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CEBU CITY, Philippines – Illegal. Giluto sa kaugalingong mantika (Cooked in its own oil).
These were the words of Representatives Pablo John Garcia of Cebu’s 3rd district as he warned that the Cebu City government has opened itself to lawsuits for the multi-billion deal it entered with Filinvest Land Inc. (FLI) to develop 50 hectares of the 300-hectare South Road Properties (SRP).
“The last two days have at last given us a clearer picture of what the Filinvest deal is shaping up to be. And the picture is very disturbing,” said Garcia in an e-mailed statement.
The congressman was referring to reports that FLI and the Joint Venture Selection Committee (JVSC) of Cebu City agreed last Friday to enter into a joint venture to develop 40 hectares in the SRP worth P80 billion and for FLI to purchase another 10 hectares for P1.8 billion.
The decision to lump together the outright purchase and the joint venture scheme “points to a deal that is patently illegal, grossly disadvantageous to the City, and a recipe which calls for the City to be fried in its own non-performing fat,” said the congressman, the brother of Cebu Governor Gwendolyn Garcia, a staunch critic of on-leave Mayor Tomas Osmeña.
Acting Cebu City Mayor Michael Rama, City Administrator and JVSC head Francisco “Bimbo” Fernandez, and SRP chief operating officer Nagiel Bañacia merely scoffed at Garcia’s claims, saying the deal was above board and could stand at any court.
“It can be defended before Plaza Miranda,” Bañacia said.
Rama curtly described Garcia as a “know it all (mura ug siya ra ang nakahibawo).”
“Nganong illegal man? Ngano judge na siya? Wala man gani kaso (Why should it be illegal? Why, is he a judge?),” he said.
The acting mayor, however said that Garcia, being a lawyer, should not draw conclusions on matters he is not directly in the know.
Garcia, in his statement, said the scheme to lump the outright purchase of 10 hectares and the joint venture over the other 40 hectares into one package is illegal.
He pointed out that the Local Government Code, other relevant laws, as well as rules and regulations of the Commission on Audit (COA) provide that the outright sale of a real property owned by a local government unit should be done through competitive public bidding, with the property awarded to the highest bidder.
The “Swiss Challenge” formula being used in the FLI-SRP deal is only peculiar to Build-Operate-Transfer (BOT) and related schemes and not applicable to outright sales, he said.
“Thus, the scheme to lump together the outright sale of 10 hectares with the joint venture over the 40 hectares is clearly to evade competitive public bidding required in outright sales,” he added.
Garcia also described the payment scheme for the outright sale as “onerous.”
“Giluto ang ciudad sa iyang kaugalingong mantika (The city is cooked in its own oil). The P1.8 billion is payable in five years, while the joint venture immediately vests in favor of Filinvest,” he said.
“Under this situation, Filinvest needs only to do the following in order to pay the City, without dipping into its own pockets: a. Pre-sell the 40 hectares to other interested locators and use the proceeds of the pre-selling to pay the City; or b. take the joint venture agreement to the banks, who would only be willing to finance Filinvest in exchange for its 90 percent interest in the joint venture. Take note that under a joint venture, the property is transferred to the special purpose vehicle (a joint venture corporation, for instance) and gives Filinvest a solid 90 percent interest in the 40-hectare property.”
Garcia said he believed that the city’s decision to bundle the outright sale together with the joint venture was “a scheme to scare away, discourage and leave out a substantial number of investors who may be interested in purchasing the prime 10 hectare land (at an even higher price), but would not want to have anything to do with a complicated joint venture with a debt-ridden City.”
He claimed that “in fact, a number of potential investors have expressed their serious reservations to me personally regarding the un-level playing field being drawn by the city.”
