After Dec. 31, debt is P524 million more; City Council still won’t pass special budget
Passing up the chance to pay off the loan for the South Road Properties (SRP) by December 31, would mean an additional cost of P524 million for Cebuanos.
For the sixth time, the Cebu City Council yesterday voted to ignore action on Supplemental Budget No. 1 and paying off its foreign debt early.
The 9-4 vote pushed deeper into limbo a decision by Mayor Michael Rama and his allies to pay off a 25-year foreign loan for the SRP whose interest is growing bigger because of global currency fluctuations.
If Cebu City pays off the whole loan in December, it could save P524 million, said Councilor Noel Wenceslao in a privilege speech, only to be disappointed again by the mayor’s critics who control the council.
Cebu City has funds to wipe out the loan after receiving P8.3 billion cash last August as down payment from real estate developers which purchased two SRP lots.
Wenceslao and the minority bloc again asked to lift the council’s deferment on discussing the proposed P2.8 billion Supplemental Budget 1 (SB1), which includes P2.3 billion to wipe out the Japanese yen-denominated loan.
Again, the city council dominated by the BO-PK voted it down.
LOAN STANDING
This is where the SRP loan stands, Wenceslao tried to explain.
The city’s outstanding balance of the SRP principal loan is P2,298,537,819.20
If the city waits for the loan to mature, the debt increases to P2,861,849,666.
“However, if it is paid on Dec. 31, 2015, the total would be P2,337,518,295.65. Therefore, if the loan will be paid this month, the City will be benefited in the amount of P524,331,371.18, excluding the devaluation cost,” said Wenceslao.
FOREX LOSSES
Wenceslao, a former banker, said the city has suffered foreign exchange losses amounting to P902,388,126.28 since the loan began.
“Clearly, the City can save. On the contrary, if this pre-payment will not push through, the City will repeatedly suffer foreign exchange losses,” he added.
The city has has been complying with documentary requirements for the loan prepayment and recently got the green light from Bangko Sentral ng Pilipinas (BSP).
Wenceslao also said it was important for the Council to pass SB1 because it includes additional funding for the loan’s interest expenses for this year.
Not enough was earlier appropriated for this.
He said the city only appropriated P112,441,114.85 as interest expenses, which was paid last February 20 and August 20, for this year.
But with currency fluctuations of the Japanese yen-denominated loan, he said the actual figure due is P115,460,382.72.
“Additional funding has been requested and incorporated in the SB1, involving the amount of P4,326,686, due to the anticipation in the fluctuation of the yen values, and the bank charges of P1,488,039.27 is also included in the same SB,” he said.
If the interest is not fully paid this year, the bank may impose additional penalties and charges on Cebu City.
CASH BONUS
Another time-bound decision is the cash bonus of Cebu city government employees.
Part of SB 1 is a P77.3 million appropriation for the Productivity Enhancement Incentive (PEI) of city government officials and employees.
The PEI is a one-time cash bonus granted by Executive Order NO. 181 of President Aquino for 2015. Government employees won’t be able to receive it after the year ends.
Majority bloc members of the Bando Osmena-Pundok Kauswagan have repeatedly stalled action on the supplemental budget.
They question the legality of the sale of SRP lots by public auction, even after the Cebu Regional Trial Court (RTC) dismissed last week the case filed by Romulo Torres who raised this issue.
Councilors said the court dismissal is not final as Torres has filed a motion for reconsideration.
“We can’t discuss yet (SB NO. 1), it’s pending in court. It’s premature on our part unless and until there is an entry of finality of judgment by the RTC,” said Councilor Sisinio Andales.
Andales said the city still needs one last approval from the Japan International Cooperation Agency (JICA) to complete loan requirements.
Mayor Michael Rama already wrote to JICA for their concurrence and for the waiver of an expected P43 million prepayment penalty.
Councilor Gerardo Carillo said that since the court didn’t issue an injunction on the use of the P8.3 billion down payment from the sale of the SRP lots early this year, there’s no more hindrance for the city to use the money.
In a 9-4 vote, the council rejected a move to lift the SB1 deferment and resume discussing the budget.
Those who voted to resume discussion: Councilors Wenceslao, Carillo, Philip Zafra and James Anthony Cuenco.
Those against lifting the deferment of council deliberation: Councilors Andales, Alvin Arcilla, Nestor Archival Sr., Roberto Cabarrubias, Margarita Osmena, Nida Cabrera, Lea Japson, Alvin Dizon and Eugenio Gabuya Jr.
Sought for comment, Mayor Rama said he wasn’t surprised by the majority bloc’s move.
“Let it continue so that if they will end up projecting it. I don’t see brightness ahead politically for them. Oblivion can come if they continue to insist on being obstinant,” he told reporters.
Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of Cebudailynews. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.
