Issue of July 5, 2020
     
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No lease payment for city for 50 years under PPP bids
by Jane B. Cadalig

The city government will not receive lease payments from the developers of the Baguio Public Market.

It will, however, earn its income from the stall rentals of vendors who will be accommodated in the spaces to be provided them.

City Administrator Bonifacio dela Peña said under the unsolicited proposals submitted by SM Prime Holdings, Inc. and Robinsons Corporation, the two entities will not pay rent to the city government for 50 years in exchange for the more than P6 billion they will infuse in developing the market.

Dela Peña, together with Mayor Benjamin Magalong, appeared before the city council on June 29 to update the latter on the proposals regarding the public market’s development.

In their proposal, SM Prime Holdings intends to build a seven-story structure in which the first two floors will accommodate the current vendors at the public market.

There will be two basement parking and three levels in which the two floors will operate as a mall and the topmost floor will be an open or green space.

SM Prime Holdings plans to lease the public market for 50 years.

Robinsons Corp. on the other hand, plans to construct two buildings – one will accommodate the vendors and the other structure will function as a mall. It intends to lease the facility for 50 years with an automatic contract renewal of 25 years.

Dela Peña said Robinsons did not indicate the number of floors for the buildings they intend to construct.

The proposals were evaluated under the Public Private Partnership for the People Initiative (P4) Ordinance, in which the developers will turn over the public market to the city government once development is done for the city to manage and operate.

Replying to the councilors’ query on how much the city government would earn from the lease of whoever gets the contract, dela Peña said the city will not receive lease in the next 50 years, since under the two proposals, the rent the developer is supposed to pay the city government will offset the more than P6B they are expected to spend in improving the public market.

The city’s source of income will be the rent that it will impose on the vendors who will lease the stalls that will be allotted for them.

Dela Peña explained that the offers of SM Prime Holdings and Robinsons Corp. will still be deliberated upon.

“These are proposals only that will serve as our guide. We will have to negotiate with the proponents. No contract is awarded yet,” he said.

He added the proponents’ offers are all subject to negotiations, including the non-payment of lease for 50 years in lieu of the expenses they will incur in developing the market.

Dela Peña said the P4 committee has evaluated the unsolicited offers of SM Prime Holdings and Robinsons Corp. so that they could select whom to award the original proponent status (OPS).

After the OPS is awarded, dela Peña said the city will implement the Swiss Challenge in which other private entities or developers can come in and match the offers of the original proponent.

Magalong said the city government entertained the proposals under the PPP modality for public market because the city could not afford to secure a loan to implement the market development.

An evaluation done by the City Budget Office showed that if the city avails of a P2B loan to develop the market, it will have to pay a yearly amortization of P283 million annually, exclusive of interests.

“Government banks have offered us loans to develop the public market, but the amortizations we will have to pay the banks for 15 years will have a huge impact on our annual budget.”

“This is why when SM and Robinsons submitted their unsolicited proposals, we entertained them. For me, this (PPP) is the best modality we can adopt in developing the public market because we will not incur any expense.”

Magalong added the development of the public market will address the unfair practices that have been gripping the facility for years.

“Once it is developed, we will address the concerns on sub-leasing where some lessors only pay the city as low as P4,000, but sub-lease the stalls to as high as P100,000,” Magalong said.

He earlier said the city government is losing P200,000 a day due to the illegal sub-leasing of stalls in the market.


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