CEBU City Mayor Michael Rama wants the Land Bank of the Philippines (LBP) to demand that the City Government pay the P2.4-billion balance for the South Road Properties (SRP) loan.
He also challenged them to sue the City Council if it refuses to heed that demand.
The mayor is standing firm on his plan to pay off the remaining loan instead of just paying the P375-million amortization for this year. Some P188 million will be due on Feb. 20.
“Send us the demand letter. The money is around. If we will not pay, let them sue the council. Don’t sue the mayor because the mayor is ready to pay,” he said.
Rama had already said that the P2.8-billion first supplemental budget (SB 1), proposed in October last year yet still unapproved, needs to be acted on by the council.
SB 1 includes an allocation to pay the entire SRP loan balance. It was supposed to be funded by a portion of the P8.35-billion down payment the City received from the sale of 46.2 hectares in the SRP.
The majority bloc, though, won’t allow the use of the SRP revenue because of a case filed by Atty. Romulo Torres that questioned the disposal of the SRP lots.
Just last week, the council suggested to the executive to submit another supplemental budget, using a different source of funds, to pay for just the amortization due on Feb. 20 and again on Aug. 20.
This way, the City will not default on its amortization due to the LBP.
The amortization will be due this Saturday, yet both the executive and the legislative officials continue to differ on their stand about the SRP payment.
But what will happen if the City fails to pay on Feb. 20?
Section 2 of the Subsidiary Loan Agreement between the City and LBP for the development of the SRP laid down the consequences of default of the amortization whether once, concurrently or in succession.
Section 2.1 states that the “lender, by written notice to the borrower, may suspend in whole or in part any unreleased disbursement and forthwith declare all principal then outstanding, with the interest and other charges thereon, to be due and payable immediately, and upon such declaration such principal, interest and other charges shall become immediately due and payable.”
This means that the P2.4-billion balance and other charges could become demandable immediately.
Section 12 further states that the City will be charged a penalty at the rate of 12 percent per annum, out of the total amount due, until the City settles its obligations.