A Fatally Flawed Study

       Two weeks ago, the Preferred Ventures Corporation (PVC) presented to the Sangguniang Panlungsod of Tacloban a feasibility study purporting to show that the New Tacloban Market, Bus Terminal and Shopping Complex as “financially viable”.

       It is not my purpose in today’s column to go into an in-depth analysis of the study. I plan to do it in a series of columns in the coming weeks. Nevertheless, having read the summary of the study, it appears that PVC did not sufficiently disclose to the City Government of Tacloban a few “weaknesses” of the project which will put in grave jeopardy the future financial situation of the City Government.

      Some aspects of the study may have been purposely withheld from being verbally explained so as to ensure approval of the project. I see some deception being employed by PVC. It was not honest and transparent in its study.

      One glaring proposal in the study is that the City Government will: (a) subsidize the first six years of the facility’s operation to the tune of P160 million or roughly P 27 M per year and (b) total payments to the advisor (PVC) is P9.45million. There are several more financial figures I will cite in future columns.

       While there is a need to provide a site for a new market and a bus terminal, two questions that easily come to mind using the above observations are:
          (a.) Is floating a bond and incurring a debt to the tune of over P300 million the best way to finance the project?
          (b.) Would it not be better to implement the project phase-by-phase utilizing the internally-generated funds of the city government?

        The location of the project should also be a subject of careful scrutiny. If there is an error in location, the subsidy will increase considerably and the city government could find itself unable to provide funds for even such routine services as maintaining a hospital.

        If the location is not patronized by market goers, the city government could easily find itself allocating at least P50 million per year from its annual budget to pay maturing bonds and for operating expenses. In short, the study is fatally flawed. This being the case, I encourage the city government to take a close second look. It is not yet too late to do so since the bonds have not been issued. It has enough competence in the city planning and development staff and in the city treasurer’s office to put this study “under a microscope”. It is just too huge an indebtedness to be ignored and to be reviewed haphazardly.

        The Sangguniang Panlungsod passed a resolution last year clearly stating that the bond float should be used only on feasible projects. The feasibility study presented shows that the project is not feasible.

         Perhaps, the city government should ask the PVC what is their definition of feasible.

         Is a project that has a subsidy of P 160 million (or is unable to pay for its indebtedness), feasible? On the matter of cost, the project will in reality cost nearly P500 million if counting both the bond float plus interest.

          In my humble opinion and using government standards in project evaluation, the project is not feasible.

         More on this in my succeeding columns.