THE Cebu City Government has to pay the Philippine Deposit Insurance Corp. (PDIC) within the year some P15 million in encumbrance on the mortgage of the CitiCenter Commercial Complex in Barangay Kamagayan.

The payment is needed so it won’t have to pay a higher interest rate and an additional P13.94 million in penalties.

According to the terms the insurance corporation agreed on with the City, the penalty will be waived upon payment of the total obligation.

With an interest rate of six percent, which was reduced from 21 percent per annum per promissory note by the City, the total obligation by Nov. 30, 2008 amounts to just P14.082 million.

But if the City cannot settle the total amount on or before Dec. 31, 2008, “interest will automatically revert to 12 percent per annum and penalty due shall be collected.”

“Approval (of the reduced interest rate and waiving of the penalty) is valid only from 26 September 2008 to 31 December 2008,” said Cristina Orbeta, PDIC executive vice president, in an Oct. 6 letter to Mayor-on-leave Tomas Osmeña.

Last Nov, 5, the City Council approved Supplemental Budget 3, which included P15 million that will be paid to the PDIC “to remove the lien it has on the property.”
City Hall gained ownership of the property last year after its owners failed to settle their tax obligations.

The property covers 7,281 square meters of land and two buildings, with a total area of 4,884 square meters.

City Administrator Francisco Fernandez earlier said that while P15 million may be considered big, its payment is in exchange for a property worth over a hundred million.

He said the City will just pay the obligation it assumed when it took ownership of the property since bringing the matter to court would be a more cumbersome process.

The City was also able to negotiate favorably with PDIC with the interest rate reduction and waiving of the penalty, which is almost equal to the payable amount.

Built in 1983, the CitiCenter has become a home to, among others, squatters and suspects of theft, commercial sex and the illegal drug trade since its closure.

City Hall plans to clear the complex to improve peace and order in the area and to increase the marketability of the property.

The City took ownership of the property when nobody showed interest when it was auctioned off in Dec. 12, 2003.

Ownership reverted to the City after the redemption period expired last June 6, 2007.

Osmeña earlier eyed the CitiCenter as a possible solution to the flooding in downtown Cebu City by turning it into a sunken park.

The mayor had said the complex would serve as a rainwater catchment so the Colon St. area would not get too flooded when it rains.

When there is no rain, the area would serve as a park or open space where children could play, he added. (RHM)

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