Puerto Princesa courting lenders, investors for major infra face-lift

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THE local government of Puerto Princesa City in Palawan is pursuing an initial P1.2-billion infrastructure buildup program seen to help boost its stature as one of the world’s best leisure destinations and, at the same time, cement its capacity to create internally generated funds not just for now but for the long haul.

 

This was learned from city Mayor Lucilo “Cecil”  Rodrigues Bayron, who said that  two state-owned banks and one privately owned commercial lender offered very compe-titive loan rates to finance a number of projects requiring also the participation of private investors to hasten the development of one of the nation’s premier island destination.

The local government unit’s (LGU) infrastructure buildup program comes at a time when barely none of the LGUs have taken advantage of the highly liquid banking system now offering historically low-interest charges because there are only very few administrators willing to take the risk before interest rates head back up again.

According to Bayron, the city already secured authority from the Bureau of Local Government Finance (BLGF), an adjunct of the Department of Finance, to borrow P540 million from the banks to begin the construction of a three-story commercial building and allied facilities along scenic Puerto Princesa Bay.

The SM Supermalls chain has conducted preliminary talks with the city government and committed to complete the construction of a mixed-use building in just 10 months from the day the contract is signed.

Under the proposed agreement, SM Supermalls, would lease the bayside property for 25 years, an arrangement that would free Puerto Princesa City from having to fund the construction of a P100-million wet market that would also house the province’s first SM Hypermart outlet.

The ground floor would host the city’s wet market, while the second and top floors would host the Hypermart branch and parking facilities.

Since the local government would lease the wet market from SM Supermalls when the building is completed, the transaction would entail no cash out on the part of the city hall of Puerto Princesa, Bayron said.

He also said the state-owned LandBank and the Development Bank of the Philippines (DBP) offered to extend the city government a loan with the potential to go from the BLGF-endorsed P540 million to as high as P700 million because a keen rival, the Philippine National Bank (PNB), offered terms superior to that extended by the state-owned lenders.

While LandBank offered a loan costing Puerto Princesa residents 5.5 percent a year and DBP agreed to only 5 percent, Philippine National Bank (PNB)  agreed to charge only 4.75 percent.

Even better, Bayron said, PNB agreed to the city’s plan to refinance outstanding debt of some P1.2 billion with a new loan costing only 4.75 percent.

Given that some of the loans cost the city government interest charges as high as 12 percent, Bayron said the terms presented by PNB seem the most tempting of all.

According to the former city administrator, city planner and erstwhile city vice mayor, the former tenant at city hall had a penchant for building beautiful toolboxes such as the P739-million City Hall Building, but neglected to provide its inhabitants with a practical range of tools they could depend for many years after the paint and the luster has faded.

“I am an imaginer. The city already has authority to borrow at least P540 million for the purchase of heavy equipment. The banks are offering us attractive rates for the loan because interest rates are very low at the moment. And we have inherited a loan that is costing us 12 percent per annum but which we can refinance for only 4.5 percent, without repricing,” Bayron said.

He believes he has the financial wherewithal to underwrite the ambitious project even in the event SM Supermalls fails to win the bidding process. Bayron said the city’s internal revenue allotment had been raised by P200 million under next year’s budget and those are funds over and above the city set aside for street lighting next year totaling P150 million, P100 million for the wet market, another P100 million to develop the city’s commercial bayside boulevard and P250 million for the purchase of heavy equipment.

Bayron acknowledged an SM Supermalls participation in the project would free millions of pesos of city hall funds that he would otherwise be forced to forego delivery to the city’s inhabitants because then the money would underwrite the construction of facilities that would attract even more investments for Puerto Princesa City.

He also said nine cruise ships with scheduled stops have already been booked a year in advance beginning this month and for the next 12 months, providing the city with potentially more tourism receipts. Thus for  this year, Puerto Princesa attracted four  cruise-ship stops. A ship typically carries 1,500 passengers and 1,000 crew, half of whom disembark to explore such attractions as the Palawan Underground River.

Bayron said 83 percent of tourist arrivals are locals but the construction of a regional international airport already under construction by a South Korean contractor magnifies the potential tourism receipts for the city that already bested 147 other world cities as top destination.

That airport will directly connect Puerto Princesa with tourists from China, Hong Kong, South Korea, Vietnam and Malaysia after 30 months of construction that began only recently. “We did not expect or plan for the new international airport but its construction, along with the buildup of other leisure facilities in and around Puerto Princesa, are all welcome developments, Bayron said.