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Blogista
By Cha Monforte
A White Elephant in the making
(the finale)
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)
Blogista
By Cha Monforte
A White Elephant in the making (I)
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)
Blogista
By Cha Monforte
The conspiracy in municipal bond flotation
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)
Blogista
By Cha Monforte
Doomed municipal bond float
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)
Blogista
By Cha Monforte
Tong-pats in P90 M bond flotation in Comval town
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)
Bluff
August 14, 2008
BLOGISTA
By Cha Monforte
We’ve heard lately that several among the pro-bond flotation pushers in Nabunturan have already
run out of reasons in justifying the exorbitant and extravagant P90-million public market building. Instead of rebutting squarely
the project-bounded issues from the growing number of oppositors to the bond float that would only construct an excessively
expensive market building, which would surely become a White Elephant, they have hoodwinked the people by the false reasoning
that the Nabunturan cityhood could not push through if the SOB bond float could not be materialized. Santa banana!
We’ll pick this latest falsity on the discussion board. It’s clear as the sky that the
Nabunturan would never be converted to a city now and in the near future. Reason: it fails on two of the three requirements
of converting a town to a city. Nabunturan’s total income from the Internal Revenue Allotment (IRA) and local sources
runs over P80 million only versus the required minimum of P100 million. Failure one. Based on the latest official census in
2007, Nabunturan has only 67,365 versus the required minimum of 150,000. Failure two. Only in the land area requirement does
Nabunturan meet. The town has 245.29 square kilometers versus the required 100 sq. kms.
Simple statistics just cast a pale of doom to the bloated claim of Nabunturan officials that it is
leading to a path of cityhood. The biggest obstacle of Nabunturan cityhood lies in its lacking population. Even if we take
a greater annual population growth rate of 2.5 percent instead of its 2.3 percent, and by a progressing cumulative projection,
the town population can only hit the required 150,000 by 2040 or 32 years from now. But since there’s this geometric
behavior of the population to increase, we take Malthus seriously and cut by half my projected 32 years for Nabunturan to
hit 150,000 persons. But in this still Nabunturan needs 15 years of waiting to become a city, at the very least.
Another selfish reason that stymies the cityhood bid of my hometown Nabunturan is the resistance
of the existing cities to the conversion of towns to become cities as they don’t like seeing newcomers competing to
bite for the IRA pie allocated for the cities. The existing cities and even the newcomers like the fortunate Cabadbaran in
Agusan del Norte and Bayugan in Agusan del Sur which became cities just this year and Mati in Davao Oriental in last year
fear that if there would be more cities to come, in the end they would be munching smaller slices of the IRA pie.
With this, it is understandable now that the League of Cities of the Philippines (LCP) has been fighting
tooth-and-nail for the stoppage of city conversion in various fronts: lobbying the President to veto an approved cityhood
bill, to Congress for a resolution declaring moratorium on cityhood bills and increasing conversion requirements, and going
to the Supreme Court to ask for restraining orders to stop towns from holding cityhood plebiscites.
With this LCP selfish and strong resistance, it’s another waste of government resources and
time for the Nabunturan officials to go into Lakbay Aral or study tours on cityhood or go into lobbying faraway national corridors
of powers in Imperial Manila. And given the glaring population obstacle Nabunturan has or the lengthy years needed to hit
the 150,000 population mark, it’s one great falsity to make the Nabunturan cityhood a crying reason of the bond flotation
pushers. It seems they are now going bankrupt of their justifications and alibis for this all-too ambitious project that is
doomed from the start.
For this cityhood false reasoning, we have this adage in vernacular: “Atika ang tatay mo, ayaw
ko” (For online edition, visit my blog at: http://cha4t.wordpress.com)
Ganging up filibustering councilors
BLOGISTA
By Cha Monforte
The outrageous P90-million bond flotation in Nabunturan is starting to come into gears even if
the town public has still largely no idea what a bond float is. On Tuesday the stamp pad majority councilors ganged up one
of their own who refuses to buy the bond float project. Councilor Alfonso “Jun” Tabas Jr was trying to filibuster
two new items relating the bond flotation pushed by Mayor Macario Humol. But tyranny in numbers of the majority councilors
sealed the continuing anti-bond float protestations of the minority bloc which included also Councilors Raul Caballero and
Editha Arangcon.
The P40 million borrowing, so unspecified, was the major item of the P42 million subjected to the
second supplemental budget ordinance which was approved by the majority on that day. I guess the ordinance was right away
signed by the mayor. But the same in our previous essays, they could not party yet. The ordinance which still needs to be
confirmed by the provincial board will surely pass the scrutiny of the anti-bond float Boardmembers the known Three Mosquiteers
or LBC- Dexter Lopoz, Neri Barte and Armando Codilla, and the latest entrant BM Dr. Ruben Flores, the ex-mayor who sensed
three weeks ago during the Comval SP voting that the bond float is bad for the health of the town he once served for one term.
Now what is this P40 million borrowing that the mayor had certified as urgent and was approved in
a rush by his stamp pad majority and Vice Mayor Romeo Clarin who ganged up and cut short a filibustering Tabas last Tuesday?
Because the P40 million has no specific source like the Land Bank of the Philippines and because
a bond float-related resolution was also passed on that gloomy day which lifted the confidentiality of the LBP accounts of
the municipal government for the Central Bank and Department of Finance to pry on it, my best guess is the P40 million borrowing
is a standby credit that the munisipyo will borrow from the waiting cabal of sharks- so to speak- composed of the financial
advisor, the Preferred Ventures Corp, the unknown underwriters, the unknown brokers (ahentes) and the unknown guarantors.
Humol and Clarin et al are not shifting to bank borrowing from a bond float funding alternative as they are already drenched
in the rain..
There we see that from the budget nomenclature alone, the bond flotation is a borrowing after all,
plain and simple, contrary what the bond float pushers have been saying all along to Nabunturan public that it is not borrowing
but fund sourcing from bond buyers and investors. These are the first-level buyers, whom I can see to be non-takers considering
the economic crunch and the lack of understanding of the general public on what a bond float is in the first place.
We see it now this early that Humol and Clarin et al have already prepared the ground to borrow from
the conspiring cabal, even as they have not floated the bonds yet for the first-level non-takers. This conspiring cabal is
the second-level bond buyers or investors who would underwrite or buy the bonds in bulk after the first-level individual buyer
fail as expected in a short month’s time.
As the conspiring cabal will expectedly be saving the faces of the bond float pushers for the zero
or lack of individual bond buyers or investors, like what had happened even to the bond float for the internationally famed
Boracay Island, expectedly, too, the cabal will be bringing the cards close on their chests, and these are the high interest
rates (P19.8 million for the first and second repayment years alone).and the hidden charges and fees of the borrowing-underwriting
besides that they could also cash in on from the expensive, exorbitant and unnecessary P2.7 million consultancy fees, yearly
recurring underwriter, guarantee and trustee fees of P2.8 million, while a contractor could benefit of the P6.7 million for
the architectural and engineering design (or sa drawing pa lang). I fear the P40 million just approved is intended for these,
as the LGU’s debt service and borrowing capacity will first be probed by the Central Bank and the Dept. of Finance.
This is getting untolerable already. First they engaged in an ambitious project without conducting
intensive information dissemination, then they chose the Preferred Ventures Corp as the financial advisor-consultant without
the benefit of a bidding, next they the made a lutong macao public hearing, next they railroaded the public hearing opposition
by enacting the bond float ordinance in a rush on the second and final reading, and now they are using their tyranny in numbers
to scuttle whatever protestation of the minority bloc. “I voting na para mahuman na ni,” commanded VM Clarin to
the stamp pad councilors who ganged up on the noisy Tabas.
But no sooner they could have their comeuppance. Once in Russia, the people have agreed to be treated
like idiots, all for the sake of some sort of “Oily Mother Russia Orthodox Neo-Tsarist Neo-Sovok Glory.” I don’t
know what that means, but it’s all about hailing a communist glory. But on the other hand it was the great US President
Abraham Lincoln who said, “You may fool all the people some of the time, you can even fool some of the people all of
the time, but you cannot fool all of the people all the time.” (Cha Monforte/Rural Urban News) http://ruralurbanews.blogspot.com
posted: aug 13/08
They could not party yet
Blogista
By Cha Monforte
Nabunturan Mayor Macario Humol et al could not yet do their partying after Wednesday’s
confirmation of the provincial board of the resolution approving the controversial P90-million bond flotation that would fund
for the construction of a new public market building many believe would only become a White Elephant, a waste of people’s
money.
On narrow nominal vote of 6-4 in favor to the bond float, the Sangguniang Panlalawigan presided by
Boardmember Maricar Zamora-Apsay (as Vice Gov. Ramil Gentugaya is on official business in Manila) and egged out by narrow
arguments of proponent Boardmember Ruwel Gonzaga, made only a temporary setback to the cause of the bond flotation oppositors.
It’s really far from over yet.
At this writing, the oppositors are reportedly gathering signatures of at least only 100 registered
voters needed to comply for the petition through the people’s initiative provision of the Local Government Code, so
that if the Comelec rules favorably, the P90-million bond flotation could be decided by the Nabunturan people themselves in
a referendum.
After a two-hour raging debate and interpellation during the privilege hour where lawyer Boardmembers
Dexter Lopoz (Montevista-District 1) and Gonzaga (Mawab- District 2), locked their horns in a gallery filled by the antis,
a surprise came when a member of the original Lakas majority, former Nabunturan mayor and now second-termer Boardmember Dr.
Ruben Flores cast a negative vote on the measure joining the Three Mosquiteers- BMs Lopoz, Neri Barte (Compostela-District
1), and Armando Codilla (Monkayo-District 1)- the known LBC hari ng padala of Ramil.
But Flores vote did not make a dent in reversing the “yes” votes of the other District
1 Boardmembers Cesar Richa (Maco), Rogelio Arambala (Laak) and Moran Takasan (Pantukan), whom the oppositors have now marked
off- politically, of course.
Forgive BM Paul Galicia (Compostela) as he is a pastor, and forget BM Joselien Romano (Compostela
) as she was not elected at large being only a PCL federation representative.
At the rate the oppositors immediately shake this setback off, it’s really far from over.
Well, the mayor , Vice Mayor Romeo Clarin and their 8 pro-bond float councilors may have the first
laugh now. But remember, he who laughs last laughs best. Meantime, we’ll wait what will happen next. (For online edition,
visit my blog at: http://cha4t.wordpress.com)
Blogista
By Cha Monforte
Float bond, make Banana Republic
The resolution approving the P90-million feasibility study for the bond flotation in Nabunturan
is now at the hands of the provincial board of Compostela Valley. Last week after two separate deliberations the matter was
referred to the joint committee on finance and legal matters.
But critics of the bond flotation have now expressed that the committee referral might yet be overtaken
by the one month period for the provincial board to act given that especially the legal committee chaired by Boardmember Ruwel
Peter Gonzaga- the former vice governor who slid in the last election running to his lower position now- is too saddled with
legal matters that need lengthy time to probe and resolve. That is according to our sources.
Hence, there is a likelihood that by the committee delay itself would have the resolution deemed
confirmed and approved, and legally Mayor Macario Humol et al and the cabal of conspiring consultants, brokers, guarantors
and underwriters would then start the ball rolling. This is a speculation, but this important matter that affects the future
of Nabunturan people needs to be speculated.
By simply dividing straight the P90 million by the period of bond flotation, which would run for
7 to 10 years, or three terms for the next mayor, at the minimum Nabunturan town be burdened of paying P12.8 million yearly.
Whew, that’s about half a million budget assistance for each of the town’s 28 barangays, or 28 two-classroom buildings
at a cost of P400,000 for each, or thousands of books, chairs, tables for the needy day care pupils in villages, or a thousand
of kilometers for barangay road maintenance, thousands of monetary assistance for pauper’s burials, medicines for barangay
health centers, subsidies for barangay health workers and nutrition scholars and school board-paid teachers, or for other
basic services especially for the barangays.
In this bond flotation, the town’s Internal Revenue Allotment (IRA) will be losing for at least
P12-P15 million yearly which will go for the assured repayment of the statutory and contractual obligations attendant to the
bond float. This is supposed to be spent to address for these badly needed services for the barangays. The yearly amount of
repayment at the minimum is about 22 percent of the town’s IRA which stood last year at P54.7 million. It even appears
that it breaches the 20-percent cap allowable to LGU borrowing.
That’s without yet considering the staggering interest payments of the bond float as computed
by the town’s Local Finance Committee at P9.9 million each for the first and second repayment years alone. All told,
the bond float is bound to strain whatever budget allocation vulnerable to fiscal and discretionary power of the chief executive,
while usually the 80-percent of the IRA is already pegged for personnel services (salaries and wages), maintenance and other
operating expenses and other basic expenditures.
By the cage and straightjacket put over this rather discretionary development and intervention funds
for the barangays, the bond float will be turning the next mayor in town inutile to the clamor for basic needs and interventions
of barangay officials and people. The next mayor wants to help, but he just could not do it as he would be burdened by the
obligations of first paying for the bond flotation capital and interest costs, including the additional and hidden recurrent
charges and fees (tong-pats for the conspiring ahentes, consultants, brokers, guarantors and underwriters), plus the unnecessary
.preparatory, pre-construction expenditures like the exorbitant P6.7 million for architectural and engineering design (or
sa drawing lang) alone. These, all in the name of a White Elephant project.
It seems that from the White Elephant the bond float of Humol et al seek to fund is making the capital
town of Nabunturan a Banana Republic, that is, when inutile mayor comes one after another or is fast replaced every other
election during the 7-10 year repayment period of the bond float. (For online edition, visit my blog at: http://cha4t.wordpress.com)
Blogista
By Cha Monforte
A White Elephant in the making (the finale)
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)
Blogista
By Cha Monforte
A White Elephant in the making (I)
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)
Blogista
By Cha Monforte
The conspiracy in municipal bond flotation
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)
Blogista
By Cha Monforte
Doomed municipal bond float
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)
Blogista
By Cha Monforte
Tong-pats in P90 M bond flotation in Comval town
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)
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