Vice mayor frowns on proposal to borrow funds to pay off loan

ACTING Mayor Edgardo Labella is not in favor of paying off the foreign loan used in developing the South Road Properties (SRP) by taking out another loan.

But he is open to further study the proposal.

“Let's sell the property rather than borrow money to pay off the loans,” Labella told Sun.Star Cebu yesterday.

He said he thinks members of the Cebu City Council would be open to selling the SRP once its advantages have been thoroughly discussed. He added that he believes the SRP will transcend politics.

The City Council adopted a resolution requiring its approval on any transaction involving SRP lots. Mayor Michael Rama, who is on leave, said the resolution prevents the City Government from earning revenues through the sale of SRP lots.

The City Government is considering to avail itself of a loan with lower interest rate to pay the P3-billion balance on the principal loan it took out in 1995 from the Japan International Cooperation Agency (Jica), formerly known as Japan Bank for International Cooperation, to construct the SRP.

The Jica loan of 12.3 billion yen (or P5.2 billion based on yesterday’s exchange rate of 42 centavos to one yen) has an annual interest rate of 11 percent and will mature in 2025. As the loan was in Japanese yen, payments were subject to foreign exchange, which expanded the loan.

The City Council will hold an executive session next month to discuss the possibility of another loan to pay off the city's foreign loan.

Banks will be invited to share their proposal with the members of the council. Two banks offered to lend Cebu City P3 billion with an annual interest rate of four percent while another offered the financing with an interest rate of 4 to 4.5 percent.

u201cEven if it's just four percent, it's still a loan. Why don't we just wait for a few more events,” said Labella, referring to the sale of some parts of the SRP. “Although it is seemingly advantageous, there being a difference in the amount of interest, it's still a loan.”

Rama has discussed the possibility of another loan with at least two banks.

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