May 24, 2024

■  Hanna C. Lacsamana   

The city council has scheduled a special session on March 20 to continue its inquiry on the plan of the city government to take out a loan from the Asian Development Bank to fund the Baguio Resilient City Tourism Project (BRCTP) worth $50.53 million or around P2.8 billion.

In a presentation during the council’s session on March 6, City Budget Officer Leticia Clemente, head of the Local Finance Committee, said for the BRCTP, which has been approved by the City Development Council, the city needs to incur a loan which will be taken by the Department of Tourism through its implementing arm Tourism Infrastructure and Enterprise Zone Authority (Tieza) in behalf of the city from the ADB.

Part of the $50.53M loan in the amount of $1.17M will be shouldered by the city government of Baguio while Tieza will shoulder $.49M as a grant. 

Clemente said the executive department is requesting the city council to pass a resolution authorizing the mayor to sign a memorandum of agreement between the Tieza and the city government and incur a loan, to pass an ordinance for sanitation and environmental user’s fee, and to approve a MOA between the city government and the Baguio Water District making the latter as collecting agent.

Clemente said the project is for the rehabilitation of the city’s sewage and septage treatment plants, and it is called Baguio Resilient City Tourism Project because it is also adopted by the DOT, Tieza, and the ADB with Baguio having been identified one of the two cities for rehabilitation during the Duterte administration.

The challenges currently faced by the city in terms of tourism and sanitation would indicate the city has inadequate sanitation infrastructure and services to meet the current and projected demand of residents and visitors of the city, aside from being vulnerable to disasters and climate change.

Right now, Clemente said only 10 percent of Baguio residents are connected to the sewer network, which is undersized and is in very bad condition considering it was constructed 30 years ago through a Japan Internal Cooperation Agency (JICA) grant.

“Our sewerage treatment plant is already undersized and it is not compliant with national standards for effluent quality. There is already leakage, contamination, and urban nuisance because of pollution from the sewage pipes. And 90 percent of Baguio residents have their own septic tanks and only 13 percent of the 90 percent were desludged,” Clemente said, among other details.

She said the Baguio sewerage treatment plant, approximately 70 kilometers of sewer pipes installed starting 1970s, is exceeding the national standards set by the Department of Environment and Natural Resources from 2016 to 2020 and even in 2023.

Only 10,500 are legally connected to the sewer line out of about 78,500 households and city has no billing mechanism as well, so households connected to the sewer line do not pay for service.

Only commercial establishments pay once a year when renewing their business permits as provided in Sections 158 and 161 of the Environment Code.

The city has also been allocating P48M to P62M annually for operational and capital expenses for the facility but sewer fee collections for 2021 was only about P19M and has decreased through in 2023.

“With our budget alone, we cannot rehabilitate our STP to meet the demands of our residents. So there is really a need for intervention, that is why we came up with this project. And we feel that it is a necessity at this point in time,” Clemente said.

The BRCTP is divided into two outputs, which are the hard infrastructure component and the soft infra component.

The hard infrastructure component involves replacement or rehabilitation of the six kilometers of main sewer pipelines which will lead to an approximate of 5,700 new connections to the existing 10,000 connections or more. The soft component will be the regional sanitation plan and bio solids strategy, sanitation compliance manual, institutional strengthening, position tracking system for dislodging operators.

The capability building of tourist stakeholders will be the counterpart of Tieza.

“Our overall project goal is to build and enhance the resilience of Baguio City: ecological, physical, financial, and social/institutional, and achieve sustainability to meet current and future demands of residents and visitors,” Clemente said.

She said the city will earn more to cover for the loan through collections from environmental fee to be collected per guest at approximately P97M starting 2024 if the council will approve the proposal.

Payment period of the loan is 29 years. The city will only start paying after eight years or in 2032 as grace period at an interest rate is 4.6 percent, but it will pay a 0.15 percent commitment fee if it is unable to disburse funds as planned to implement the project.

“The loan including interest charges during implementation is under us and the soft component will be under Tieza. We will be paying the interest on the loan amortization after the grace period and the commitment fee if we are unable to implement the project on time and the guarantee fee. Those are our commitments.”

The city will start paying the loan on 2032 up to 2053, where the payment starting 2040 is constant at P196.77M until the loan is paid off in the total amount of P4.664B.

“Where are we going to get all this money to pay?” asked Councilor Peter Fianza, who also pointed out why is the project only being presented now, with the opinion it should have been discussed first with the legislative department.

On the source of repayment funds, Clemente said: “We commit to put into the general fund P50M as our counterpart or subsidy for the implementation of the project and the collection from sanitation fees we will have a new rate to be assessed from residents. We will have also environmental user’s fees collected from visitors. For residential tariff as per willingness to pay based on our study is P116 which we feel is reasonable and 18 percent of the water bill for commercial and government establishments. If we start collecting now we will have these collections and up to 2039 we will be able to collect P2,091,500,000.”

Fianza asked why the BRCTP is clustered as a tourism resilient project in the first place. “Is it for the reason of justifying what shall be collected later on? Is the project not for the residents?”

Clemente said the city partnered with Tieza as the city cannot loan directly from the ADB, which can only provide loans to the national government. In this case, the city’s conduit is the DOT through the Tieza, which is guaranteeing the loan of the city.

Clemente added the city needs to take out a loan for the project because the city’s funds are already earmarked for priority projects including the current year’s budget, and for its continuing appropriations and remittances to agencies.

She added the loan in partnership with Tieza is an opportunity taken by the executive department and included it in the annual investment plan for the city council’s deliberation.

“But it is only now that it is presented. It should have been presented at the time that the project is being designed because you are now coming to us for the approval of the loan. Did we agree on taking a loan in the first place? That should be a mutual understanding between the executive and legislative departments,” Fianza said.

Considering these questions and other clarifications sought by other council members, Vice Mayor Faustino Olowan said the issue shall have to be discussed further and asked that a special session be set together with the Local Finance Committee; the city assessor, accountant, and treasurer; Mayor Benjamin Magalong, the city administrator, the City Environment and Parks Management Office, and representatives from the ADB, Tieza, and DOT.

On motion of Fianza, the council approved the setting of the special session on March 20 at 10 a.m.