THE Commission on Audit (COA) questioned the revenue terms of an agreement between the Cebu provincial government with a real estate developer for the Cebu Cyberzone project.
State auditors said the Capitol may not be able to fully enjoy the financial benefits from the Build, Transfer and Operate (BTO) Agreement it contracted with Filinvest Land Incorporated (FLI).
COA worried that the P12 million a year the province would earn from lot rentals would only be enough to pay for real estate taxes to Cebu City.
“The pecuniary benefit that the Cebu Provincial Government (CPG) would derive from the BTO it contracted with FLI is questionable as the annual income that would be generated from it may just be sufficient for the payment of realty taxes that would be imposed on CPG once it operates,” COA wrote in its annual report.
In a separate interview, Mark Tolentino, provincial administrator, said this COA concern has already been addressed.
He said an amendment, which will make Filinvest responsible for the payment of real estate taxes, was made part of the agreement the Province signed with Filinvest in April this year.
At the same time, the Province signed an agreement with the Ayala-controlled Cebu Property Ventures Development Corp. (CPVDC) to remove a perimeter wall that separated the province-owned Filinvest project site from the IT Park.
The BPO Complex was inaugurated last Nov. 18, 2014 but could not fully operate because the facade and main driveway face the wall owned by its next door neighbor.
“We brought up to FLI the issue on tax payment and told them that they should be the ones paying. It was a good thing they acceded,” said Tolentino.
The latest agreement between the Capitol and FLI states that Filinvest will pay the provincial government P500,000 monthly or five percent of the total gross revenue of the estate, whichever is higher.
During the tenure of then governor Gwendolyn Garcia, the province signed a 25-year BTO agreement with Filinvest for a BPO complex at the province-owned lot beside the Cebu IT Park.
The annual real property tax based on the assessed value of the property once the project operates is computed at around P12 million.
The Capitol is expected to earn a monthly income of P1 million (or P12 million a year) from lot rental of P500,000 and another P500,000 from the minimum percentage share in office rentals.
As stated in the 2012 agreement, “Cebu Province shall, during the entire term of this agreement, be responsible for the payment of any and all real property taxes, if any or applicable, assessed in accordance with law on the Properties.”
During an exit conference with COA last February, Cebu Gov. Hilario Davide III said the issue has already been discussed with Filinvest.
He said the company agreed to have this provision amended and require Filinvest to shoulder the tax.
In the original 2012 agreement, the Capitol would share two percent of the total gross revenue of the property.
The 25-year BTO agreement was extended to 30 years so Filinvest can recover its losses due to the delayed start of its operations.