Gov’t may absorb P2-B LRT1 deal breaker

As part of efforts to improve the bidding terms for the P60-billion Light Railway Transit 1 project, the government is now willing to absorb what is deemed to be the single biggest deal-breaker—real property tax (RPT).

Cosette Canilao, executive director of the Public Private Partnership (PPP) Center, which is helping the Department of Transportation and Communication (DOTC) in the bidding, said in a phone interview on Saturday that the bidders who pulled out from last week’s auction were mostly concerned about the RPT that local government units (LGUs) might impose. Based on the most conservative assumption made by one bidder, she said the RPT could surge to as high as P2 billion a year for an extended railway.

RPT liabilities on the current LRT1 amount to about P150 million a year for the existing 20.7-kilometer length of the metropolis’ oldest elevated railway, which has 20 stations that traverse Quezon City, Caloocan, Manila, Makati and Pasay.

For many of the bidders, Canilao said the RPT could be very volatile, based on the proponents’ vast experience in dealing with LGUs.  Citing written feedback from these bidders, the RPT was seen as the wild card that the bidders did not want to play. As such, she said the government might be willing to absorb the RPT to get this variable out of the equation. “It will just go from one pocket to another so the national fiscal account won’t be affected,” she said.

Canilao acknowledged that the RPT was not something that was fully factored in when the government drafted the original terms for the PPP project but a critical variable that must be considered under the new terms.

Since the railway infrastructure would revert to the government at the end of the contract, she said that absorbing the RPT would be an option for the government. Other issues such as right-of-way delivery are not as critical compared to the RPT.

As part of the maintenance of the existing line, the PPP project includes the extension of the railway to Cavite, increasing its span to 32.4 km. The project will be under a 35-year concession agreement.

Overall, Canilao said the LRT1 build-transfer-operate (BTO) project was “economically viable [and] there are a lot of efficiencies that we see if this project pushes through.”

The government is determining if there is a legal basis to extend the bidding process and to not declare a failed bidding. This meant the government might reject the lone bid submitted by the Metro Pacific group and then allow all four pre-qualified bidders to submit bids, a process that could take about 30 days, Canilao said.

The other option was to reopen the tender without having to alter technical, legal and financial qualifications, a process that could take longer than a mere extension, or about three to four months, Canilao added.

LRT1 serves an average 488,000 passengers a day, with the highest recorded passenger volume at 659,000.

The south of Metro Manila—Parañaque, Las Piñas and the province of Cavite—is home to nearly four million people, many of whom commute daily to central business districts in Metro Manila through any combination of bus, jeepney and garage-to-terminal vans. Once direct access is made available to this population, the government expects an additional 500,000 commuters availing themselves of LRT1 services.