Weekly Finance Tips

Archive for the ‘Alternative Financing’ Category

Setting up human resources that have a reliable knowledge about the “OD” and all the intricacies, including the setting up of a treasurer of a reliable and knows the behavior of the bond market; Issuing “OD” will bring consequences that investors will demand transparency, accountability, and always monitor the performance of local government in managing development funds. In addition to demands to pay the obligation runs, will also be accompanied by the demands of performance and reporting that must be good for ratings of bonds issued to obtain a good position in the eyes of investors or the rating agencies which is used by investors. Thus, the civil servants have to change the paradigm and mindset drastically in managing finances and accountability. Accountability and transparency required by the investors will cover the entire process of issuing the bonds. Local Government should be transparent, including in the selection of lead underwriters who will be the underwriter. Local government could no longer use the same approach in managing the debt of the central government that is bilateral and negotiable. In managing the bond, investors are demanding consistency of bond interest payments and principal on time, or local government will default or fail to pay assessed. If until this happens, governments will lose confidence in the market and will no longer affect the investors interested in financial instruments issued by governments in the future, whether it’s the other bonds or may be a mutual fund.

Explicitly the statement contained in Chapter VIII of the seventh section of the OD. However, these opportunities have not been offset by the Regional readiness in managing and organizing: (1) the internal organization, (2) its association with external parties. According Gunoto Saparie (2008) the management and structuring not only determine which steps publishing OD, but also prepare from start until after the issuance of pre OD activities.

It is recognized that: “Regulation of the Minister of Finance Number 147/PMK.07/2006″ establish procedures for issuance, Accountability, and Information Publication OD came into force on 29/12/2006. In the policy, which is the OD is a loan offered to the public through a public offering on the capital market. OD can only be issued in the domestic capital market and denominated in rupiah. Management organized by the Regional Head of OD which includes strategy and policy, including risk control, planning and establishment of regional loan portfolio structure, publishing OD, sales OD, OD repurchase prior to maturity, and accountability. Regulation of the Minister of Finance was taken in implementation of the provisions of Article 36 of Government Regulation Number 54 Year 2005 on Regional Borrowing.

Thus, the local government plan published OD makes a very interesting situation, as the opening of the taps of regional autonomy, especially with the Law No. 33 of 2004 on Financial Balance and the Central Region and the Ministry of Finance Regulation No. 147/PMK.07/2006 on Procedures of Issuance, accountability, Information and Publications OD. Financing through the issuance of bonds is a relatively inexpensive alternative financing and funding that could get pretty big, but it will all be accompanied by a lot of consequences that must be met by local government as an issuer.

Local financial management in terms of allocation of capital expenditure is associated with long-term financial planning, particularly financing for the maintenance of fixed assets resulting from capital expenditure. According to the concept of multi-term expenditure framework (MTEF), that the capital expenditure policy should pay attention to expediency (usefulness) and the financial capacity of local government (budget capability) in the management of these assets in the long run (Allen and Tommasi, 2001). Capital expenditures intended to get a local government fixed assets, such as equipment, buildings, infrastructure and other fixed assets. Theoretically there are three ways to acquire fixed assets, namely: (1) build your own, (2) exchange with other fixed assets, and (3) purchase. Most of the cases in the government, usually the way it does is build it yourself or buy.

The issue now is the limited financial resources to build  remain, on the other fixed assets is needed. Therefore, the Government will certainly look for other sources, such as investors, loans to third parties, and are much easier today with the publication of the Regional Bond (OD).

This short paper will explain the above issues, and how their prospects for Regional Development.

Local financial management in terms of allocation of capital expenditure is associated with long-term financial planning, particularly financing for the maintenance of fixed assets resulting from capital expenditure. According to the concept of multi-term expenditure framework (MTEF), that the capital expenditure policy should pay attention to expediency (usefulness) and the financial capacity of local government (budget capability) in the management of these assets in the long run. Capital expenditures intended to get a local government fixed assets, such as equipment, buildings, infrastructure and other fixed assets. Theoretically there are three ways to acquire fixed assets, namely: (1) build your own, (2) exchange with other fixed assets, and (3) purchase. Most of the cases in the government, usually the way it does is build it yourself or buy.

The issue now is the limited financial resources to build asep remain, on the other fixed assets is needed. Therefore, the Government will certainly look for other sources, such as investors, loans to third parties, and are much easier today with the publication of the Regional Bond (OD).

Government Regulation (PP). 105/2000 and the Decree of the Minister of Home Affairs  provides confirmation that the area has the authority to determine the allocation of resources into expenditures by embracing the principles of propriety, necessity, and local capability. Local governments, in cooperation with the House of Representatives as the legislature, first determine the general policy direction (ME) and budget priorities as guidance in the allocation of resources in the budget. ME and budget priorities is a synthesis of the aspirations of the people crawl in order to obtain an adequate description of the policy of short-term (annual) and long-term policy (five-year) related to financial management policies.

Other ways to finance an auto purchase include home-equity loans, home-equity lines of credit, and credit cards.

Banks traditionally have been willing to lend you money based on the equity in your home, either as a single home equity loan or a home equity line of credit (HELOC), essentially an open-ended line of credit that you can draw on when you want to.

The benefits are generally lower rates than you can get with a traditional auto loan. And the interest may be deductible on up to $100,000 in spending on non-home purposes, such as a new car. unpredictable because they have variable rates that can leave you paying more than you anticipated.

But the biggest danger with either option is the risk to your home. With a conventional auto loan, the vehicle itself is the collateral. But with either a home equity loan or HELOC, the collateral is your home. If something happens and you can’t make the payments, your home could be in jeopardy. That’s a big price to pay for an auto loan.

Never has that been more apparent than with the recent economic crisis, characterized by a dramatic decline in home values and an increase in foreclosures.

And even if you choose either of these options, you may find that you don’t qualify or that the hurdles are higher than ever before. That’s because, as with traditional car loans, lenders are being much pickier about who gets approved.

You also can purchase a car using a credit-card draft, which is a cash advance that works like a personal check. You may have received a draft in the mail from your credit-card company with a letter encouraging you to pay off other credit balances or make some other large purchase with them. With low introductory rates and cash advance fee waivers, it may be tempting to use one to buy a car. But we don’t advise this.

Financing Alternatives Comparison Tool

The Financing Alternatives Comparison Tool (FACT) is a financial analysis tool that helps identify the most cost-effective method to fund a wastewater or drinking water management project. This tool produces a comprehensive analysis that compares various financing options for these projects by incorporating financing, regulatory, and other important costs.

FACT creates a variety of useful reports to effectively communicate the results of a comprehensive analysis. A summary report is provided, which compares various financing options using key financial figures. This tool can also create graphical comparisons of annual and total costs of various financing options over time. FACT will aid municipalities, utilities, and environmental organizations in selecting the best financing option to fund their water quality and drinking water projects.

FACT has been updated to version 3.1 and now includes a new streamlined analysis option: FACT-Lite. FACT-Lite greatly reduces the amount of information users must enter to compare possible financing options for various water quality projects. A comprehensive user guide has also been developed and is automatically available as part the installation of FACT. Once FACT is installed, the user guide may be accessed by selecting the “Help and Definitions” button that is located in the top right corner of the homepage. A copy of the FACT user guide may also be downloaded separately.