‘A TIMELY DEBT’: Budget office says planned P300-M loan is the practical fix

By Rjay Zuriaga Castor

The Iloilo City Budget Office said a planned PHP 300 million loan from the Development Bank of the Philippines is the most practical option and the “immediate answer” to the urgent need for additional classrooms at Iloilo City Community College.

City Budget Officer Viminale Capulso said the city cannot allocate the full PHP 300 million from its annual budget for the expansion alone.

“This is a big project. It is worth P300 million. From the perspective of the budget, we cannot at one go allocate 300 million for just one project. That’s why one of our options to maximize the source of the fund is to resort to a loan application,” she said in an interview.

Capulso also addressed why a supplemental budget, using a budget surplus at the end of the fiscal year, cannot cover the expansion.

“The amount is too big for a single allocation because we have so many operating expenses, and our surplus and our supplemental budget covers,” she said.

Capulso said the city needs to contract the loan soon, citing a lack of classrooms that has forced Bachelor of Science in Criminology students to hold classes at the Diamond Jubilee Hall.

“[The expansion] is an immediate need. We cannot just say we will wait and save PHP300 million for five years because the students already need a new space. That’s why our contracting of loan is the immediate answer to our dilemma in the lack of classrooms,” she said.

Although the expansion will be billed progressively, she said full appropriation is required upfront before progressive billing can occur.

She said procurement cannot proceed without certifying the full project amount as available and appropriated in the budget.

Once procurement is awarded based on the full approved amount, contractors bill progressively for completed work tied to verified milestones, such as project phases or percentages of completion.

“That’s why we need a full amount of PHP 300 million, and that is through a loan,” she said.

The budget office said the city’s budget surplus is typically allocated to supplemental budgets and cannot be used for a single large project.

In 2024, a PHP 500 million surplus was used as the fund source for Supplemental Budget No. 1 in 2025.

For 2025, no surplus has yet been declared, as the City Accounting Office is still finalizing its reports.

Capulso said surplus funds are typically identified as sources for supplemental budgets, which can be used to fully fund accounts that receive only partial allocations in the annual budget.

She said the annual budget is based on estimates and is insufficient to cover all the city’s needs.

Partial funding in the annual budget is balanced through supplemental budgets to ensure ongoing city operations.

Not a cause for concern

Capulso said the public should not worry about the loan plan because the city government remains in a stable financial position.

She said the city is in a strong position to take on the new loan because two previous major loans will be fully settled by 2027.

“I don’t know where the doubts are coming from because before we contracted the loan, our City Council had a committee hearing, and from there the Local Finance Committee is involved, particularly the City Treasurer, who assesses the city’s repayment capacity based on the loan terms,” she said.

The loans include a PHP 292 million loan from the DBP for the Calajunan sanitary landfill and a PHP 10.6 million loan from the National Housing Authority for infrastructure projects in resettlement sites.

Capulso said both loans, acquired in 2012, will be fully closed by 2027, reducing the city’s current debt obligations.

“That’s minus 2 in our loans. That’s why it is timely that we contract a new PHP300 million loan. The existing amortization payments won’t change because the two previous loans will be fully paid off. That’s why it’s the right time to take out this new loan,” she said.

Capulso said the loan approval process includes strict background checks, adding that she does not understand criticisms questioning the city government’s financial capacity.

“DBP does not grant loans without background checks. We also have a clearance from the Bureau of the Treasury confirming that the city has the capacity to contract and pay according to the amortization schedule,” she said.