Council gets new “threat”

CEBU, Philippines - Cebu City Mayor Michael Rama is again mulling suing members of the council over the delay of the conversion of the South Road Properties amortization loan, claiming “economic sabotage.”

“They are insignificant. They should be helping. I will file a case against them if they will not act and take this matter seriously because that is economic sabotage,” Rama said.

The council has declined to tackle the proposals of three banking institutions for the conversion of the city’s yen-denominated loan incurred in the construction of the South Road Properties saying it was still “premature” to entertain them.

But Rama said it was an “insensitive and naïve” decision knowing that the city still has a huge outstanding balance of P2.91 billion.

“What are they trying to come up and what message are they trying to convey? They are so naïve and insensitive to the needs of the city. This is a survival matter that needs a survival instinct. They don’t really see the logic, wisdom and clarity of what the mayor is doing,” he said.

The conversion will allow the city government to save P1.1 billion in guarantee fees. The members of the City Council earlier discussed the possibility of converting the foreign denominated loan into pesos to free the city government from ballooning guarantee fees due to foreign exchange rate loss

In an interview, Councilor Margarita Osmeña downplayed Rama’s pronouncement saying, “He wants to keep on filing, then let him file a case. He can do what he wants. Bahala siya.”

Councilor Sisinio Andales said they cannot hear the proposals yet because the Japan International Cooperation Agency and the Bangko Sentral ng Pilipinas-Monetary Board have yet to issue a clearance on the restructuring plan.

Andales said the mayor needs to request for a resolution authorizing him to negotiate and undertake the conversion scheme before the council endorses it to BSP and JICA as a “procedure or protocol.”

Rama, however, argued that a request from his office is “irrelevant” knowing the urgency of the matter. He pointed out that JICA “will never reject our proposal.”

“They should help me to hasten the conversion para di nata magbaguod sa bulging loan interest. Why do I have to request sa council? I can do what I want they can validate what I want if it is legitimate. Ngano? Illegitimate diay atong gibuhat nga restructuring plan?” he asked.

Andales clarified that the council was never insensitive to the needs of the city especially the financial aspect.

He cited that the council initially approved a resolution asking the Land Bank of the Philippines to assume one percent guarantee fee of the city’s outstanding balance with JICA, to which the bank agreed.

“But if he’s going to sue us. He can file case or whatever he likes. We are willing to face him. But as I said, we cannot take a shortcut, rather follow what is proper,” he stressed.

The last time Rama threatened to sue the council it was after they set conditions for his use of the P13.4-billion 2015 budget.

Osmeña and Andales said they are in favor of the restructuring to spare the city from huge loan interest fluctuations, but the city has to follow proper protocol for transparency and accountability.

The city government is obligated to pay the national government one percent of its loan balance as guarantor. At present, the city has an outstanding balance of P2.9 billion based on the prevailing foreign exchange rate.

Cebu City was granted P5.6 billion loan by JICA to undertake the 300-hectare South Reclamation Project which is now the South Road Properties. So far, it has only paid P2.66 billion. The loan will mature in 2025.

The city has already paid a total of P6.8 billion, which is bigger than the original SRP loan, inclusive of the national government’s guarantee or commitment fee amounting to P546.36 million.

The bulk of what the city has paid so far has gone to interest payments and the national government’s share termed as “guarantee” or “commitment” fee.

If the city continues paying its loan, which is yen-denominated, until 2025, it is projected to suffer a foreign exchange loss of approximately P992.63 million.

The city sets aside approximately P300 to 500 million a year for the SRP loan. Of this amount, P150 million to P200 million is for the interest to the conduit bank which is the Land Bank of the Philippines.

PROPOSAL

The interested banks are the Development Bank of the Philippines, Philippine National Bank and LBP.

The LBP has offered the city an interest rate of 4.5 percent to pay in full the P2.9 billion, while DBP is offering an interest rate of 4.25 percent fixed for five years with P3 billion allowable loan. This is a maximum borrowing capacity of a local government unit as mandated by the Bureau of Local Government Finance.

The city pays 11 percent of the loan amortization loan to LBP for its being the conduit bank for the loan.—/BRP (FREEMAN)