Wednesday, May 21, 2008

P90 M Bond Flotation For Nabunturan Market Opposed

COMPOSTELA VALLEY, Philippines - The move of the municipal government of Nabunturan to engage into ten-year bond flotation costing P90 million to finance for the construction of a new market building has been opposed by several sectors over its exorbitant amount including its project components.

Already, the pre-final edition of the feasibility study for the bond flotation was approved in a resolution three weeks ago by majority of the Sangguniang Bayan led by Vice Mayor Romeo Clarin and proponent Councilor Iluminada Cabuga amid vehement opposition by Councilors Raul Caballero and Alfonso Tabas Jr.

Bond flotation here would mean that the Nabunturan local government unit would issue and sell interest-bearing paper bonds with which would be paid up until ten years to individuals, government banks or private firms, the proceeds of which would be used for the construction project of the town’s public market building. If there is no bond buyer who is assumed to be the investor of the project, the bond flotation underwriter firm would underwrite the bonds in bulk and sell it to institutional buyers.

Bonds bought in this case would mean the obligations (capital, interest and other charges) incurred by the municipal government which it would pay in installments from its Internal Revenue Allotment (IRA) that has been assigned as source and collateral to the sinking fund repayment to the obligations.

Ideally, proceeds or collections from the project (public market building) to where the bond flotation was intended should be enough to pay for the obligations but practically the IRA is stashed to make up for the repayments of obligations.

Two weeks ago, a public hearing on the bond flotation was made by the executive and legislative departments without the presence of third-termer Mayor Macario Humol but howls of protest were raised by vocal participants led by Tabas.

Oppositors slammed the project’s staggering cost which is P90 million and several of its components as exorbitant and feared that delivery of basic social services would be strained after Humol’s term as the Internal Revenue Allotment (IRA) of the town will be tapped to pay for the obligations backing up the bonds.

Based on the feasibility study alone prepared by the project’s financial adviser and consultant, Preferred Ventures Corp. only some P84 million will go directly to construction of the planned public market building, which has lot area of 1,700 square meters.

Tabas charged as “too expensive” the pre-construction components that include architectural and engineering design amounting to P6,057,465 , site development with P3,682,264, general requirements, P1,200,331, while P73,059,940. is allotted for the construction of the new public market building which would stand in the area where the old market spaces were razed to the ground by a fire over two years ago.

Oppositors charged as prohibitive are the P2.7 million for the 3% consultancy fee which will go to Preferred Ventures Corp as the project financial adviser, P1,350,000.00 for underwriter fee (1.5%), P900,000 guarantee fee (.05%-1.25%), and the P450,000 trustee fee (.5%), all which would be paid during the first year repayment period.

First the year alone, the municipal government would have to pay a total of P15.3 million, of which about P9.9 million goes for interest payment, Tabas disclosed.

Councilor Caballero appealed to his colleagues in the council not to push the bond flotation saying that ultimately it is disadvantageous to the local government as what the comparative study of the local finance committee showed earlier.

The Nabunturan Local Finance Committee reportedly released its comparative study late last year revealing that if the project is financed through a loan on various terms Landbank repayment for the first year repayment showed having only P4,836,750 at the least while the Development Bank of the Philippines has only P13,303,167.

The same study noted that on the second year, repayment would reach P45,047,600 under the bond flotation, while LandBank and DBP loans would only have P25,649,250and P40,633,750, respectively.

Oppositors also said that small stall holders who were victims of the fire would be displaced as the new public building would have high rentals for the spaces which ion effect trigger high prices of basic commodities in town.

They claimed that stall holders having 18 square-meter space would have to pay a monthly rental of P11,340 after paying P68,040 for the three months advance rentals.

Tabas alleged the several councilors from the majority went for a study tour on bond flotation this year to Calatagan, Batangas where personnel from Preferred Ventures Corp. met with and accommodated them.

Meanwhile, Mayor Cesar Colina of Maragusan has reportedly commented last week that he was able finish the construction of his town’s 96-stall public market building as replacement to the one that was also gutted by fire three years ago at a cost of P3.4 million only using his government’s own resources, in obvious comment to the bond flotation plan of Nabunturan. (Cha Monforte, Rural Urban News

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