The local government of Orihuela clarifies that it will request a line of credit and not a loan of 40 million

The PP-Vox government team has entrusted more than a hundred investments worth more than 40 million to bank financing. Something that has earned him criticism from the opposition for “mortgaging” the City Council. However, according to executive sources consulted by LA VERDAD, the loan would not be the financial formula chosen, but rather the line of credit. The fundamental difference between one banking product and another is that the latter allows the money to be used progressively, according to the needs of the applicant.

During these last few days, the opposition parties have agreed to emphasize the “high debt” contemplated in the new budgets of the Vegara cabinet. The Councilor for Urban Planning and Heritage, Matías Ruiz, was the one who gave clarification before the Radio Orihuela microphones and provided details not included in the economic-financial report of the new budgets, to which LA VERDAD has had access. According to the mayor, what will be subscribed will be “a line of loans” and, he insisted, “only interest will be paid on what is available.” According to Ruiz, interest will only be paid on the money that is used effectively.

What the report includes, on the other hand, is something different. It reflects that the Oriolano City Council maintains four loans open, of which close to 1.8 million remain to be paid. The first of them is with Caja Rural Central. It expires in 2031 and was contracted for one million euros, of which around 575,000 euros remained to be paid at the beginning of 2024. The second is subscribed with Caja Duero. It also expires in 2031 and was contracted for 450,000 euros; 247,000 remain to be paid. The third is with BBVA. It is the one that is closest to its end. It ends in November 2025. It was also the largest, at 6.1 million; Just over a million euros remain to be paid. The last of the loans was signed with CaixaBank. It ends in 2031, it was 427,922 euros and around half remains to be paid.

All this speaks of a current level of practically insignificant debt. None of the loans is even close to the size of the 42,903,211.67 euros of bank financing to pay for investments. Even so, some details of how the money will be obtained are provided. It is said that the borrowed money will be paid with an interest rate of 4.5%, that the term will be 15 years and that there will be a grace period in which nothing will be paid for the borrowed capital. Yes, interest will be paid, which, it points out, amounts to 1,287,096.35 euros per year.

The case could, therefore, be similar to that of Torrevieja. The City Council of the salt city is going to sign a loan with Sabadell for 19 million. They will have a year of grace; unlike Orihuela, both for the capital borrowed and for the interest. The objective is to liquidate the operation when the treasury remnants are incorporated after the liquidation of the current budget.

Orihuela, by approving the accounts much later, is further behind. The City Council will have the money after the accounts are definitively approved and the loan or line of credit is signed.

Pending settlement

In addition, Orihuela is waiting to finish its settlement of last year's accounts to find out how many remainders (money not spent from previous years) the City Council has at its disposal. The latest settlements showed a figure close to 40 million, very close to the amount that is sought to be financed.

If the liquidation yields a positive result and the remainders grow again as in recent years, the government team would have liquidity to face the loans it signs. All of this, in addition, avoiding a possible return of the spending rules suspended due to the pandemic. If they returned, the remainder could only be used to pay off debt. Until now, the remainders were used to finance investments and current spending with credit modifications approved in plenary session.

The economic report also provides proof of the financial health of the Consistory, since the City Council has around 60 million in fixed-term deposits, 30 in Caja Rural Central and another 30 in Banco Sabadell. This money cannot be used; In fact, it is there to generate profitability. The mayor, Pepe Vegara, in fact plans to earn close to 1.7 million to maintain these deposits.