ALL OR NOTHING
Will Cebu City officials set aside politics and together address the P185-million payable on Feb. 20 to avoid paying millions of pesos in penalties?
As of yesterday, no resolution was in sight.
Cebu City Mayor Michael Rama stands pat on his position: either the P2.4-billion South Road Properties (SRP) loan balance is paid off, or there would be no payment at all.
He insisted that the city council, which is dominated by Bando Osmeña–Pundok Kauswagan (BO-PK) councilors, approve the P2.6-billion Supplemental Budget 1 (SB1) that was proposed and shelved six times last year.
“There was an SB1. That SB1, they should act on it. If they don’t act on it, they’re cowards. If they don’t act on it, their political oblivion is waiting for them when May 9 will come,” Rama said yesterday.
He insisted that SB1 is still valid, even if it’s already 2016. There’s no need to submit another supplemental budget, as demanded by Councilor Margarita Osmeña, he added.
Osmeña warned yesterday that if the city fails to pay and is declared in default, the authorities responsible for the default would be made to pay the interest and other charges.
“I was informed by a banking authority that if the city defaults, there will be penalties and interest dues. But penalties cannot be paid for by the local government unit. The ones liable are the ones in authority. Maybe it’s the mayor. He blames us, we blame him,” Osmeña told Cebu Daily News.
Osmeña and other BO-PK councilors, who have opposed SB1 because it will be sourced from SRP lot sale proceeds, are not about to relent to the mayor’s demand to approve SB1.
“That’s crazy. We are now 2016 and SB1 was for 2015,” Councilor Sisinio Andales said.
“Moreover, there is still a case pending before the court as far as the source of funds of SB1 is concerned. That’s why we are sued before the court and Ombudsman,” he added, referring to the case filed by former prosecutor Romulo Torres questioning the validity of the SRP lot sale.
Councilor Alvin Dizon agreed and said the mayor “sounds like a broken record.”
For Councilor Nestor Archival, Sr., SB1 of 2015 is already “dead.”
“Besides, it has legal concerns. For the city to pay for the statutory loan of about P190-plus million, it is wise to go with the suggestion of the chairwoman of the committee on budget and finance,” Archival said.
He was referring to Councilor Osmeña, who delivered a privilege speech on Wednesday calling on the executive department to immediately submit a supplemental budget for the Feb. 20 loan amortization.
The council passed a resolution based on Osmeña’s call.
For Osmeña, discussions on the mayor’s proposal to pay off the loan balance can resume after the Feb. 20 amortization is settled.
She said her committee is doing its part to settle the obligation first and has requested the executive department’s local finance committee (LFC) for a meeting to discuss solutions like looking for other sources of funds just for the amortization itself.
But the executive department has not heeded their invitation for a meeting, she said.
“I don’t know what will happen (if there is still no approved budget when the due lapses). Let’s see what happens. The Feb. 20 amortization payment is obligatory on our part. It is a fact, it’s part of the contract that we should honor. It cannot be: ‘I like this, I don’t want that.’ It’s what we have to do,” she told CDN.
There is zero allocation for amortization payments in the approved P6.4-billion budget for 2016. The executive department did not include these in the budget because the proposed SB1 last year included the full payment for the loan.
Failure to pay the Feb. 20 amortization will mean a penalty of “almost P2 million a day” for the city government, City Administrator Lucelle Mercado warned.
Based on the billing statement sent by the Land Bank of the Philippines, the city needs to pay by Feb. 20 around 440 million yen, broken down as 299.8 million yen for the principal loan and 140 million yen for the interest.
The same billing statement showed that the city has to pay on Aug. 20 this year 431.9 million yen, which includes 299.8 million yen for the principal loan amount and 132 million yen for the interest.
Based on yesterday’s exchange rate of one yen to P0.42, the city needs to pay around P185 million on Feb. 20 and around P182 million by Aug. 20.
The original loan was 12.315 billion yen, roughly equivalent to P4.65 billion back in 1995. Loan proceeds were used to reclaim and develop the 300-hectare SRP.
As of end-2015, City Hall said the balance was still about P2.3 billion. With interest charges, the balance is estimated at P2.4 billion now.
Mayor Rama wants to pay off the loan using part of the P8.3 billion that the city received as down payment for the sale of two SRP lots last year.
City Hall expects another P3 billion as first installment payment in August this year from developers SM-Ayala consortium and Filinvest Land, Inc., which won the SRP lot bidding.
Rama said the BO-PK councilors should not hold the city “hostage” with their numbers.
He also said Land Bank, which is the conduit for the SRP loan from the Japan International Cooperation Agency (JICA), should “demand” that the city already pay in full the remaining loan balance.
Based on Section 12 of the SRP loan agreement, the city government will be charged a penalty “at the rate of 12% p.a. (per annum) of the total amount due.”
If the city fails to pay and is declared in default, the entire outstanding loan as well as interest and other charges become due and payable immediately.
City Treasurer Diwa Cuevas earlier said that while there are penal provisions in the SRP loan agreement, it will still be Land Bank that will compute the amount of interest and charges it will impose on the city.
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.