A proposal has been made that the municipalities seek financing by securitizing their income, requiring information on their financial capacity.
From a press release issued by the Legislative Assembly of El Salvador:
The Finance Commission today launched the consultation phase for a draft amendment to the Law on Securitization of Assets, to hear the views and comments of the leaders of the Superintendency of the Financial System (SSF), the Central Reserve Bank (BCR), the Stock Exchange of El Salvador (BVES), and institutions specializing in asset securitization HENCORP Valores, S.A. and RICORP Titularizadora S. A.
Sabesp, the Sanitation Company of São Paulo (Brazil) and Latin Consult were awarded the $ 2.3 million contract.
The contract is for commercial and operational consulting for a period of three years in nine municipalities.
This is the second bid awarded to the consulting firm in Central America. In 2009 it won a $ 8.8 million bid in Panama sponsored with the Institute of Aqueducts and Sewage Systems (Idaan).
IFC will finance part of $ 44 million in road repairs in Tegucigalpa and Comayaguela.
The money will be channeled through three local banks: Ficohsa, Atlantida and Banco de Occidente, covering 36% of the $ 44 million credit loan the municipalities have with these banks.
This is the first sub-national credit the International Finance Corporation (IFC) does in Honduras and serves as a mechanism for credit sharing, allowing local banks to overcome limits of funds they can lend, providing better conditions for long-term investments.
Since the law was passed giving municipalities the right to collect property taxes, collection has increased by 2% annually.
However, the amount being collected for property taxes could grow substantially because their registered values are much lower than their real values.
In their analysis of the issue, Daniel Shea of the Costa Rican Tico Times, indicates that according to a recent study by the Technical Standardization Entity (ONT) of the Treasury Department, where they evaluate the value of properties in Costa Rica (the first one of this type in 10 years), 92% of properties have a value listing at $20,000 or less...
The Honduran Congress will approve a tax amnesty law in the coming days that will be in effect for the entire month of July.
During this period, taxpayers who are behind in their tax payments may make their payments without any late interest fees.
A Tiempo.hn article stated that “taxes owed in San Pedro Sula are upwards of $42 million (800 million Lempiras). Authorities believe this amount will be greatly reduced though amnesty."
The mayoralties reported decreases between 10% and 70% in taxes which affect project execution and employment.
The president of the Corporation of Salvadoran Municipalities and Mayor of Antiguo Cuscatlán, Milagro Navas, said, "We are seeing a recession in all the mayoralties and now we are in trouble and are even considering staff reductions." Her own community has $300 thousand in unpaid taxes.
Centralization, lack of resources, poorly defined competitions, are some of the most serious problems faced by cities in Central America.
Despite being the main actor when it is time to provide the communities with the goods and services that they need, no country in the area stands out in giving local governments the tools they need to carry out their duties, according to the "Comparative Study on municipal finances for local development in Central America and the Dominican Republic."