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Flotation of Bond for Medium Rise Building (MRB)

I met Mayor Mike Rama in our Barug Party gathering and he was very emphatic of the city’s desire to house more than twenty thousand structures that will be displaced by the implementation of the three meter easement and the coastal rehabilitation which would extend twenty meters from the coastline.

To make it happen, he has to build 300 Medium Rise Building (MRB) to house the displaced families costing more than 30 billion pesos. These funds will be sourced from the City’s coffers and his investments beggings.

Atty. Jerone Castillo, Mayor’s Assistant on Special Concerns, bared that the city is preparing the relocation sites of all the affected residents.

These people will get attuned to the condominium living condition which is new to most of them, he said.

But the affected dwellers have various reactions. Like how would you like to live with the situation where your next neighbor is just a wall away. Daghan kaayong “Maritis” ana, “ one of my friends who will be affected told me. Kay hastang imo “hagok”madungog. ( even your snore can be heard) he added.

But let’s face it Cebuanos should realize that they have to learn to co-exist with their neighbors in the same building and environment. Besides, with the MRB, lesser displacement from their workplace would transpire as most of them would be placed more or less in the same barangay.

But the question begging an answer is how to finance the huge project? With more than twenty thousand families to house, the City would be spending more or less 30 billion with 300 units the mayor plans to build. Is it doable within his term?

But before responding to such queries, let us first discuss what the law provides in financing MRB. Under Sec. 42 of R.A. 7279 the following are ways to finance socialized housing programs.

Funds for the urban development and housing program shall come from the following sources:

A minimum of fifty percent (50%) from the annual net income of the Public Estate Authority, to be used by the National Housing Authority to carry out its programs of land acquisition for resettlement purposes under this Act;

Proceeds from the disposition of ill-gotten wealth, not otherwise previously set aside for any other purpose, shall be applied to the implementation of this Act and shall be administered by the National Home Mortgage Finance Corporation;

Loans, grants, bequests and donations, whether from local or foreign sources; Flotation of bonds, subject to the guidelines to be set by the Monetary Board;

Proceeds from the social housing tax and, subject to the concurrence of the local government units concerned, idle lands tax as provided in Section 236 of the Local Government Code of 1991 and other existing laws;

Proceeds from the sale or disposition of alienable public lands in urban areas; and Domestic and foreign investment or financing through appropriate arrangements like the build-operate-and-transfer scheme.

Hence, aside from the City’s funds, one way to raise the needed money to finance the gargantuan expense is to raise bonds. But has any Local Government Unit tried to venture this before?

One Municipality in Negros Oriental tried this innovative concept, the municipality of Victorias in Negros Oriental.

The lack of resources in initiating a low cost housing program confronted municipal government of Victorias, Negros Occidental. The leaders of the Municipality of Victoria, Negros Oriental floated bonds for a housing project in the locality. A bond is an instrument of indebtedness sold as IOUs to investors. Its interest rate was comparable to the banks.

It took 18 months for the municipality of Victoria to float the bonds in July 1994. The flotation of the municipal bond was enthusiastically received by the private sector. Investors were encouraged to use idle funds and presented the LGU with alternatives in mobilizing resources to finance its projects.

Later they introduce the bond, many investors were still looking for the availability of the bonds which were insured by the Home Insurance and Guaranty Corporation which also acted as the financial adviser of Victorias.

Other players included the provincial government which provided the project equity of P5 million; the Negros Economic Development Foundation which acted as developer; and the Philippine National Bank which acted as the trustee bank.

And for the success of its bond flotation, the municipality is a recipient of the Ten Outstanding Programs in the 1995 Galing Pook Awards.

In reality this is very doable. We can tap our local banks, Land Bank for example to act as conduit and the Home Guarantee Insurance Corporation as the guarantor for the bond floatation. This can be done Mayor for you to raise your 30 Billion needed resources to make the city Singapore like. Write us at carillogerry@ yahoo.com.ph