Three banks made offers. The cheapest was thrown out because its interest could go up. The two that were chosen can also go up — and the city's own lawyer asked the banks to remove those clauses four days before the vote.
DUMAGUETE CITY — Veterans Bank offered 4 percent. Land Bank and DBP offered 4.5 percent. The city took the 4.5, and the reason it wrote down was the interest rate.
On July 31, 2026, the Local Finance Committee — the mayor among the signatories — resolved that the two government banks' offers were "more beneficial and advantageous" than Veterans', "particularly with respect to the interest rates." Veterans' rate was "variable and escalating," it said. Land Bank and DBP offered "the more stable indicative fixed interest rate of 4.50% per annum."
Read the rest of the file and that sentence does not survive. Neither bank promised 4.5 percent for 15 years. Both called their rate indicative. Both tied it to the city keeping "substantial deposits" with them. Both draft contracts can raise it. And on September 4 — four days before the Council voted — the City Legal Officer wrote to both banks asking them to delete those very clauses.
What Veterans put on paper
The proposal is dated February 12, 2026 and was stamped received at the City Mayor's Office the next afternoon. Two pages. Up to 15 years, a term the document says was set "per client request." Two years' grace on the principal, then monthly payments. Interest 4 percent for the first year, then repriced every year at the one-year BVAL rate plus 2 percent, but never lower than 4 percent. The bank's July 23 letter calls it a preferential rate that needed special approval. Veterans also wanted the city to keep deposits worth at least 40 percent of the balance, or pay one point more the next year.
Veterans said its rate could move and said exactly how. That is what it was rejected for.
DBP: 4.5 percent, with a ₱1-billion condition
DBP's February 13 offer sheet gives 4.5 percent "provided that substantial deposits continue to be maintained with DBP." Its June 3 approval — Annex H in the bundle City Hall gave the Council — says what happens if they are not: a variable rate based on 3-month BVAL plus a spread, or 5.50 percent, whichever is higher, repriced every quarter. The same term sheet says what "substantial" means: "Maintenance of at least ₱1.0 Billion in CASA deposits in order to maintain the 4.50% p.a. interest rate." The city's total revenue in 2022, from the financial statements in the same bundle, was ₱1.22 billion.
The draft contract sent to the Council on August 27 keeps the mechanism and takes out the number. Section 2.07(a) ties the rate to those same deposits and says an adjustment takes effect after notice; if the city does not accept it, the city must repay the whole loan, and if it cannot, the new rate is "deemed accepted." Section 2.07(b) lets either side reopen the rate. The promissory note is titled "Form of Promissory Note (Variable Interest Rate)." The space for the required deposit balance, in Section 9.11(a), is blank.
DBP's revised term sheet of August 12 deleted the ₱1-billion line and the 5.5 percent fallback. The contract clauses stayed.
Land Bank: "indicative," and adjustable
Land Bank's January 5 offer, repeated word for word on July 23, says "(Indicative) At 4.50% p.a.… provided that substantial deposits continue to be maintained with LBP," and that the terms are "subject to market conditions at the time of availment." Section 2.8(c) of the draft agreement's General Conditions makes the rate "subject to upward or downward adjustment" if any law or rule changes the bank's cost of funds, on 30 days' notice. The city's only escape, under Section 4.2, is to pay the whole loan within 30 days. "Substantial" is never defined anywhere.
So: Veterans, 4 percent, variable after one year by a formula written down, with a floor. DBP, 4.5 percent, on condition of a deposit balance once set at ₱1 billion, otherwise repriced quarterly. Land Bank, 4.5 percent, indicative, on condition of a deposit balance never stated. The only bank that spelled out how its rate would move is the one that lost.
Where did 6.80 percent come from?
The resolution says the Veterans rate "may reasonably be expected to increase to around 6.80% per annum." No BVAL figure, no date, no computation. The City Legal Officer's September chronology says the same offer was "6% interest rate per annum at the minimum" — but the proposal's minimum is 4 percent. And whatever produced 6.80 was never applied to DBP's own 5.5 percent fallback, which uses the same kind of benchmark, or to Land Bank's cost-of-funds clause.
Never entered in the process
The BLGF certified the city's borrowing capacity on March 12 for a loan application that named only Land Bank and DBP. The March 23 requests to the Bangko Sentral named only Land Bank and DBP. When the mayor wrote on July 31 asking for draft contracts and for clarification of fees, penalties and the effect of the security on the city's accounts, he wrote to two banks — not to Veterans, whose proposal had been in his office since February 13. On August 25 the Feasibility Study Committee told the independent reviewers the terms were "fixed for the full 15-year term, no repricing." Veterans does not appear in the review record at all.
The Veterans proposal had itself asked for a Monetary Board opinion, a BLGF certification and a Council resolution. It wanted the same process it never got.
"Unsolicited" — and the July 21 visit
The resolution calls the proposal unsolicited. The proposal says its 15-year term was "per client request." And the bank's July 23 letter says a City Hall officer, Leonidasa C. Oira, went to its Dumaguete branch on July 21 and asked that the February 12 proposal be re-dated to July 23 with the same terms. The bank said no — a new date needs new approval, and rates had gone up since February.
An offer that was "outright disregarded," in the City Legal Officer's own words, is not one an office asks a bank to re-date — especially onto a date inside the authority the Council gave on July 14.
What was not compared
There are arguments for a government bank. Veterans is smaller and capped the loan at its single-borrower limit; DBP already holds the city's National Tax Allotment account; and the security Veterans asked for — the NTA "and other local revenues" — is wider than the 20 percent of NTA each government bank took. None of that is in the resolution. The reason given, over the mayor's signature, was the interest rate.
A real comparison would have put all three offers through the same BLGF application and the same Bangko Sentral request, sent all three the same July 31 questions, shown all three to the independent reviewers, and priced all three on the same assumptions — including the deposits each bank wanted in return for its headline rate.
Still unanswered
Who computed 6.80 percent, and why the same arithmetic was never used on DBP's 5.5 percent. What deposit balance the city will actually have to keep, and what it costs to leave that money idle for 15 years. Whether the banks agreed to delete the repricing clauses. Why the lowest offer never reached the BLGF, the central bank or the reviewers. And who decided, on July 21, to ask a bank to change a date.
The city rejected the one bank that admitted its rate could move, then told the Council the rates it chose were fixed. The contracts say otherwise — and the city's own lawyer has now told the banks so.
READ NEXT IN THIS SERIES: The two dates this story rests on — Bank Approved Dumaguete's ₱974-Million Loan Six Weeks Before the Council Allowed Negotiations