000 more in revenue by implementing the new tax roll created in 2008.

The council is also considering whether to ride out the present sanitation contract with Belize Maintenance Ltd, which expires in 2015.

The Council presently pays BML $78,000 per week, but is having talks with the company to reduce this to $55,000 per week, which would save the Council $1,196,000 per year.

BML had won a Supreme Court judgment against the Council of more than $2 million, but in exchange for writing off the judgement and reducing the weekly cost of services, the company would like the contract to be extended another seven years.

This is unlikely as the council has already found it can collect the garbage more economically using their own workers and equipment.

Other ways the council has proposed to increase revenue include a parking meter system on the city’s main streets, building a parking structure at the NICH parking lot opposite Brodies, and putting a toll on the Philip Goldson highway after the section from the city to the Haulover Bridge is refurbished. Bradley said this refurbishment would also be an economic development, which would stimulate business.

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