Boncodin to meet with Metro mayors

Budget Secretary Emilia Boncodin has agreed to meet with the Metro Manila mayors to discuss the issues raised about the released of their one month delayed internal revenue allotment (IRA).

Boncodin informed the mayors recently about the meeting to be held at the Department of Budget and Management office in Manila next Wednesday regarding the IRA monetization program of the Union of Local Authorities of the Philippines-Department of the Interior and Local Government (ULAP-DILG).

Makati City Mayor Jejomar Binay in particular wrote to Boncodin to inquire about the monetization program which would pave the way for the immediate release of the national government’s obligation to the local government units (LGUs).

The national government owes the LGUs one month IRA from October last year which is equivalent to P8.9 billion. In November, one fourth of the amount or P2.237 billion has already been released to the LGUs as a result of the directive of President Arroyo. The national government now owes the LGUs three fourths of the delayed amount or P6.712 billion.

The DBM, in its Circular Letter No. 2002-4 dated Jan. 11, informed the LGUs of their notice of payment schedules (NPS) for the release of three fourths of the IRA. Under the NPS, the amount would be released in six equal installments starting April to April 2007.

However, the LGUs may opt to avail of the entire amount immediately if they enrol in the IRA monetization program. Upon enrolment, the LGUs would be issued the equivalent of its shares in government guaranteed securities to be invested in government financial institutions (GFIs).

One of the issues raised by Binay about the program was about the total share of the LGU which would be discounted.

With a discount expense of 26.9 percent and a monetization cost of 2.6 percent, the LGUs would effectively be left with only 70.5 percent of the total amount that they were supposed to receive.

A point raised by the ULAP was that the securities would earn the same amount or more in interest if it were to be invested in the GFIs.

Binay argued that the discounted rate is unacceptable as the LGUs should actually be given the amount in full plus the corresponding interest because of the delay in its release.

"It strains our imagination as to how the DILG which is mandated to fulfill those objectives can be party to a scheme that is clearly against the welfare of LGUs," Binay said in his letter to Boncodin.

Moreover, Binay asked Boncodin whether or not the securities or bonds are fully negotiable instruments to be used by the LGUs to negotiate with other non-government banks. Specifically, Mayor Binay asked whether the instruments could be used to form part of the reserve requirements of the private banks or as tax payments to the national government by the corporate taxpayers.

The use of the bonds for purposes other than an investment in the GFIs would make them more valuable on the part of the LGUs. Makati City’s share of the three fourth un-remitted IRA is equivalent to P26,598,064.