CEBU City Mayor Michael Rama formally sought the concurrence of the Japan International Cooperation Agency’s (Jica) on the prepayment of the P2.4-billion balance of the South Road Properties (SRP) loan.

The City’s proposed P2.8-billion first supplemental budget (SB 1) this year has yet to be passed, though. The bulk of the budget amounting to P2.4 billion is supposed to pay off the SRP loan.

In his letter to Jica Philippines, dated Oct. 8, Rama said Jica’s support for the prepayment of the loan will help the City realize its objective to be debt-free.

“Your assistance will greatly aid in achieving better services for the constituents of the City. We hope that you can be of service to the City of Cebu upon the matter,” he said.

Addressing other needs

The mayor pointed out that every year over the past several years, the City has been earmarking more than P500 million for the loan and interest.

“With the prepayment of the loan, the City will have adequate opportunity to allocate the annual amortization to other basic services urgently needed by the constituency of the City and likewise, save on billions of pesos worth of financial interest,” he said.

Jica lent the City 12.315-billion yen in 1995 to develop the 300-hectare SRP. At that time, the loan’s peso equivalent was P4.65 billion. The loan is supposed to be payable until 2025.

Rama informed Jica that the City can pay off the balance following the sale of 45.2 hectares at the SRP.

The City, he said, already received P8.3 billion as down payment from the three winning bidders of the lots—SM Prime Holdings Inc. in consortium with Ayala Land-Cebu Holdings Inc. and Filinvest Land Inc.

Some P3.9 billion has already been identified by the executive department to support the proposed SB 1.

However, it has not yet been approved after Atty. Romulo Torres, a taxpayer from Barangay Basak San Nicolas, filed a case questioning the validity of the disposal of the SRP lots.

Other requirements

The concurrence of Jica on the prepayment of the loan is one of the requirements that the City needs to comply with to realize the transaction, said the Land Bank of the Philippines (LBP). The LBP is the borrower on record of the SRP loan.

Other requirements set by LBP include the concurrence of the Bureau of Local Government Finance (BLGF), specifically if the prepayment will not exceed the 20-percent debt-servicing of a local government unit.

The BLGF already gave the City a go-signal to pay off the loan last September. But as to the certification covering the debt-servicing limit, the BLGF asked that the matter be taken up by the Department of Budget and Management in the course of its review on the appropriation ordinance covering the prepayment of the loan.

LBP also requires the City to get the approval of the LBP Manila Office, the Bangko Sentral ng Pilipinas and the City Council.