INSTEAD of a bank loan, the Cebu City government can terminate its P165 million time deposit with the Philippine Veterans Bank (PVB) to help fund the P1.147-billion Supplemental Budget no. 2.
Councilor Margot Osmeña suggested this option in yesterday’s budget hearing at the City Council that was attended by City Hall department heads.
“Wouldn’t it be more prudent to pre-terminate the time deposit?,” she asked City Treasurer Tessie Camarillo.
During the hearing, Camarillo said the city government would have to pay seven percent interest if it takes out a bank loan to cover the supplemental budget shortfall of P674 million.
Councilor Augustus Pe Jr. also floated the proposal of opening a credit line with other banks that offer lower interest rates.
Camarillo said the P165 million time deposit with PVB has already been “obligated” for other uses.
Camarillo said former city treasurer Ofelia Oliva opened the five-year time deposit in December 2010 since the fund wasn’t needed yet.
“But five years for a time deposit is too long. Don’t you think the need is here?” Osmeña said.
Osmeña, who chairs the council’s finance committee, also questioned the basis for the City Treasurer’s Office’s decision to open the time deposit without council approval.
Camarillo said she would have to ask the Commission on Audit (COA) whether terminating the city’s time deposit was allowed.
In his budget message, Mayor Michael Rama said he was confident he can secure council approval for the supplementalbudget.
Assistant Treasurer Emma Villarete said the city government has at least P1.6 billion cash in bank of which P1 billion is already obligated.
Rama admitted that the city doesn’t have any extra funds.
Of the city’s four depository banks, Camarillo said only Land Bank of the Philippines (LBP) has given a proposal for a bank loan payable in five years at seven percent annuall interest.
The city would use as collateral part of its Internal Revenue Allotment (IRA) which is proportionate to the monthly amortization which the city would have to pay for its loan, she said.
Camarillo said opening a credit line doesn’t necessarily result in a bank loan.
She said this may mean that the city has identified a source available to fund proposed projects.
If tax collection increases, there may be no more need for a bank loan, she said.
Camarillo said so far, their office collected P3.060 million of its P4.6 billion collection target.
She said the city opened a P500 million credit line with the Philippine Veteran’s Bank in 2005.
Another P382 million credit line with another depository bank which she failed to specify was opened last year as source of funds.
Camarillo said this is the first time that the city was required to pass an approved supplemental budget before LBP would agree to grant the P674 million credit line.
Camarillo told the council that both the P500 million and P382 million credit lines have not been used to date.
She said Rama approved contracting a loan for the city subject to the council’s approval.
Camarillo said Pe’s proposal to borrow from banks with lower interest rates runs counter to the Local Government Code which only allows the city to deal with its depository banks.
But Daluz said the Code only limits deposits with the city’s depository banks and not bank loans.
Rama said the second supplemental budget will cover infrastructure projects like drainage and market projects, payment of salaries and aid to senior citizens.