An onerous land deal
The Department of Finance recently discovered not just an anomalous but also an onerous lease deal in a government land property. The deal involved Chevron Philippines Inc. (previously Caltex Philippines) and Batangas Land Co. Inc. (BLCI), the National Development Co.’s (NDC) subsidiary.
In December 2019, the department finally decided to dissolve the land agreement—which should last until 2021—between the two companies with respect to the industrial property.
It turned out that the subsidiary allowed the energy and coal company to pay a measly 74 centavos per square meter every month in rental fees for the 1.2 million-sqm state property in Batangas.
Chevron should be contributing an amount of about P17.90 per sqm per month to match the current fair market rental value in the area.
The government property serves as an industrial park in San Pascual, Batangas. Chevron Philippines, on the other hand, uses part of the property as an oil import terminal.
Another anomalous government contract
Upon uncovering the land agreement, the Department of Finance recently slammed the very small rental fee leased by Chevron Philippines in the property. Finance Secretary Carlos Dominguez III cited this lease deal as “another government contract with onerous provisions.”
The data was gathered from the appraisal reports of the NDC and the “asset pool” of the attached agency of DoF, which is the Privatization and Management Office (PMO).
The appraisal report in details
An appraisal report is a detailed evaluation of the fair market value of a real estate or industrial property. It is determined by a number of factors. In this case, this includes the rental rates paid by Chevron Philippines to the Batangas property.
It turned out that in a period of 44 years from 1975-2019, Chevron only paid P146.51 million for the land property.
This means that Chevron has only been contributing about 0.2 per cent to the land’s market value.
This should also be compared to the current fair market value of the state property which ranges from P4.9 billion to P5.3 billion.
With respect to these current rates, Chevron Philippines should already have contributed about P20 million a month in rental fees.
Finance secretary Dominguez cited this as a “grossly disadvantageous [rental yield] to the government and the Filipino people [or taxpayers].”