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Mar 2, 2017

Belmopan Goes for Municipal Bond

The Belmopan City Council is looking for investors for its six-point-five million dollar municipal bond. They are hoping to do some major works and upgrades in the Capital – but need business owners and residents to buy into the bond.  The start interest rate is one of the best – better than lending institutions. And if those who are willing to invest would like their monies before maturity, they are tradable – in that they can be sold off to a third party. And if you think this is only for big investors, think again – the minimum is a thousand dollars.  News Five’s Andrea Polanco was at the official launch today in Belmopan.

 

Andrea Polanco, Reporting

The Belmopan City Council has started infrastructural works valued up to six point five million dollars. To finance this big project, the Council is offering municipal bonds in order to raise money from residents willing to put forward money for a certain period of time to do these investments in the Capital city. The project is expected to not just improve works in the city, but also generate jobs and pay interest to locals – the bond holders.

 

Khalid Belisle

Khalid Belisle, Mayor, Belmopan

“The offering is for six point five million Belize dollars and the vast majority of that is slated to be injected into infrastructural development for the City of Belmopan. I explained that we had inherited a loan facility from the Holy Redeemer Credit Union and we are going to be paying that off; that was roughly a million dollars. That was a kind of condition of being able to make this offering, so we are left with roughly five point five [million dollars]. We had benefited from a bridge facility from the Heritage Bank that allowed us start some of the work preliminarily so we started works in the Cohune Walk and Belmopan Heights area of the city; so some of the work has already taken place and it is just for us to come in and do the final works in those areas. And so that leaves us with roughly four point five to five million dollars left to work with in terms of infrastructure.”

 

Those remaining few million dollars will go directly into infrastructural works in the City; primarily towards streets and drainage. As it stands, almost three million of the six point five million dollar bond has been sold; Mayor Belisle says he is confident that everything will be sold.

 

Khalid Belisle

“We are roughly forty percent subscribed already and that is because we haven’t been doing any kind of public advertising and our approach to selling has really been private; targeting those institutional investors like the insurance companies who have that liquid capital and need where to invest it; and so we are roughly, today, at two point seven already sold out of that six point five. With discussions and negotiations continuing with several other investors who we hope will come aboard shortly. So, we are very confident that the entire six point five will be sold and subscribed.”

 

For the partners in this project, participation of the community in the bond offering is important. The bond has been structured so that anyone with a minimum of a thousand dollars can purchase one bond for that value. The City Council has offered to pay specific interest rates for the duration of the life of the bond – starting with a rate that they say is pretty unbeatable. There are thirteen tranches with maturity from two to fourteen years.

 

Ervin Perez

Ervin Perez, Legacy Fund

“The structure of the bond also looks at different time horizons. You may be somebody who wants for say two years or three years – there are two year tranches. You get a lower interest rate at three point five percent, but it is much larger than what you would get at the average saving rate at the bank. And then if you have a long term savings need – like you have a young child and you are thinking I need to put aside money for college – ten or fourteen years – there are the longer tranches that pay seven point two-five percent. At all times these bonds pay semi-annually, so every six months you get the interest income.”

 

But how will the Belmopan City Council do this? The City Council has assigned its monthly subvention to a sinking fund to ensure that bondholders will not assume the risk. This will also impact the daily operations of the council, so Mayor Belisle says there will be a tightening of the purse but essential services will not be affected – in the same breath they are looking at ways to boost revenue collection.

 

Khalid Belisle

“We have looked at ways of enhancing our revenues and so I will tell you that we have typically, over the years, historically bounced between seventy to eighty percent collection rate on something like property fees; that is something that we realize we need to raise that and target eighty to ninety percent if we possibly can and that way we start to bridge that gap that we create by assigning our Belize Government subvention which is six hundred thousand dollars a year. It has, in effect, yes put a six hundred thousand dollars hold in our cash flow and we now have to make sure we close that gap so that the services provided to the city are not affected and that is just better collection on our part. New revenue streams on our part continue to be underpinned by collection of property taxes, as well as the devolution of traffic. The City continues to expand as the first or second most rapidly growing municipality so that naturally expands your collection base. And we just need to be more prudent about the way we spend our money, so we are looking at trying to cut the fat; trying to trim that waste.”

 

The Fiscal Agent in this municipal bond is the Heritage Financial Services Limited. They say they are confident that this is a solid offer that is capable of selling the full six point five million in bonds.

 

Stephen Duncan

Stephen Duncan, Fiscal Agent, Heritage Bank

“As we did the numbers and were looking at the figures as a part of the analysis and the assessment of what is taking place, I am very comfortable that in fact the City of Belmopan will be able to service these bonds and it is for that reason we are pleased to be a part of what is happening.  The amount that is already in the pipeline being discussed is very evident that people who want an alternative means of investment such as these bonds, need to make sure they hurry and buy it because some of the large companies and organizations and entities are looking to eat up the bonds.”

 

Reporting for News Five, I’m Andrea Polanco.

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