Cebu City

Time to raise taxes and rightsize – Cebu City finance committee

John Sitchon
Time to raise taxes and rightsize – Cebu City finance committee

CASH-STRAPPED. Cebu City consultant for finance Jerome Castillo explains why the local government needs to raise taxes and implement 'rightsizing' during a press briefing by the Cebu City local finance committee.

John Sitchon/Rappler

Cebu City has only P4.5 billion in cash as of June 30, and that money is tied to the local government's P5-billion payables

CEBU, Philippines – Cebu City has no more funds for new projects and must focus on increasing tax revenues and “rightsizing”, the local finance committee (LFC) announced in a press briefing on Monday, August 8.

Walay libre nga kwarta nga magamit (There’s no available cash that can be used),” said Collin Rosell, secretary to Mayor Michael Rama.

The city only has P4.5 billion in cash as of June 30, based on the city’s fiscal management report.

That money, Rosell said, is tied to the city’s P5-billion payables.

These payables include money for programs in the pipeline: long-term development plans, projects that have received certificate of available funds (CAF), and continuing works that have already received partial payment.

The release of the CAF means a local government unit needs to appropriate funds for a project.

The LFC said the city is evaluating P3.2-billion worth of projects that have not yet been implemented.

To fund these projects, the LFC recommended increasing tax collection for businesses, properties, and other charges.

NO WRIGGLE ROOM. The city’s cash balance as of June 30 stands at P4,541,852,943.99 – all tied to the local government’s payables. (Screenshot from LFC fiscal management report)
Bite the bullet

Jerome Castillo, the city consultant for finance, described these moves as mandatory.

The law mandates local government units to adjust valuation on properties every three years, Castillo pointed out.

The LFC also recommended “rightsizing” the city’s departments/agencies, and disposing of unused government assets.

President Ferdinand Marcos Jr. used the term “rightsizing” during his first State of the Nation Address, as he stressed the need to make government agencies more efficient. (READ: [OPINION] Principles in government rightsizing: 5 Es and an A)

Kung unsa ra gikinahanglan aron sad makadaginot ug maayo sad ang pagdagan sa serbisyo, mao ra gyud unta gastohan,” Rosell said.

(Whatever is needed so we can save and (still have) our service run smooth, that’ll be the only expense we ought to pay for)

TOUGH TIMES, TOUGH MEASURES. The full list of recommendations from the LFC to Cebu City Mayor Mike Rama. (Screenshot from LFC fiscal management report)
Consecutive rough years

Between 2020 to 2021, worst years of the COVID-19 pandemic, the city experienced a massive drop in revenue, P8.7 billion and P7.3 billion, respectively.

“Collection was a huge struggle during the pandemic,“ City Treasurer Mare Vae Reyes told Rappler.

Due to the prolonged lockdown, most businesses declared smaller incomes and, thus, less tax collections for the city.

The revenue crunch was worsened by the need to spend billions on COVID-19-mitigation programs.

From 2019 to 2020 alone, the expenses went from P7.2 billion to P10.3 billion, the LFC said.

The city also recorded P3.04 billion in COVID-related spending from 2020 to 2022.

Typhoon Odette also set back the economy when it devastated Cebu province on December 17, 2021, forcing the city to spend a total of P1.08 billion on rehabilitation and relief operations.

The bulk of disbursement went to financial assistance for the victims of the typhoon: P576.4 million in 2021 and P396.95 million in 2022.

The combined hits depressed the city’s cash position from P19.5 billion in 2019 to P13.8 billion in 2021.

No more money from SRP

The LFC reported that the P18-billion revenue from the 2015 sale of two lots in the South Road Properties (SRP) had already been exhausted in the first quarter of 2021.

Wala nay naabtan si Mayor (Michael Rama) sa mga kita sa SRP sale,” said Rosell. (The mayor had nothing to access from the proceeds of the SRP sale.)

The city in 2015 sold two lots, Lot 8-B to SM-Ayala Consortium, and Lot 1 to Filinvest Group, for P10 billion and P6.76 billion, respectively, and received P1.25 billion in interest from the sale.

LOT SALES. The total interest that the city received from the SRP sale was P1.25 billion while the total sale from the principal was P16.77 billion, making the total sale P18 billion. (Screenshot from LFC fiscal management report)

For three years, from 2016 to 2019, then-mayor Tommy Osmeña refused to touch the P4.99 billion received in 2015 as partial payment for Lot 8-B.

Osmeña claimed then mayor Mike Rama, who served from 2010 to 2016, had undersold the property.

Osmeña’s successor, the late mayor Edgardo Labella, utilized the funds for the city’s pandemic response, even as the city struggled to meet loan payments for the construction of the SRP.

According to the LFC’s report, the city had to pay an additional P1.9 billion between 2003 to 2011 on its P4.5-billion Japan International Cooperation Agency loan due to foreign exchange loss.

The loan was to be paid in Japanese Yen.

Castillo told Rappler in June 2022 that the city planned to pay off the debt by August 19, to become “officially debt-free”

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