Department of Finance (DOF) said the government will work on getting the “best deal” for the rental of all state properties, as it discovered a lease contract with “onerous” terms between an oil company and a subsidiary of government investment arm National Development Co. (NDC).
The DOF said in a statement yesterday under the terms of its lease contract , Batangas Land Co. Inc. (BLCI) , allowed Chevron to pay a “miniscule rental fee.”
The DOF Chevron has been paying a monthly rental fee of just 74 centavos per square meter (sq. m.) on a 120-hectare or 1.2 million sq. m. industrial park in San Pascual, Batangas that it uses as an oil import terminal.
The agency said comparative data from NDC appraisal reports and other official sources showed the current fair market rental value in that area should be around P17.90 per sq. m., per month.
If the amount is adjusted to current fair market rates, the rental rate by now should be above P20 million a month or P257.76 million annually, the DOF said.
Carlos Dominguez, DOF secretary, described the lease deal as “another government contract with onerous provisions.”
“Definitely we have to implement a totally transparent method of getting the best deal for the rental of all government property,” Dominguez said.
The finance chief earlier said he endorsed the review of all contracts that may have onerous provisions.
At P10.66 million per year since 2010, the DOF said the rent Chevron has been shelling out is only around four percent of the P257.76 million per year that current fair market rental rates in the area would suggest.
Dominguez said the request for renewal of the deal was recommended by some offices to the Privatization Council, which found the contract grossly disadvantageous based on current fair values.
The DOF said based on documents submitted to the NDC Board, the rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled to only P146.51 million or about P3 million per year, in addition to real property taxes paid by Chevron under the lease agreement.
This property’s current market value is estimated at about P4.9 billion to P5.3 billion, translating into a rental yield of only about 0.2 percent of the property’s value.
Dominguez, who is also NDC board member, said “based on current standards that the state imposes on similar contracts, to have a rental yield of less than one percent is surely grossly disadvantageous to the government and the Filipino people.”
The DOF said renegotiation on the lease started as early as 2000 but it was not until 2010 the rate was increased to the current rental amount of P10.66 million per year, which is still way below fair market rental rates in the province.
The DOF said American firm, then Caltex, was able to acquire the Batangas lot and other prime properties owned by the government under the 1946 Bell Trade Act passed by the United States Congress.
Under this law, American entities were granted “parity rights” on land ownership in the country as a condition for the US government’s payment of $800 -million war damage claims to the Philippines.
Parity rights had allowed American companies to own land in the Philippines just like Filipinos.
These parity rights were extended for 20 years through the Laurel-Langley Agreement signed in 1955 by then senators Jose Laurel of the Philippines and James Langley of the US. Such parity rights ended in 1974.
With the expiration of the 1946 Bell Trade Act, the DOF said Caltex, and now its subsidiary Chevron Philippines, was granted preferential treatment in continuing to occupy and use various real properties, including the Batangas industrial park.
Issued by then-President Marcos, Letter of Instruction No. 276 required the lease-back of the properties occupied by Caltex for a maximum of 50 years from 1975, at minimum rates of 1.5 to 2.5 percent of the property’s valuation in 1974.
