News:Comval SP refers controversial Nabunturan P90-M bond float to committee
The Compostela Valley provincial board has referred the municipal resolution approving the P90 million bond flotation in Nabunturan town to a joint committee for a study during their session Wednesday.
But local critics of the bond flotation have expressed fear that the committee referral could be overtaken by the 30-day required period for Sangguniang Panlalawigan confirmation.
They charged that the SP legal committee chaired by Boardmember Peter Ruwel Gonzaga is presently too saddled with referred legal cases and delays of recommending legal matters which need lengthy of time of study, probe and recommendation.
The SP on Wednesday constituted a joint committee composed of the committee on legal matters and the committee on budget and finance, each of which have to make its study and recommendation to the joint committee created which would recommend to the whole SP on whether to confirm or not the municipal resolution approving the feasibility study for the P90 million bond flotation.
Once the legal committee drags its foot in not acting alone on Nabunturan resolution beyond a month’s time as required under the Local Government Code, the resolution is deemed approved and confirmed.
Boardmember Dexter Lopoz of District 1 earlier opposed the municipal resolution charging that the terms and conditions of bond flotation are “grossly disadvantageous” to the government.
The approval of the said resolution could lay the legal groundwork for the controversial bond flotation in town to proceed.
Oppositors have charged the municipal bond float Mayor Macario Humol is pursuing in his last term is “so expensive” and its projects components are laden with exorbitant and unnecessary fees and hidden charges such as the P6.7 million for the architectural and engineering design, P2.7 million consultancy fee and P2.8 million underwriter and guarantee fees.
They also questioned the mayor’s insistence to pursue the project despite the adverse findings of the municipal local finance committee showing the total expenditure of a bond float is at least P14 million greater than the expenditure of resorting to borrowing with the Development Bank of the Philippines with the staggering P19.8 million for interest payment alone for the first two years.
Earlier, Vice Mayor Romeo Clarin and nine of the 11 councilors who are in favor to the project were reported to have been “well accommodated” by the project’s financial adviser-consultant Preferred Ventures Corp. when they made a study tour to Calatagan, Batangas to know of Calatagan’s bond float early this year.
A source from the councilor’s majority said that the Calatagan public market which was the subject of bond flotation brokered by Preferred Ventures is largely idle with a handful of renters at present.
Small market vendors in Nabunturan are also worried that they would be displaced in the new market building sought for bond float financing as it pegs high monthly rentals of stalls.
Meanwhile, sources said that oppositors have reportedly mapped out legal actions to stop the town’s bond flotation including filing of administrative cases, temporary restraining order (TRO), petition for review by the Department of Justice and recall and initiative against the officials who approved the bond float project. (Cha Monforte/Rural Urban News) http://ruralurbanews.blogspot.com
The cat is out of the bag and now we know that the new Calatagan public market building in Batangas -which was the constructed out from this silly thing called bond flotation Pinoy-style- is largely idle and unoccupied. My source said there is an ongoing resistance of the Calatagan market vendors to transfer to and lease on high rentals and arkabalas in the new public market building.
From the projected high rentals and advances pegged in the planned new market building in Nabunturan and from the current pestering gripes and talks of the fire victim leasees of the stalls, the great chance is that this ambitious infrastructure project that Mayor Macario Humol wants to construct in his current last term will go down in the likes of fate of new Calatagan market building.
The comparative study of Nabunturan Local Finance Committee (LFC) has shown that bond flotation is too expensive with a lot of unpredictables than bank borrowing. The LFC informed the mayor of its adverse findings on bond float September last year. In its study it found out that the total expenditure of a P90-million bond float is at least P14 million greater than the expenditure that could be incurred in a borrowing with the Development Bank of the Philippines with the staggering P19.8 million for interest payment alone for the first two years.
Of these, it could immediately rip off at least P5.4 million of what we earlier said as unnecessary fees attached to the float that will go to the conspiring consultants, guarantors and brokers, and the assumed recurrent guarantee and trustee fees running to at least P1.3 million yearly. And these are besides the exorbitant P6.01 million for the architectural and engineering design! Divide P90 million by the land area of the planned market building which is 1,700 square meters, the result in P52,941 per square meter. Santa banana! What a skyrocketing project cost Nabunturan town people would have to bear at this crisis time!
Fire victim leasees of stalls are saying now they surely would be displaced as they could not afford with the planned high monthly rentals rates that increased tenfold from the P1,000 monthly rentals they used to pay on the average. And that’s besides the burden of paying the three months advance rentals and three months advance deposits.
Dried fish vendors are saying now they could not afford and their business would have a hard time breaking even in overhead cost even if they lease a small space of 18 square meters which would have a monthly rental of P11,340 after the P68,040 worth of three months advances. Humol’s planned infrastructure could yet trigger high prices of basic commodities as leasees, if ever there are, would only pass on to the customers this high cost of rental.
Time and again, we are reminded of the mothballed Bataan nuclear plant that even now keeps Filipinos paying staggering interests on foreign loans used to construct this White Elephant. At the rate the Preferred Ventures hoodwinked Nabunturan local officials into believing its whimsical FS that fixes unrealistic, high rentals and 100-percent occupancy rate projection despite a laggard town economy and general unawareness of the public on bond float, the planned and so expensive Nabunturan public building is White Elephant in the making. The right forecast on the project is rather doom even for among the local businessmen in the town business chamber.
The FS prepared by Preferred Ventures is just so good to be true in its bid of clinching the P2.7 million consultancy fee and opportunities it could gain in brokering for the underwriting and guarantee-making, while it could only and obviously easily make up the Nabunturan FS patterned from its easy-to-copy-and-paste FS templates and forms from other municipal bond floats it brokered which went a failure.
From this opposition alone against the high rentals, there surely would be a few takers of stalls, if none at all, making the planned infrastructure a White Elephant, even as there’s a looming scenario where nobody or only few individual bond buyers would be attracted to the project.
Now young practicing lawyers in Nabunturan are of the opinion that if the bond float so proceeds, the involved town officials are inviting suits. The LFC finding in itself is a corroborative evidence with its tacit assessment that the bond float is disadvantageous to the government. The lutong macao public hearing and the rush of legislating the Nabunturan bond float have procedural lapses and have shades of abuse of power and discretion.
Someone said that if he were Mayor Humol, who managed to serve as councilor, vice mayor and mayor now, unscathed and without any Ombudsman suit, he would have to immediately take the Nabunturan bond float out from the backburner and flush it to the kitchen sink instead, while his municipal coffer isn’t yet strained, than be thrown of books which could make him only regret later. (For online edition, visit my blog at: http://cha4t.wordpress.com)
It is regrettable that bond flotation in a poor country like ours is still not doable and feasible for local government units. It’s unlike in developed countries like the US, Japan which have burgeoned middle class and where bond flotation is even prodded by this sector which has extra money to invest on their reliable government that would never go bankrupt unlike banks.
At this time of rice and price crisis, when people are tightening their belts, eroding further the economic capacity of the middle class, it’s nil to expect from people of this class, the prime mover of bond flotation in developed countries, to chip in even out of patriotism in an endeavor they can not yet fully grasp nor understand. Time isn’t yet ripe for bond flotation considering the still laggard financial and economic capacity of Nabunturan.
Bond flotation in the country has instead turned subject LGUs as guinea pigs in the expensive and doomed experiment leading to the unwitting discovery of scheming financial adviser-consultants, brokers and underwriters that a so lucrative money-making business has been spawned by the failure of the bond float to attract individual bond investors or buyers. This after they could earlier hoodwink unknowing LGU officials to spend for the expensive, extravagant and unnecessary preparatory and pre-construction costs and expenditures.
A street-smart wag, a former councilor in a neighbor town of Nabunturan, who frequents in malls and posh resto bars for his daltan (dala tanan) rackets, has even the gall to brag sometime that it was he who brought up the idea and brokered the bond flotation deal in Nabunturan. He promised a councilor who is with the minority, that he is sharing his future commission to the latter, who is refusing the offer. Santa banana! May the municipal resolution approving the feasibility study (FS) of the Nabunturan bond float be better snagged at the Comval provincial board.
As of now, observers are confused why pushers of the P90-million bond flotation in Nabunturan, that is already in the works, have proceeded in rashly approving the FS prepared by Preferred Ventures in second and third readings after they conducted what was obviously a lutong macao public hearing a month ago. The ABC representative Alfredo Manalop himself was quoted as saying to friends, wa ko kasabot aning bond flotation pero miboto gihapon ko pabor ato. Oh my gulay! If someone who is an insider in the close deliberation of the town’s bond flotation talks that way, the more we see on the general absence or low level of awareness and understanding of the Nabunturan people in this complicated concept of bond flotation.
This is understandable since the Nabunturan LGU had not even made extensive information dissemination on the bond float. The matter has been in the backburner since two years ago, during the second term of Mayor Macario Humol. But it’s only now on his last term that audible cries from fire victims, who were leasees of stalls of the old burned market building, have been heard over the projected high rentals and advances in the stalls and spaces pegged in the new public market building that the town bond flotation pushers want to construct. (For online edition, visit my blog at:http://cha4t.wordpress.com)
At its face value, bond flotation is good. Government finance managers find it as a new means of getting alternative sources to fund development projects for usually cash-strapped local government units as against the usual route of borrowing from banks and financial institutions. Embarking on bond flotation is looked upon as a step in strengthening devolution and autonomy of IRA-dependent LGUs.
Municipal or city bond flotation started in the country in the early 90s but this financing mode is still considered an unknown babe-in-the-wood in the financing industry owing to many constraints. Chief among which is the lack of awareness and knowledge of the general public as well as potential bond investors or buyers on the bond flotation scheme itself, which caused for the failure of many municipal bond floats to attract bond buyers or investors. The LGUs are high-risk, highly political entities that not yet relied upon by individual investors from the public no matter how they dangled their IRAs as sinking fund repayments or put at greater risk the delivery of basic social services once the bond float cage is put over their IRAs.
The reported buy-back made by a Bukidnon LGU which resorted to bank borrowing just to stop the further bleeding of its coffers due to unnecessary obligations and charges attendant to bond flotation is a sorry spectacle that Nabunturan officials pushing for the same bond float experiment ought to dread and evade. The reported emptiness of occupancy in the new public market of Calatagan, Batangas where a bond float was made ought not to be repeated in the Nabunturan where its officials want to construct the same type of infrastructure that pegs high rentals of stalls and spaces and advances.
The best scenario for the municipal bond flotation is if its total amount of bonds floated is bought completely by the first-level individual buyers. Which means that funds have been sourced out enough to complete the intended project. In this case the LGU, would only have to bear for the interest charges to be added to the principal amount which would be repaid on term.
But what would be fatal to the municipal coffers is when there is nobody or there are only a few first-level individual bond buyers, or the bonds are bought in bulk through the waiting underwriter (ahente) as in the painful cases in Claveria, Misamis Oriental and Aklan. It is the underwriter that exacts more tong-pats- additional variable fees and charges including hidden charges and conditionalities on top of the interests on bonds for saving faces of LGU officials. Certainly, there is lucrative business in here, that underwriters and brokers including the orchestrating LGU financial advisers and consultants have discovered, and it is spawned by the failure to attract bond investors or buyers, a reality that has practically hounded a many municipal bond floats in the country.
Where bank borrowing exacts only a few known charges, fees and fixed interest that are not difficult to project in the yearly budget pipelining, bond flotation on the other hand exact variable, unknown charges, fees and floating interest, plus the other fees and expenditures that are first borne during the preparatory, pre-construction period.
If you would not call expensive, exorbitant and unnecessary the P6.7 million cost for architectural and engineering design, the P2.7 million consultancy fee, the P1.35 million underwriter fee, P900,000 guarantee fee, P450,000 trustee fee and other expenditure items in Nabunturan bond flotation scheme, I don’t know what they are. Needless to say, these are completely unnecessary if the Nabunturan LGU resorts only to bank borrowing and taps its own departments in doing preparatory activities such as the making of feasibility study, architectural and engineering design, among others. (For online edition, visit my blog: http://cha4t.wordpress.com)
There are still a few of municipal bond floats in Mindanao, but unfortunately reports said that most of these projects are a failure turning involved LGUs to being saddled with unnecessary obligations and debts.
Nabunturan sources who went on study tour to Malaybalay, Bukidnon said that the Malaybalay’s own bond float was a big failure as the local government made a buy-back option by resorting to bank borrowing just to stop the high financing costs of the bond flotation on the running.
For having allegedly malversed proceeds from municipal housing bond flotation just in a year’s time after it took off, former Misamis Oriental Governor Antonio Calingin, then the town mayor of Claveria in the province, was haled to court resulting to his conviction from 47 graft and criminal cases filed at him in connection to the bond float. His cases included an alleged cornering by his brother of the rentals of heavy equipment used in the construction of the housing project. In this bond float, proceeds from the housing project did not manage to reach fifty percent of the bonds floated resulting to the net loss of the project which was inherited by the administration next to Calingin’s.
There was not even a single investor in Aklan province which floated bonds in 2000 for its jetty port and terminal building to support the world famous Boracay Island. Both the Claveria and Aklan bond floats were brokered by Preferred Ventures Corp., the current financial adviser-consultant in Nabunturan bond float.
A councilor now disclosed that during the study tour of the majority of sanggunian members to Congress early this year they made a side trip to Calatagan, Batangas, where another municipal bond float was made, and saw for themselves a largely idle new public market building with a lot of unoccupied stalls and spaces. The building is the reason of the town’s bond float which was brokered by the same Preferred Ventures.
The side story of this side trip was that the Preferred Ventures had accordingly “accommodated (the SB members) well” there. That at a time they were still in the thick of deliberation on whether to approve the feasibility study for the Nabunturan bond float, the document whose approval could finally lay the legal grounds for the ambitious project of Mayor Humol.
There is it, from these cases, we find upfront the impracticality, unpopularity if not non-doability of the municipal bond flotation, and at its rear-end its extravagance, wastage of governmental resources and corruption that put the government in disadvantageous and losing end. (For my online edition, visit my blog at: http://cha4t.wordpress.com)
Local government units especially municipal governments in the region have to better monitor the P90-million bond flotation project in Nabunturan, Compostela Valley. As of now, the bond flotation is already in the works after the feasibility study for the project pushed by Mayor Macario Humol was approved by the majority in the local sanggunian three weeks ago. The resolution approving the FS is now awaiting deliberation in the provincial board, and should the latter fails to act on it in a month’s time it is good as confirmed based on the local government code. Then the bond flotation in Nabunturan legally takes off.
The FS is prepared by the mayor’s chosen financial adviser-consultant, one firm that goes by the name Preferred Ventures Corp. (PVC), which has at least two failed and busted municipal bond floats tailing its track record in this yet baby financing industry.
Humol, a third-termer, has pushed for the bond flotation to tap private funds for the construction of a new public market building, which would replace for the stalls that were gutted by a fire three years ago. The mayor is known to be a frugal steward of funds since his first term as he was observed to be not keen in having his municipal coffer tied up with loans from banks. It’s his feat that he acquired heavy equipment using internal resources.
Why a sudden change of heart in his last term by his aggressive campaign to float bonds whose repayment obligations would last for 7 to 10 years is quite a tall query as the bond flotation is just the same dog, nay nastier dog with a different collar (read: it is still loan made inversely, not secured from banks but from private persons and firms through the underwriter or ahente).
We will explain this now to know what is this thing called bond flotation. It is like a transaction where you as businessman assign the future income of your business as payment with added interest for the money you get from others who join with you in making an income-generating project. To legalize the transaction with your co-investors or so as to assure them that you would be returning their money with added interests, you need a legal document and this is what the bond is- a scrap of legal paper that you issued to your co-investors.
But there is another actor in bond flotation- the underwriter or ahente, who would get the bonds in bulk in case there would be no investors or buyers of your bonds. This ahente would either buy the bonds in bulk by using his own money or resorting to bank borrowing or by selling the bonds to his own buyers, or a combination of these. In return, the ahente for helping the businessman who is facing an absence or lack of investors, gets underwriter fees, other fees and charges including hidden fees (read: tong-pats) on top of the interest he would be earning from buying and selling the bonds in bulk. Of course, the ahente makes sure that his total tong-pats should be over the interest charges he would be paying for his own bank borrowing which he uses to buy the bond in bulk.
In short, bond flotation is still a borrowing not secured directly from banks but made inversely either or both from investing persons and firms and through the ahente (underwriter) who profits much from his tong-pats in buying through his own capital or by borrowing from banks, and selling the bonds to his own buyers.
Given these, why can’t just Mayor Humol of Nabunturan and his majority cabal of councilors borrow directly from the banks as a shortcut and do away from paying the exorbitant P1.35 million underwriter fees, P900,000 guarantee fees, P450,000 trustee fees, additional fees, charges and interests and hidden charges (tongpats) for the ahentes, besides doing away from paying the same exorbitant P2,7 million consultancy fees, P6.1 million for architectural and engineering design and other pre-construction expenditures?
Now put the Internal Revenue Allotment (IRA), that share of tax from the national government which comprises the bulk of the town income (usually 80-90 percent), in your future income from business. Note that the IRA is an assured income as the government will never go bankrupt being a tax collector. It’s also the source of the expenditure for the most of the personnel services, maintenance and operating expenses, infrastructure development and basic social services of the LGU.
Unfortunately, it is this precious IRA that is made as the collateral and assured source for the repayments of the bond obligations as it put in the sinking fund in installments automatically debited by chosen trustee bank to assure that the brokers and ahentes of the bond flotation would be laughing in their way to the bank. (For my online edition, visit my blog at: http://cha4t.wordpress.com)
