Cash-strapped Kochi Corporation to issue municipal bond

Civic body to approach State for to determine feasibility of govt. guarantee

With the cash-strapped Kochi Corporation deciding in favour of issuing a municipal bond as an additional source of funds, the civic agency will approach the State government to determine the feasibility of a government guarantee for the bond.

Approaching the government for a guarantee is a preliminary step in a long process. The Corporation’s credit rating will have to be determined and improved. Since the civic body did not have a register of its assets yet, one would have to be made, and the books of accounts would have to be cleared, said Mayor M. Anilkumar.

If the government agrees to a guarantee, the Corporation’s finance standing committee will begin discussions to take the plan forward. “The Union Budget for this financial year encourages municipal bonds and is offering subsidies on them,” said Mr. Anilkumar. While some local self-governments in the country have issued bonds, this will be a first for the State.

The Mayor suggested at the council meeting on Friday that with the funds raised by the bond, the Corporation could consider a detailed town planning scheme, possibly covering around eight to ten divisions between Banerji Road and Cheranalloor. A plan can be considered for the underdeveloped areas falling within those divisions, including islands such as Thanthonni Thuruth. A suitable agency will have to prepare a design for such a scheme, that can incorporate plans for parks, roads and housing.

The concept of a municipal bond had been floated in the Corporation’s budget for the 2018-19 financial year, said United Democratic Front (UDF) councillor V.K. Minimol. It was intended to pay the civic body’s share for the Smart Cities project, but the Left Democratic Front (LDF) in the opposition then did not allow the process to move forward, she said. “The viability of value capture financing as a source of funding should also be considered,” she said, adding that the Opposition backed the idea of a municipal bond despite the risk involved. A municipal bond is a debt instrument on which interest will have to be paid.

The idea of issuing a bond had been presented before the council as a suggestion from the finance standing committee and the Mayor. “But with the Corporation’s liabilities, getting a good credit rating might be difficult,” said UDF councillor Henry Austin, adding that no clear plan was presented to the council on what the funds from a municipal bond would be used for.