BAGUIO CITY – The City Council is studying whether or not to grant the authority Mayor Benjamin B. Magalong to negotiate and enter into a loan agreement with the Land Bank of the Philippines (LBP) an initial amount of P5.5 billion purposely to fund the major infrastructure projects of the city government.
Earlier, Magalong wrote the members of the city legislative body on February 13, 2020 pertaining to an offer for loan agreement from the government bank in the amount of P5.5 billion subject to standard terms and conditions.
The intended fund shall be utilized for the city government’s socio-economic development projects as included in the approved Annual Investment Plan (AIP) or priority development projects, such as the renovation of the city public market, construction of a multi-level parking buildings, and construction of transport terminals in strategic areas in the city, among other identified priority development projects.
The resolution authored by all members of the city legislative body stated that in order for the city chief executive to be able to enter into a loan agreement with Land Bank of the Philippines, there is a need for the city legislative body to authorize him for the said purpose.
According to the resolution that was referred to a committee, the signed loan agreement between the City mayor and Land Bank of the Philippines shall be submitted to the City Council confirmation and appropriate action pursuant to existing laws, rules and regulations.
The city mayor assured the members of the City Council that utmost consideration will be given to terms and standards that are most beneficial to the city.
In her letter dated February 13, 2020 to Mayor Magalong, LBP senior vice president for Northern and Central Luzon lending group Filipina G. Monje stated the government bank has allocated in favor of the city government the amount of P5.5 billion subject to the bank’s standard terms and conditions, those stipulated in the omnibus term loan agreement, sub-loan agreements and to some specific terms and conditions.
The interest rate of the said loan will be at Land Bank lending rate at the time of availment, subject to quarterly repricing and that the loan shall have a maximum period of 20 years inclusive of 1 to 3 years grace period on the principal depending on the project to be financed.
Monje informed the city government the loan will be available in 3 years from the date of approval provided that at least one project is started within one year from the date of the signing of the loan.
Further, she explained each of the sub-project to be funded by the city government shall have a separate repayment schedule consistent with the city government fund.
In case of non-payment of the loan, the city government shall be charged 24 percent per annum surcharge to start on the day after the due date of loan amortization or credit accommodation up to the date of settlement.
Under the proposed loan agreement, the city government is mandated to assign at least 20 percent Internal Revenue Allotment (IRA) in favor of the bank to serve as a collateral for the said loan while the bank will waive other fees for the release of the desired loan.
By Dexter A. See