The city council has approved on first reading a proposed ordinance putting in place guidelines on the issuance of bonds by the City Government of Baguio to finance some of the city’s major development projects.
A bond, as defined in the proposed ordinance, is a debt security issued by a borrower (city government) to investors (private individuals or companies) who are willing to lend a certain amount of money for a certain period of time.
In return, the borrower promises to pay the lender a specified rate of interest during the life of the bond and to pay the principal when it matures.
Oracles said the issuance of bonds is a viable and safe alternative to traditional financing mechanisms currently employed by the city government such as public-private partnerships, debt financing, local finan-cing, and securing of grants from external sources.
Oracles emphasized the issuance of bonds as one of the city government’s financial mechanisms develops accountability and transparency and harnesses a sense of bayanihan among residents.
Under the proposed ordinance, the Local Finance Committee shall be tasked to determine the competitive rates, select underwriters, prioritize development or investment projects, duration of the bond, maturity and coupon rates, and the payment of incurred obligations to private investors.
In consultation with concerned sectors, the city go-vernment shall identify specific projects to be financed through bonds and inform the public of the intended use of the process of the bonds.
The identification of these projects shall be based on the Annual Investment Program where the location, cash flows, and nature of the project are clearly identified.
The city government shall likewise set parameters in selecting the projects to be financed by the bonds including the manner in which the project can generate revenues which may be used to pay the outstanding bond obligations.
The issuance of bonds by the city government shall be subject to the rules of the Philippine Dealing and Exchange Corporation as to its liquidity mechanism.
The city government may outsource and engage third parties needed for the management, issuance, and servicing of bonds.
Funds for the engagement with third party providers shall be sourced from the annual appropriations of the City Budget Office.
The proposal was referred to the committee on laws, human rights, and justice. – Jordan G. Habbiling