PLANNED P3 B ADB LOAN NEEDS CAREFUL REVIEW
The city government’s plan of acquiring roughly P3 billion loan from the Asian Development Bank through the Tourism Infrastructure and Development Authority for the rehabilitation of the 35-year-old sewerage treatment plant of Baguio has to be studied carefully especially its long-term implications on the city’s financial reserves, possibility of increasing tariff, and its pass-on effect to future administrations.
Tackled at the city council recently was the request from the executive branch for the body to approve the $58.19 million, or roughly P3 billion loan from the ADB, so that it can be submitted to the National Economic Development Authority for review.
Only with approval from NEDA that Tieza could start processing the loan in behalf of the city government.
City officials pushing for the loan claim this is the best option yet for the city if it wants to upgrade the STP that is currently serving 65 out of the 128 city barangays. If funds are available, construction of the new STP will start on 2022 up to 2026. But collection of higher tariffs will begin on 2023 and payment of the loan will begin on 2031 up to 2049.
We agree that the STP facility badly needs rehabilitation. The department in charge of managing the facility has the best intention especially since the upgrade will address environmental issues related to the discharge of wastewater into the Balili River. But availing of a loan at this point is not a good time and might not be the best option as claimed.
Based on the projected timeline for the project, the city government will begin collecting higher tariffs by 2023. By that time, it is still uncertain if the government would have addressed the health and economic crisis brought about by the pandemic.
It was only recently when the city government implemented a graduated increase in the valuation of real property. Increasing other local taxes at this point or in the near future for the city to able to pay the loan is not only impractical, it is also unfair to the public that have been badly affected by the pandemic.
As the city government is expected to allot P147 million annually for 18 years to pay the loan, it is probable that other equally important city projects and programs might take the backseat as it will be tied up with this sole obligation.
We also cannot rely on the additional national tax allotment for the city as a result of the Mandanas Ruling, for along with additional finances are the need to increase the budget of the local government in order to take on the devolved functions from the national government.
Abruptly availing of the loan without considering the prevailing issues on its long-term implications might have more serious repercussions in the future.
We also notice the fact that the Local Finance Committee has no input in this and the sole data presented by the executive branch is the study made by a consultant of the ADB.
As managers of the city’s finances, shouldn’t the LFC members be consulted as well? In fact, their inputs are vital in this case as they are aware of the city’s financial status and of our capacity to pay.
Is this not the reason why the LFC advised against availing of a loan to develop the market as borrowing will surely impact on the city’s finances? The same applies with the STP.
The city’s 2021 budget has shown the resulted has resulted in a decrease in revenues compared to the previous years. What more when we avail of the loan and slash a sizeable amount for the payment of one project alone?
Baguio has always taken a conservative stance when it comes to availing of loans despite good credit ratings it is getting from private and government financing institutions. With the volatile situation the city government is in at the moment, we suggest for the executive department to reconsider its plan and discuss with the LFC and other consultants, if necessary, other options where the city may be more capable of handling rather than availing of a loan at a time when finances are still inadequate.