In a letter to President Arroyo, Rep. Eric Singson (second district, Ilocos Sur), president of the Northern Luzon Alliance of legislators, said their provinces need funds to "implement urgent development projects."
Under Republic Act 7171, the national government is mandated to allocate 15 percent of tobacco excise tax payments yearly to Ilocos Sur, Ilocos Norte, Abra and La Union as their share as producers of Virginia tobacco.
The government, however, has been slow in releasing the funds accruable to the four provinces, which run up to more than P1 billion yearly. Funds were last released last year but were still incomplete.
Led by Singson, the northern legislators’ bloc earlier walked out of the House session hall to protest the delayed release of the funds.
Singson told The STAR that their proposal would resolve the issue. He urged the President to approve it.
Under the proposed securitization, the Land Bank of the Philippines, as trustee, would issue investment certificates and sell them at a discount to perspective investors in an auction.
The certificates will have maturity dates coinciding with the annual releases to the four Ilocos provinces of their shares from tobacco excise taxes by the budget department.
The scheme mandates the congressional districts of the four Ilocos provinces to maintain accounts with the Landbank where the proceeds of the investment certificates will be subsequently deposited.
An unspecified amount representing discount and transaction costs will be deducted from the proceeds, states a copy of a document detailing the deal, which The STAR got.
The securitization package, which AZ Development Managers Inc. drew up, proposes that 75 percent of the tobacco excise tax shares accruing to the four beneficiary-provinces would be monetized.
Aside from Landbank, the Development Bank of the Philippines has reportedly expressed willingness to take part in the deal as co-lead underwriter. Landbank will reportedly act as trustee and lead underwriter.
The package also calls for the budget department to issue Special Allotment Orders (SAROs) and Notices of Payment Schedule (NPS) for the 2002 tobacco excise tax shares to be due on or before December 2002 and for the 2003 shares in January 2003.
The beneficiary-provinces would then assign their own SAROs and NPS to Landbank as the trustee, which, in turn, would securitize and monetize the SAROs by issuing the investment certificates.