Can Carcar in Cebu pay a P600-M loan for new city center?

Dale G. Israel

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Can Carcar in Cebu pay a P600-M loan for new city center?
Provincial board members point out that the estimated yearly payments for the loan is higher than the debt servicing cap of the city

CEBU, Philippines – Carcar City, the newest city of Cebu province, is taking out a P600-million bank loan to construct a city center that will host city government offices, a public market, and a bus terminal.

Provincial board members, however, express doubts about the city’s capacity to pay that loan, given its annual income.

During the provincial board session on Monday afternoon, April 20, Board Member Raul Alcoseba, who represents Cebu’s first district that includes Carcar City, asked the board’s committee on finance to study the city ordinance that authorized Mayor Nicepuro Appura to take out a loan from the Development Bank of the Philippines (DBP).

The provincial board has the power to approve the ordinances crafted by component cities or municipal councils.

“We in this august body must be vigilant enough to notice any defects in the drafting and approving an ordinance where the future of our constituents is at stake. We are not against any development plans of LGUs (local government units). However, we should not be a partner to its unlawful means of achieving their goals,” Alcoseba said.

Mayor Appura and other Carcar City officials attended the provincial board session.

On January 20, Carcar City approved Ordinance 4-15, allowing the mayor to enter into a loan agreement with DBP involving P600 million. The fund is for the construction of a new city hall, a new public market, and a public transport terminal.

The loan will be payable in 15 years. Of the amount, P350 million will be for the new city hall; P160 million for the public market; P90 million for the transport terminal.

Carcar City has an annual income of P359 million, which has a debt servicing cap of P71.93 million. Based on Alcoseba’s computation, the total payable amount every year will be P73 million, or P2 milion more than the cap.

Alcoseba’s rough computation are as follows: 

 

Amount of Loan

Interest

Principal Ammortization yearly

Interest Yearly

Total Payable yearly

P600 million

5.5% in 15yrs

P40 million

P33 million

P73 million

 

 

 

Debt Cap

P71 million

 

Apurra gave assurances that the city has the capacity to pay for the loan. It has used 20% of its Internal Revenue Allocation (IRA) worth around P61 million as collateral for the loan.

Alcoseba said the city government did not present a feasibility study on how it will be able to sustain the payment of the loan over the next years.

In a separate interview, Appura said the concerns raised by the provincial members are already addressed in a feasibility study being conducted on the loan. Basically, he said, since the the IRA share of the city will increase every year, Alcoseba’s computation may not hold true. The payments for the loans will start only 3 years after the loan is downloaded.

Appura said the current city hall, which was built 50 years ago, will be transformed into a museum. The existing public market near the historical Carcar Rotunda will be turned into a park.

The new city center will sit on 34.7 hectares of contiguous lots in barangays Valladolid and Poblacion 3, some portions of which have yet to be expropriated.

At the end of the session, the provincial board referred Carcar City Ordinance 4-15 to the provincial committee on laws and ordinances for further study. – Rappler.com

 

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