P3.2B in city budget rendered ‘inoperative’

By: Jose Santino S. Bunachita March 25,2015 - 11:03 PM

About P3.2 billion out of Cebu City Hall’s P13.4-billion annual budget this year is declared inoperative by the Department of Budget and Management (DBM).

The amount questioned include the P3.2-billion appropriations for debt servicing.

In a letter to Cebu City Mayor Michael Rama released last March 19, DBM regional  director Carmela Fernan said the city exceeded the debt cap provided by law.

“Section 324 (b) of RA No. 7160 requires that the amount of appropriations for debt servicing won’t exceed 20 percent of a local government’s regular income. Cebu City went over the debt cap by P2,230,195,983.05,” she said.

The city appropriated P3,204,669,454.85 for loan repayments or amortization.


But the city’s regular income for 2015 is only P4.87 billion and 20 percent of which is only P974.4 million.

Aside from the debt servicing, the DBM also declared inoperative the items vetoed by the mayor.

“Our review also shows that there are vetoed items, which were not overridden by the City Council. Pursuant to Section 55, RA No. 7160, the vetoed items shall not take effect,” Fernan said without elaborating.

Section 55 of the Local Government Code states that the local chief executive may veto any ordinance of the council on the grounds that it is ultra vires or prejudicial to the public welfare with his reasons in writing.

It also states that the local chief executive can veto any particular item or items of an appropriations ordinance wherein the veto shall not affect the item or items which are not objected to.

First time

Earlier this year, Rama  expressed his line objection to 20 “inappropriate provisions” and special conditions that the council placed in City Ordinance 2417 or the annual budget ordinance.

He said these restricted his authority as the local chief executive.

One of the items vetoed is the provision on the sources of funds, since the council did not follow the details certified by the local finance committee.

The City Council did not override or even discuss the mayor’s veto when it was included in their agenda earlier this year. The veto was just “noted.”

It’s the first time for the city’s annual budget to be declared inoperative in part by the DBM, City Treasurer Diwa Cuevas said.


Sought for comment on the DBM’s review on the debt servicing, Cuevas said this means the city can’t push through with restructuring the loan for the South Road Properties (SRP).

“If we really exceeded the limit, then the plan of conversion of the SRP loan can’t be done,” she said.

Cuevas added that based on their experience, when the DBM declares parts of a budget ordinance as inoperative, they have to immediately stop disbursing or not use the allocation.

This happened last month when the DBM also declared the bulk of the city’s supplemental budget last year as inoperative.

Cuevas said they immediately ceased disbursing the funds from allocations that were cited by the DBM. However, those that were already disbursed were not refunded or returned.

Rama wanted to push through with the loan conversion in order to spare the city from allocating more funds for yearly payments for the loan’s principal amount and interests.

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