Cash flow problem

The Cebu City government would be selling real property forfeited in favor of the city government and would intensify tax collection in order to raise P5.4 billion and meet this year’s revenue target.

As of April 30, the City Treasurers Office has raised only P1.9 billion or P3.5 billion short of this year’s budget requirement.

“Tagged accounts and time deposits have contributed to our cash flow problems and it will affect our present condition as these amount to P200 million. This is a big amount,” City Treasurer Emma Villarete told Cebu Daily News.

The Commission on Audit (COA) has warned the city government to put its finances in order after state auditors discovered that they have been incurring obligations without the corresponding cash back-up.

Overdraft

A COA Audit Observation Memorandum (AOM) dated April 30 also warned the city government that overspending could result in a potential cash overdraft. The same memo said the city government incurred an overdraft of P965.5 million. COA also said that the city’s cash balance of P1.06 billion as of December 31, 2012 is not enough to settle its unpaid obligations of P1.98 billion, indicating a substantial deficit of P965.5 million.

City Administrator Jose Marie Poblete said however that the city government has a total of P1.023 billion cash on hand and in banks as of May 24, but only P403.9 million is placed under the general fund.

Cebu City is barred from spending P208.3 million of the P403.9 million it has under its general fund because it is either tagged or placed on a five-year time deposit.

The P208.3 million appropriation consist of the P165.3 million in time deposits with the Philippine Postal Bank which will mature in 2015 and another P43 million in deposits with the Philippine Veterans Bank which was tagged in relation to the Rallos case.

“I already requested for the pre-termination of the city’s time deposits but we were told that this is not practical as the termination cost is high. The COA (Commission on Audit) will not allow us to pay for penalties or fees,” she said.

Options

Villarete said that the city’s only options for now is to make sure that they are able to collect more taxes and sell real properties.

City Administrator Poblete, who is the officer in charge of city hall until Mayor Michael Rama returns today, said that mayor Michael Rama, subscribes to COA’s recommendation for the city to intensify its tax collection effort to improve its finances.

Poblete said it is an admitted fact that the city have not exhausted all available remedies to improve its tax collection.

“But we will not be imposing any tax increases kay dili mo sugot ang atong mayor. We will just have to work harder and collect more taxes,” he said.

From January 1 to April 30, CTO has collected a total of P1.9 billion. Of the amount P1.2 billion was derived from local sources while P364 million represents the city’s share of the Internal Revenue Allotment. The remaining P330 million is from payments made by Filinvest Land Inc. and SM Prime Holdings for the land which they bought at the South Road Properties (SRP).

“If we’re talking of local sources we can really try to hit our collection target but there are fund sources that need intervention of the mayor and the City Council,” Villarete said.

The disposal of city-owned land, for example, needs legislation.

Villarete is happy that the City Council already approved during their May 22 session an ordinance by Councilor Jose Daluz III which will allow the city to sell back to its owners real property which were already forfeited in favor of the city government because of tax delinquencies and which were not sold in public auction.

The resale of the about 500 pieces of real property is expected to earn at least P150 million.

CTO, Villarete said, also intends to auction off properties forfeited in 2011 and 2012. The city government last called for an auction of real property in 2010.

“It is also part of the BLGF (Bureau of Local Government Finance) directive that we hold auction of forfeited real properties at least ones a year,” she said.

But before they could organize the planned auction, Villarete said, they will have to complete their inventory of properties with unpaid tax delinquencies and sent notices to owners to inform them of the city’s plan to sell their properties in an auction.