TAINTED P1 BILLION BANK LOAN TO CAGAYAN
DE ORO CITY GOVT DENOUNCED BY PIMENTEL

Senate Minority Leader Aquilino "Nene" Q. Pimentel, Jr. (PDP-Laban) today expressed fears that the city government of Cagayan de Oro is headed for a financial ruin as a consequence of the imprudent decision of the previous city administration to obtain a scandalously huge bank loan that is disproportionate to its paying capacity.

Pimentel said he was told that more than P1 billion worth of loan was granted to the Cagayan de Oro city government by the Land Bank of the Philippines without sufficient collateral.

>From initial reports reaching his office, Pimentel said the collateral for the loan was in the form of a lot with a total area of less than 5,000 square meters. The lot is located not in the heart of Cagayan de Oro but in a barangay east of the city.

"The repayment of that loan and other existing loans of the city will impoverish the city and prevent it from delivering public services to its residents. Its internal revenue allotment will be consumed by the payment of these unconscionable loans," he said.

Pimentel said that although local government units are authorized to borrow loans from banks and government financial institutions to finance projects needed by their communities, they should be of reasonable amount and should not unduly burden the LGUs.

He said the Cagayan de Oro city officials - both elected and appointed - who had a hand in securing the excessive bank loan should be held administratively and criminally liable for abusing the authority to borrow that is granted by the Local Government Code.

The senator from Mindanao said such anomalous loan is unfair to the residents of Cagayan de Oro since they will end up paying back the debt possibly in the form of higher local taxes.

"That is unjust to the people of the city. The Land Bank officials who approved the loans even if they would cause hardships on the people of the city should also be sanctioned," Pimentel said.

Pimentel, principal author of the Local Government Code (Republic Act 7160), said officials of the Land Bank have obviously failed to exercise due diligence and to comply with basic banking rules before approving the P1 billion to Cagayan de Oro city government.

He also stressed that the Internal Revenue Allotment - representing the share of LGUs from the collection of national taxes - is intended to help provincial, city and municipal governments meet the financial costs of delivering public services.

It is simply not right if the lion's share of the IRA will be eaten up by the repayment of loans incurred by the LGUs, the senator said.

To prevent the abuse of the borrowing authority of LGUs, Pimentel said that any loan application should have the prior approval or consent of the provincial board, city or municipal council.

Likewise, he said there should be full transparency in the availment of loans by informing the people about such financial transaction.