It has long been awaited but now the Prospectus for the Belize City Council’s Municipal Development Bond (MDB) is finally ready.
The prospectus has three key features in it. Firstly, it paints a historical picture of the finances of the Council through audited financials up to the period ending March 2012. This is accompanied by unaudited reports for three previous years as well as projections for the next 4 years. This will show revenue streams and how they are expected to perform for that period. Secondly ,the prospectus has a description of the bond structure with its accompanying legislation. Thirdly, it features the breakdown of the bond tranches with its interest rates, maturity dates and the works to be procured with the 20 million dollars.
The bond itself is broken down into three tranches with the first being for 3 million dollars for a period of 3 years, bearing an interest rate of 3.5%; the second tranche will be for 7 million dollars for a period of 5 years with an interest rate of 5.5%. The third tranche is for 10 million dollars for 10 years at an interest rate of 8%. According to Mayor Darrell Bradley, the market had indicated that investors had varying needs, some wanted to stay for a full 10-year-term and wanted to get higher yields in interest while others wanted shorter yields and yet, some were concerned with political risk and wanted their investment to mature within this political cycle. Bradley explained that because of the varying requests, the Bond was structured in such a way that half of the payments will be retired within this central Government’s tenure in office. He added that it is not the intention of the current Belize City Council to saddle any future Government or Councils with debt.
Even so, because of the use of the $20 million development bond, which will be strictly into streets which are projected to last at least 40 years there is a justification in passing payments over a period of time because future generations will benefit.
As it relates to the purchasing of the Bond, Bradley stated “anyone can purchase.” Offerings will be made in lots of 200 dollar denominations and any amount thereafter can be had. He said that there has been great interest in the Bond so for. A lot of interest has come from the Belize American community who are interested in investing and contributing to the development of Belize city. Mayor Bradley added that the council is also seeking investment from institutions like banks, insurance companies and large companies. Nonetheless he stated that the council in interested in a large cross section of investment participation.
So far the MDB has been presented to at least 15 companies, organizations and boards of directors and it has been designed so that it qualifies as liquidity reserve requirements for insurance companies. These have already expressed interest in the purchase of the bond. Bradley says that he is optimistic that within the first few days of the offering at least 50 percent of the MDB will be sold.Â
The Bond has been designed in such a way that it will only take 15%Â of the Council’s annual income, representing 2.5 million dollars, to service both the principal and interest requirements. The Council currently takes in between 17 and 18 million dollars a year and the bond service requirement will come directly from the Council’s most consistent revenue sources ,which are the yearly government subvention and the tourism head tax. These revenue streams will be directly allocated to a Central Bank sinking fund established for the Bond servicing.Â
And as a measure of ensuring that the council remains always on the revenue safe side, it is proposing a 10-dollar-per-household fee for the collection of garbage. Mayor Bradley says that Belize City and Corozal are the only municipalities in the country, which currently do not collect such a fee. He says that as it is, there is a fee implemented for the collection of commercial garbage and, that the residential garbage will only bring the entire collection system in line. At a 70% collection rate, it is expected that 1.09 million dollars will be collected. Combined with a moderate increase in property tax, which will yield an additional 1.2 million dollars and the cutting back of one of the sanitation contracts from 78 thousand dollars to 55 thousand dollars a week to yield 1.2 million dollars a year, the council will be more than able to compensate for the bond servicing.
With all the numbers crunched and justification for the use of the 20 million dollars to be raised from the Belize Municipal Development Bond, there is no way that a failure is on the horizon in its floating.
