By Joseph Bernard A. Marzan
The Sangguniang Panglungsod of Iloilo City formally authorized Mayor Jerry Treñas on Wednesday, Sept. 25, 2024, to seek a PHP 300-million loan from a state-run bank to complete work on three of the city’s public markets, after clarifying a notable error on the council’s agenda.
The council’s agenda initially indicated an Appropriations Committee report authorizing Mayor Treñas to apply for, negotiate, and borrow PHP 300 million from the Development Bank of the Philippines (DBP) “to finance the LGU’s lot acquisitions for relocation sites.”
This agenda item was posted on the city council’s Facebook page on Tuesday, Sept. 24, but was corrected by Committee Chair Councilor Rex Marcus Sarabia during the session on Wednesday. Sarabia clarified that the loan was intended for Phase 2 of the redevelopment of public markets in Arevalo, Jaro, and La Paz.
“I have made the correction. It’s not for land acquisition, but for the development of the Jaro Big Market, La Paz Big Market, and the Arevalo Public Market,” Sarabia told the council during the session.
The committee report and the resolution authorizing the mayor’s loan application were approved by the council without objections.
Sarabia explained to the media that the error was merely clerical, dismissing suggestions that the loan was linked to the upcoming 2024 local elections.
“The endorsement was for Phase 2 of the public market development. We previously approved a term loan agreement, which was a prerequisite to this,” Sarabia told reporters. “This is a continuing requirement for the PHP 300-million loan.”
“Market development was approved long ago. Before we initiated the market developments, it was included in the annual investment plan, followed by the budget, and then seeking DBP’s approval. The process took years, and it just coincided with the election period,” he added.
Sarabia stressed the urgency of approving the loan, noting that major roads have been blocked since last year as temporary stalls for vendors.
He cited the city’s total debt balance at an estimated PHP 917 million, from an initial PHP 1.7 billion principal loan, consisting of PHP 617 million owed to DBP and around PHP 300 million to the Land Bank of the Philippines.
Regarding the 2025 budget, Sarabia said they are awaiting the final proposal from the Local Finance Committee, which is expected by the end of September or early October, with budget hearings set for next month.
About the Loan
During visits to the market construction sites earlier this year, Mayor Treñas confirmed plans to borrow PHP 300 million from DBP for Phase 2, which includes completing arrangements for these projects.
Sarabia told the council that the loan would be released in three tranches corresponding to the project’s percentage of completion.
The loan will be secured by city government deposits, along with contractors’ all-risk insurance as additional collateral.
The loan carries a fixed interest rate of 4 percent per year, contingent on maintaining a minimum average daily balance of PHP 3 billion in the city’s DBP savings account.
A three-year grace period on principal repayments is included, after which the loan will be repaid in quarterly installments. A 24 percent annual penalty will apply to overdue payments.
Additionally, the contract includes a 3 percent early repayment penalty on amounts paid ahead of the schedule or within the grace period.
However, this penalty may be reconsidered by DBP’s Monetary Board if the city government gains the financial capacity for early repayment.
DBP may waive certain fees related to the loan, such as front-end fees, extension fees, and gross receipts taxes.
Approval of the contract by DBP’s Monetary Board will require the loan payments to be included in the city government’s annual investment plan.
A public hearing will still be held on the ordinance ratifying the loan’s terms and conditions, along with other necessary documents to be signed by the mayor.
The city government aims to reopen the markets to the public in time for the Christmas season this year.
