SRP DEBT RISING
The Cebu City government faces a penalty of nearly P2 million a day if it fails to pay the amortization for the South Road Properties (SRP) loan on Feb. 20.
“There would be penalties and charges. It will be millions. It won’t reach P2 million, but almost. It will be per day,” City Administrator Lucelle Mercado told reporters yesterday.
This would be on top of the loan balance of P2.4 billion as of end-2015, about half of the original loan amount of 12.315 billion yen (roughly P4.65 billion in 1995).
Mercado didn’t have the specific amount of penalties that City Hall would have to pay after the due date lapses, saying the LandBank of the Philippines still has to make the computation.
City Accountant Mark Salomon said they will know the amount of interest and charges only when LandBank sends a billing statement.
Since LandBank is the conduit bank for the loan, Salomon said the state-owned bank would make the payment to JICA to avoid a default by the Cebu City government. But City Hall would have to pay LandBank, which will impose finance and interest charges.
Based on the general terms and conditions of the Japan International Cooperation Agency (JICA) for official development assistance (ODA) loans, a two-percent overdue charge per annum will be imposed above the principal loan and interest amount if a borrower fails to pay within the due date.
City Hall needs to pay around P180 million to Landbank by Feb. 20 as amortization for the loan used to develop the 300-hectare reclamation project. Another P180 million will be due on August 20.
But as of yesterday, there is still no budget for the loan payments.
The city council and the executive department have continued to clash over how to pay the loan.
Mayor Michael Rama wants the city to pay off the balance of around P2.4 billion using the proceeds from the sale of the SRP lots last year.
“I have been very clear on my position. Luoy kaayo ang syudad. Pila ka bilyon na ang nagamit. Nakabaligya na ta. Naa nay P8.3 billion. Naa pay umaabot nga P3 billion. Unsay ilang gusto? Kung sila pay tag-iya ana nga utang, maghikog na sila (The city is suffering. How many billions of money have we spent? We have sold the lots. We already have P8.3 billion and there’s another P3 billion coming. What do they want? If they owned that debt, they will commit suicide),” Rama told Cebu Daily News in a phone interview yesterday.
Payment for the loan balance of P2.4 billion was included in the Supplemental Budget 1 (SB1) that was proposed as early as August last year.
It was shelved several times because the council is against using the SRP proceeds, pending the final ruling on a case questioning the validity of the sale. The year 2015 ended with the SB1 left unresolved.
With the due date for the SRP loan payment only eight days away, Councilor Margarita Osmeña wants the executive department to immediately submit a supplemental budget to cover the amortization.
Rama, for his part, said the council should not dictate the executive department on what to do in terms of proposing budgets as well as on which sources of funds to use.
Rama reiterated that the city should not be “paralyzed” in using its own funds just because of a case filed in court which was already dismissed earlier.
“Mamayad ta’g utang, ila man nuon babagan. Kinsay responsable sa pagbayad sa amortization? Magtudlo sila nako nga naa na tay kwarta. Ang angayan mamayad dili kami. Sila nga mga konsehal maoy nagbabag nga bayran ang tanan,” Rama said.
(We wanted to pay the debt, but they opposed it. Who’s responsible for paying the amortization? We are not the ones who should pay, but the councilors who are opposing our plan to pay off the loan.)
Mercado said the local finance committee, based on discussions with the mayor, plans to submit another SB1 this year to pay off the loan.
City Legal Officer Jerone Castillo said he has been recommending the full payment, especially since the money is there and the city has complied with the documentary requirements which include the concurrence of the Department of Finance, Land Bank and the Monetary Board, among others.
“Technically, there’s no issue because the money is there. Except for the council approval, that’s the last remaining requirement. As member of the local finance committee, I only look at the best interest of the city. We have incurred so much losses in foreign exchange rates that’s why I really strongly recommend to prepay the loan,” Castillo said.
Councilor Osmeña pointed out, though, that aside from the financial implications, the entire country will be affected if the February 20 amortization due is not settled since the SRP loan is a government-to-government transaction.
Failure to pay will also mar the city’s credit standing.
She remained adamant, though, that the city can’t use the SRP sale proceeds because of the pending case in court.
“Why is that (prepayment) when that’s not even obligatory? We don’t have to pay that. In the meantime, we have this statutory obligation that we must pay. Why
don’t we just deal with that first? Why risk the reputation of Cebu? This is not just about Cebu City,” she said.
She said the council has already asked the local finance committee for a meeting to discuss the SB1 and other sources of funds that can be used. But as of yesterday, there has been no response from them.
Meanwhile, Mercado said the city already has to settle the loan to be able to sell the other lots in the SRP because of a provision in the loan contract that states the city cannot sell more than 51 percent of the 300-hectare SRP while the loan is still in effect and unless the “proceeds shall be used to pay the lender and the OECF in full.”
OECF, or Overseas Economic Cooperation Fund, merged with the Export-Import Bank of Japan to become the Japan Bank for International Cooperation, which later became JICA.
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