So long as Cebu City still has lots to sell, it cannot go bankrupt.
A confident Mayor Michael Rama made the assessment yesterday as he announced his desire to form a special body to manage the South Road Properties (SRP) and craft a master plan for the 300-hectare reclamation.
His statement is expected to draw the ire of his predecessor, Rep. Tomas Osmeña who considers the SRP his brainchild.
“If we sell these lots, that’s revenue for us,” said Rama.
He mentioned vacant SRP lots, Block 27 in the North Reclamation Area and the downtown City Center lot.
“We should have a master plan for the SRP,” said the mayor, who recently returned from a trip to China.
He said his foreign travels showed him that other countries have master plans and special bodies to manage their economic zones.
While Rama prefers outright sales of land, Osmeña , who ran for Congress to be able to oversee the SRP in the south district, spent years negotiating joint venture-lease arrangements with big investors like SM and Filinvest.
The two disagree over approaches to managing land assets.
Rama said he would soon give Cebuanos a financial briefing on the SRP.
He said he would report how much has been earned from the disposal of SRP lots to SM Prime Holdings and Filinvest Development Corp and how much the city has paid for its SRP loan.
“It will be a briefing to the people of Cebu City,” he said.
Rama said he would seek passage of an ordinance for the creation of a special body or committee to institutionalize and manage the SRP.
The committee would include a representative of the city government in its composition.
He said having a special body manage the SRP will spare it from political disputes.
Rama declined to say whether the Cebu Investments Promotion Center (CIPC), which now functions as the SRP’s marketing arm, would be included in the special body.
Rama said Cebu City hasn’t earned substantially from the SRP yet and that what proceeds were earned from SM and Filinvest were only “incidental” due to the need to pay the SRP loan amortization to the Japan Bank for International Cooperation (JBIC).
Rama is scheduled to leave for Manila tomorrow to meet with Bureau of Internal Revenue (BIR) commissioners and Finance Secretary Cesar Purisima to reconsider the city’s stand for tax exemption of SRP lot sales.
Earlier SM Prime Holdings told the city government that starting next month, SM would have to withhold payment and instead remit taxes directly to the Bureau of Internal Revenue (BIR) due to the city’s failure to secure a tax exemption for disposal of SRP lots.
SM Prime Holdings acquired 30.4 hectares at the SRP worth P2.7 billion which is payable in six years.
SM already paid close to P2 billion since the lot deal was closed last year.
About P110 million is paid to the city government per quarter.
BIR said the lot acquired by SM is subject to withholding tax and other taxes.
The BIR Cebu City South office sent a Preliminary Collection Notice to the city government asking payment of P837,216,997.75 in taxes.
The amount represents deficiency value added tax, expanded withholding tax and documentary stamp tax which arose from transactions it made with Filinvest and SM Prime Holdings, Inc.
To further boost SRP’s revenue generation, Rama said a master plan and a special committee are needed to manage the property.
Rama said foreign countries he had visited have master plans of their economic zones to show off to their guests.
Since he no longer enjoys the support of the City Council, the mayor said he was confident that a “miracle” would happen.
Rama said the SRP lots are not intended to earn revenues for the city but to generate employment for the Cebuanos.
“We didn’t think of business but to have a lot for export processing zone that would generate 80, 000 employment opportunities,” he said.
Aside from unpaid taxes, the Cebu City government had to deal with a reduced supplemental budget.
City Treasurer Tessie Camarillo earlier told the City Council that the city no longer has surplus funds since P2 billion in bank deposits were already committed to the general fund.
The City Treasurer’s Office pushed for a P600 million loan to finance the infrastructure projects in proposed P2.5 billion second supplemental budget, which the council rejected.
Osmeña accused Rama of “mismanagement”, saying this was why the city lost all of its cash reserves.
Vice Mayor Joy Augustus Young asked Mayor Michael Rama to explain an earlier proposal to avail of a bank loan to fund over P600 million worth of infrastructure projects included in the proposed P2.5 billion second supplemental budget.
The vice mayor accused Rama of allegedly deceiving the council by claiming that the Land Bank of the Philippines (LBP) already committed to grant the city a P2 billion loan fund to finance its projects.
Young said Rama made the claim in a letter attached to a copy of the second supplemental budget.
“But the truth is there was no commitment from Land Bank yet. They only gave a proposal to grant the city a P2 billion loan,” the vice mayor said.
The vice mayor said despite Rama’s claims that the city still has money, the proposl to secure a loan meant otherwise.
“If the city has money as the mayor claimed, why is he applying for a loan? We have to understand this so I am asking him to speak in straight English and not in gibberish English,” the vice mayor said.