VM Alvin seeks clarifications from City Legal and City Administrator as regards the leasing of the Magsaysay Park

November 27, 2006 Atty. Geraldine Baniqued City Legal Officer Mr. Rafael Baraan City Administrator Thru: Mayor Benjamin S. Lim City Mayor Greetings! May we request the opinion and reply of the City Legal Officer and the Administrator on the BOT Law and an update on the Bugnay issue? Let us first discuss the Build Operate Transfer Scheme. A Build-Operate-Transfer (BOT) project is a concession contract in which a Principal, grants a concession to a Concessionaire who is responsible for the construction and operation of a facility over the period of the concession before finally transferring the facility, at no cost to the Principal, as a fully operational facility. Build Operate Transfer is the building of PUBLIC INFRASTRUCTURE using private funds that grants the financier rights to operate. The BOT Law is also known as Republic Act 7718. The project proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding these proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in the project. The project proponent transfers the facility to the government agency or local government unit concerned at the end of the fixed term which shall not exceed fifty [50] years. SEC. 4. Section 4 of the same act is hereby amended to read as follows: "SEC. 4. Priority projects. - All concerned government agencies, including government-owned and -controlled corporations and local government units, shall include in their development programs those priority projects that may be financed, constructed, operated and maintained by the private sector under the provisions of this Act. It shall be the duty of all concerned government agencies to give wide publicity to all projects eligible for financing under this Act, including publication in national and, where applicable, international newspapers of general circulation once every six (6) months and official notification of project proponents registered with them. "The lists of all such national projects must be part of the development programs of the agencies concerned. The list of projects costing up to Three hundred million pesos [300,000,000] shall be submitted to the ICC of the NEDA for its approval and to the NEDA Board for projects costing more than Three hundred million pesos [300,000,000]. The list of projects submitted to the ICC of the NEDA Board shall be acted upon within thirty [30] working days. "The list of local projects to be implemented by the local government units concerned shall be submitted for confirmation to the municipal development council for projects costing up to Twenty million pesos; those costing above Twenty up to Fifty million pesos to the provincial development council; those costing up to Fifty million to the city development council; above Fifty million up to Two hundred million pesos to the regional development councils; and those above Two hundred million pesos to the ICC of the NEDA." May we know from the City Administrator if the City Development Council approved the plan? Did the CDC consider its limitation of up to 50million pesos? Did the CDC carefully study the type of Tourism Complex that it is to propose to the Sanggunian for Authorization? Did the Sanggunian Authorize the B.O.T project? Was the technical plan in existence before the bidding was done? Who did the plan? Why was the Sanggunian not part of the process, Authorization? Did it pass thru the Regional Development Council for confirmation having a projected 84million investment? What is the basis of this 84million peso investment? My opinion: If the answers to requirements are in the negative, then the city can not proceed to the Bidding of Project as per NATIONAL LAW. It will have to pass through the process as required by the Law. If it did not go through the process required by law then it could not be awarded. May we request the opinion of the City Legal as regards this matter? The Sanggunian has no power to authorize a BOT contract that is contrary to what was required of by Republic Act 7718 prior to bidding. My Question: If the Sanggunian allows and authorizes the contract of a BOT which did not pass through the mandate of the Law, will it be guilty of abuse of discretion? Will the Authorization of the Sanggunian for the Mayor to enter into a Contract cure the defects of the bidding process? Does the Sanggunian have the power to override RA7718? My Question: If you think the project is really worth doing, Would you recommend for a re-bidding in order for it to comply with the law? Would it be wise to consult the public as regards to a Magsaysay Park that shall be leased for another 25years to another BOT operator? The people will be affected and the scope of the contract will go beyond the administration of the present elected officials. My Question: Last October 25, 2004, The SP through resolution 4678-2004 pinpointed the Magsaysay Park as a Tourism Park that is to be equipped with adequate recreational Facilities. The SP also passed Resolution 5406-2006 on May8, 2006 Adopting the Magsaysay Park Development Project as a Priority Program of the City Government that could be used as the basis for future development. Does this resolution allow the bidding of a B.O.T? What is the basis of the bidding? Where did the bidders base their bid? When did the bidding process start? SEC. 5. Public Bidding of Projects. - Upon approval of the projects mentioned in Section 4 of this Act, the head of the infrastructure agency or local government unit concerned shall forthwith cause to be published, once every week for three [3] consecutive weeks, in at least two [2] newspapers of general circulation and in at least one [1] local newspaper which is circulated in the region, province, city or municipality in which the project is to be constructed, a notice inviting all prospective infrastructure or development project proponents to participate in a competitive public bidding for the projects so approved. "In the case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder who, having satisfied the minimum financial, technical, organizational and legal standards required by this Act, has submitted the lowest bid and most favorable terms for the project, based on the present value of its proposed tolls, fees, rentals and charges over a fixed term for the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. For this purpose, the winning project proponent shall be automatically granted by the appropriate agency the franchise to operate and maintain the facility, including the collection of tolls, fees, rentals, and charges in accordance with Section 5 hereof. My Question: Who made the prescribed minimum design, performance standards, plans and specifications? Since it is not a part of the Annual Investment Plan or Annual Development Plan, should the SANGGUNIANG PANLUNGSOD CONFIRM and Authorize the Technical PLAN and terms of reference first BEFORE a BOT project was to be BIDDED OUT? Could the city bid out a BOT plan that was not authorized by the Sanggunian for bidding? Where is the basis for the bidding? Do we have a program of works that shall state the type of materials to be used? If you have sent this to the Sanggunian, when was the date? When was the bidding? Could the City bid out a lease rate that was not authorized by the Sanggunian such as the 75centavos/sq.meter/day or if you compute it on a yearly basis is equivalent to 1million pesos per year? What is the basis for a term of 25years? Why not 10years or 5 years? What will the Tourism Complex house? Will it house the public recreational facility stated in SP Resolution 4678-2004? As to the issue of Bugnay which needs to be settled, being a lawyer of the city that was directed by the Sanggunian to pursue Bugnay in the City’s claim, may we be enlightened on the following issues. The Bugnay Market is considered as a PUBLIC Infrastructure that used private funds that granted the financier to operate and maintain the facility, including the collection of tolls, fees, rentals, and charges. As a public infrastructure, it is owned by the city and the city waits for the project proponent to transfer the facility to the government agency or local government unit concerned at the end of the twentieth year which is 2007. Where is the Bugnay Market now, as is, where is, what happened to it? Why did it suddenly disappear? Does the city have possession of the Bugnay Market or its remnants? Did the city get the insurance due the building? Will it still be able to get the insurance of the building or get a reconstructed building? As per the law, The project proponent operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals, and charges not exceeding these proposed in its bid or as negotiated and incorporated in the contract to enable the project proponent to recover its investment, and operating and maintenance expenses in the project. The project proponent transfers the facility to the government agency or local government unit concerned at the end of the fixed term which is 2007. The fire that broke out in Bugnay in 2004 was found to have been caused by faulty electrical wiring of a cell phone stall that was not listed as an official tenant, therefore having no official electrical connection and only taps in other stalls electrical connection. Who is responsible for this unsafe practice that caused the Fire Accident? The administration of Bugnay? If this is the case, could the city still demand the responsibility of constructing and turning over a facility of equal structure from Bugnay? Lastly, is the city allowed to bid out an area where a Contract with Bugnay has not yet expired? If the city has pre terminated the contract of lease for the continued used of the leased premises of the said corporation, Did the Sanggunian approve or authorize or ratify such a contract? May the Sanggunian be furnished a contract of termination to ensure that the rights of the city are protected? These are the issues that need to be clarified in the Sanggunian. Kindly make a written reply on all clarifications being raised in this letter to the Sanggunian Panlungsod, so it may be able to deal with the request of Authorizing the City Mayor to enter into a contract with the BOT operator with clarity and legality. Respectfully, VM Alvin Fernandez cc: All SP Members