PM Briceno Proposes Municipal Securities Bill for City Councils

PM Briceno Proposes Municipal Securities Bill for City Councils

Prime Minister John Briceno presented a Municipal Securities Bill in the House today that would give the city councils more autonomy and ease when it comes to floating bonds.  In his presentation, he explained that additional funding has become necessary due to the expansion of the cities, and additional developments.

John Briceno, Prime Minister of Belize: “This, however, is not the most appropriate means by which long-term infrastructure works are or can be funded. In the past the municipalities have simply gone to the banks to borrow funds on long-term loans or overdraft to finance these works. As we all know whenever you have a middleman there tends to be an additional cost added for the middleman to make money. In this case the middleman is the bank. That is why they are referred to as financial intermediaries. In other more financially developed jurisdictions borrowing from banks is not the typical practice of municipalities. Municipalities typically raise money through direct borrowing in the capital market by cutting out the middleman, by cutting out the banks. This is done by issuing municipal securities in the form of bonds, notes or municipal paper. These financial instruments are essentially basically an IOU issued by the municipality to its lenders or investors. This is usually the cheaper way, more efficient way of borrowing by the municipalities.”

Once the Municipal Securities Bill is passed, Prime Minister Briceno says it would circumvent having to go to the National Assembly for approval.

John Briceno, Prime Minister of Belize:­ “Municipal securities allow local municipalities to finance their investments without burdening the central government. Raising money through the issuance of municipal securities is not foreign to Belize. It has happened before. The first municipal bonds were issued under a UDP Belize City Council led by then Mayor Darrell Bradley. Since then another UDP City Council in Belmopan also issued municipal bonds. The Belize City Council has since issued a short-term municipal paper as well. The monies raised through the municipal securities have been used for various purposes, but in most instances for public infrastructure works like the building of roads and drains. The development of the municipal securities market will go a long way in providing the availability of municipalities to obtain long-term finances, access to financing and better capital allocation. The Municipal Securities Act will streamline the process or issuance of municipal securities. As it currently stands each time Belize and Belmopan City Councils have sought to raise funding by way of the issue of municipal securities, whether municipal bonds or municipal paper, new, customized legislation has had to be introduced. As a result the Belize City Council Municipal Bond Act, the Belize City Council Municipal Paper Act and the Belmopan City Council Amendment Act 2016, all had to be enacted. The Municipal Securities Act will eliminate the need for new legislation for cities and towns each time any municipal securities are intended to be issued.”

The first ever Municipal Bond was done in 2012, and had raised twenty million dollars in capital for public works encompassing streets and drains.

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