Mayor eyes grant and P120-M loan
Will Cebu City use its own funds and donations to build the new Cebu City Medical Center (CCMC) or will it get a loan?
City Councilor Noel Wenceslao yesterday asked his peers to authorize the mayor to avail of a grant from the World Bank to cover 90 percent of the cost and apply for a loan to cover 10 percent.
A grant is a form of assistance extended for free.
Wenceslao said the Rama administration is considering this option for the hospital project whose P1.5 billion cost is only partly covered by a P600 million outlay from city coffers.
The project has been delayed by controversy over the disqualification of the lowest bidder WTG Construction but a rebidding to get Phase 1 started is expected to be announced soon.
Wenceslao’s resolution to tap the World Bank was raised in the Council’s regular session and drew several questions about the novel arrangement.
A decision was postponed until more discussion is made in an executive session on March 25.
“What is this loan all about?” asked Cebu City Councilor Margarita Osmeña, who heads the committee on budget.
“It’s just puzzling. ‘Why do we have to borrow P120 million to avail of World Bank support and why use the Internal Revenue Allotment (IRA) as collateral?”
She pointed out that the City Council already appropriated P600 million for construction of a new CCMC to replace the public hospital that was demolished due to earthquake damage in October 2013.
Over P60 million in donations and pledges were raised from the private sector.
“It doesn’t make sense to me,” she said.
The proposal is for the mayor to negotiate for a P120 million loan with the Land Bank of the Philippines to cover 10 percent of the hospital project cost. This would be part of the city’s application to avail of a World Bank grant to cover 90
percent of the total cost under the WB’s Support for Strategic Local Development and Investment Project (SSLDIP).
“I think the City of Cebu is availing of this, hoping that this will be approved, and this will be pursued by the Land Bank of the Philippines. This is just an authority to be consider” said Wenceslao.
He said the loan collateral would be 20 percent of the Income Revenue Allotment (IRA) of Cebu City.
Wenceslao explained that the World Bank project assists LGUs that suffered from calamities.
“Let’s not look at the loan, which is only 10 percent. You only have to look at the 90 percent grant. Sayang kaayo (It will be a waste if we don’t take the opportunity).” Wenceslao said.
The website of the World Bank said the closing date of the SSLDIP for the Philippines is April 30, 2016 and that US$100 is committed for the Philippine project.
It said the project aims “to improve local public service and management by facilitating LGU access to viable financing to implement strategic infrastructure investments.”
Cebu City Mayor Mike Rama, in a press conference, said other LGUs in the country are availing of the WB grant but that it would be difficult if the council, which is dominated by his critics, doesn’t support him on this.
“When will they support when the rest of the country is availing of that?” Rama said
Rama said that they should be happy because if Cebu City avails of the WB grant the other funds raised for the CCMC can be used for other health needs and programs.
But Osmeña said she doesn’t see a need for a grant to build the CCMC since local funds were already appropriated for reconstruction.
“Maybe we can use the grant for other things affected by typhoon Yolanda, like schools or housing and endangered areas. But not for the hospital since its already funded at this point. CCMC is taken care of already,” she said.
The council also pointed out that Cebu City does not have a Seal of Good Housekeeping, which would disqualify it from the grant program.
Mayor Rama said the collateral of 20 percent IRA was just a formality for local governments and that he’s never heard of an LGU that had its IRA share reduced because of the arrangement.
The executive session on March 25 will invite representatives of the Land Bank of the Philippines, the City Administrator and members of the Local finance committee- composed of the city treasurer, accountant and budget officer among others.
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