Councilors freeze Surigao City’s plan to obtain P120-M loan

SURIGAO CITY (MindaNews/13 December) — Fearing possible lawsuits, the Surigao City Council has put on hold Mayor Ernesto T. Matugas’s plan to secure a P120-million bank loan for the purchase of heavy equipment.

“We have found several technicalities,” said Councilor Baltazar C. Abian, ways and means committee chairman, though he declined to specify when asked about the supposed loopholes in the loan contract.

The legislative body had conductive several closed-door sessions with Mayor Matugas recently, apparently to smoothen out specified disagreements over the contract governing the loan with the Development Bank of the Philippines.

Abian said the executive sessions ended late month with both sides agreeing to let the loan’s approval move on to the first reading until the executive and legislative departments reach a common ground on the contract.


“We have yet to settle some differences but we don’t want to give the impression that we are delaying this loan for whatever reason. Therefore, we agreed to pass the ratification on the first reading,” the councilor said in the dialect.

The contract is deemed approved after it passes the third and final reading.

Abian admitted that most of his colleagues have reservations with the major aspects of the loan, including whether the amount was too high and whether all the necessary procurement procedures have been followed.

Council members, he said, would not rule out reducing the loan amount, if only to appease those who believe the P120-million price tag was too high for the cash-strapped local government unit.

“Most of the city council members, especially the lawyers, don’t want to become party to the contract that appears to have legal infirmities. They’re afraid we might get sued if we don’t handle this correctly. So I agree with them that it is prudent that we scrutinize this to the last details,” he added.


Prior to the executive session held November 24 this year, Matugas was upbeat that the P120-million equipment purchase would proceed as planned, saying the council’s ratification of the contract was a purely procedural matter.

“Approved na ang loan. (The loan is approved). There was already an authority, otherwise we will not proceed to the bidding process,” the mayor told reporters confirming that a winner has been picked out of the four participating bidders.

Abian said that under the current situation, a rebidding could take place in case the loan contract was modified.


That may be unpalatable to the mayor, who defended the loan package as a necessary step to free the local government from expenses relating to equipment rentals, while enabling it to pursue infrastructure projects such as roads and mass housing.

Matugas also saw no problem with the loan amount of P120 million, citing a Bureau of Local Government Finance (BLGF) assessment that Surigao City still has a current overall credit line of over P500 million. He said this demonstrates that the city still has “enough capacity to borrow,” and that he intended to avail of the total credit line to fund his other projects, chief of which is the proposed Surigao City fish port.

To make the P120-million heavy equipment project “self-liquidating”, the mayor said these will be rented out to private contractors so that the profits could be plowed back as loan payments.

Under this scheme, he said the city can pay the loan in less than 10 years, or way before its maturity period.

The city could also save from equipment rentals every time it undertakes road construction, repair and other infrastructure projects, the mayor said, adding the city has spent some 3 million for the rental for equipment being used at the landfill.

“It’s good investment in the long run because it can pay for itself. We don’t need to pay for itself. We don’t need to pay from our Internal Revenue Allotment (IRA) which is being used as loan collateral,” he said.


Matugas also sought to dispel criticisms that the loan came at a time when the city is facing a reduced IRA–projected to be at around 54 million–next year because of the creation of additional 16 cities.

A councilor who asked not to be named questioned the propriety of the loan when the city is desperate at scouring funds to pay the city’s job order employees who might not receive Christmas cash gifts because of lack of funds.

Another councilor complained that they were only consulted by Matugas at the last stages of the loan.

But the mayor insisted the loan was necessary if “we ever have to accomplish something.”

“Even the richest LGUs borrow money to pursue long-term projects. Why should we deprive our constituents of important services when we have the capability to do so?” he added.

He also assured the DBP loan was aboveboard and advantageous to the local government.

“We secured, for example, guarantees that the prepayment penalties and other charges will be waived,” he said.

He said his administration has instituted the “open bidding policy” to make the awarding of the contracts transparent and fair to all parties.

Open bidding or competitive bidding is conducted in a public venue, and in the presence of all who may wish to witness the opening of the received sealed bids. (Roel N. Catoto/MindaNews)

Councilors freeze Surigao City’s plan to obtain P120-M loan