For the Development of Belize City, It’s a MUNICIPAL BOND Deal Print E-mail
( 2 Votes )
Written by Administrator   
Thursday, 06 December 2012 00:00

Gentle Avenuecontributed

Belize City Council Vision:
“Our vision for Belize City is to have all residents live in a modern, clean, and secure environment. A city abounding with civic pride, patriotism, unity and opportunities for all.”

It is said that where there is no vision, many things perished and so it is with the vision of the Belize City Council that the Mayor and Councilors launched the Prospectus for the sale of Municipal bonds or ‘munis’ as they are called. We are seeing the transformation of Belize City and more can only be done if the residents of Belize City take ownership of that vision and help to see it to fruition. The Council has been strapped with expenditures and other obligations that make it difficult to realize some of their goals and meet their mandate, but visionary thinking has prevailed, and what once didn’t seem possible is now a reality. The Council launched its Prospectus for the sale of munis to the public, which includes business houses, members of the public, and other entities that are seeking a sound investment that ensures a guaranteed rate of return. Municipal bonds, in all respects are known to be the safest category of bonds and the purpose, for which they are sold, includes the development of Belize City to ensure, as stated above, that there be a :clean, safe, and secure environment.”

When you buy municipal bonds, your money is lent to the Belize City Council for projects that make life better for the average person.  They may be used to construct roads, bridges, hospitals, sewage plants, and other public works.  In this case, we have seen the number of cemented streets, which has allowed easy access and less wear and tear on vehicles, which can be costly. The Council needs the partnership of the residents, though we know that presently there are some inconveniences due to repairs, but in the end, the infrastructure should be developed to allow Belize City to transform into a welcoming tourist destination. This would bring revenue, not only to the City, but to the general economy of Belize. Your investment in purchasing the munis are twofold, because your loan will help the Council to realize its goal, and secondly, that you get a guaranteed rate of return (interest) on your investment. At some point in the future, on the maturity date, you are promised the return of the par value of the bond itself.  In most cases, certainly in the case of a traditional tax-free municipal bond, this is equal to the amount of money you originally lent to the City Council. 

In Belize, with a very liquid banking system, the banks are almost discouraging deposits which happen based on the interest on deposits. There was a time when deposits were encouraged and rates were higher to encourage deposits for on lending at higher rates, which is one of the ways that banks make their money from the spread. The average interest on deposits in the banking system is about 2.75%; at the credit unions, it might be higher when dividends are declared at annual general meetings (AGMs). Of course, those rates aren’t fixed. The launch of the munis has created an investment opportunity for institutions such as the Social Security Board (SSB), insurance companies and others, which have high liquidity, but scarce investment opportunities.

It is no surprise that in three days, some $18.5 million of the $20 million or 93% of the offering have been purchased. From tranche one (1) to tranche three (3), the return (interest) escalates, which means that the dollar return for investors also increases. It is noteworthy to mention that at the end of the maturity date, each investor will receive their principal (par) value of their investment. With inflation risk minimized due to a trend showing low inflation rate over the last number of years, then the future value of the bondholders’ investment will most likely be equal to the present value. This makes the investment in the munis even more attractive. There will be naysayers, but this is an issue, where the vision of a Mayor and his Councilors are doing their best to ensure that the vision of the Council becomes a reality. Don’t be on the wrong side of development; invest, because your investment will ensure a dollar and infrastructural return.