Sorsogon City gov’t grants 25 years to SM Prime Holdings Inc. to operate SITEX

by Bicol Express News research team

The Sangguniang Panlungsod of Sorsogon City granted SM Prime Holdings, Inc. twenty-five years to operate the City Grand Central Transport Terminal or the Sorsogon Integrated Terminal Exchange for twenty-five years (25) with an option to renew for another twenty-five years (25) as part of the validity and effectivity when it granted the authority to City Mayor Ma. Ester Hamor is to enter into a Memorandum of Agreement notarized on May 25, 2022, at Pasay City.

History

On April 19, 2022. The 7^th City council approved Resolution No. 181 s. 2022 granting authority to the city Mayor Ma. Ester Hamor entered into a Memorandum of Agreement with SM Prime Holding, Inc. represented by Jeffrey Lim President of SM Prime Holding, Inc.

By May 24, 2022, the same council passed Resolution No. 18 (Ordinance/Resolution) that authorizes the granting of a Special Use Permit for the Exclusive Use of the Proposed Sorsogon Grand Transport Terminal.

Again on the same date, the Sangguniang Panglungsod passed Resolution No. 181 granting the authority to City Mayor Ma. Ester Hamor to enter into negotiations with SD for the establishment of the SITEX and to sign a Memorandum of Agreement wherein the Mayor entered into negotiations with the representative of SM on the establishment of SITEX followed with the concurrence of the city council to enter into a Memorandum of Agreement with SM for the establishment and operation of SITEX.

The Provisions of MOA

The MOA consisted of six pages covering seven sections that identified 11,537.65 square meters as the area for the grand central transport terminal which will be constructed by SM. It also covers the construction of certain facilities inside the project.

That the construction and development of the terminal shall be completed within the period of six months following the execution of the agreement and the issuance of an ordinance ratifying the Agreement by the City Council.

Hard Points of the MOA

In Section 2, it said that “Upon rescission (An equitable remedy which allows a contractual party to cancel the contract Ed.) of this Agreement, the use and the fruits of the Property, its Structures, Facilities and Improvements shall revert to SM. While Section 3 states that “The operation, management and administration of the SITEX shall be the primary responsibility and prerogative of SM.

Also included is the miniscule percentage of 5% that the City government will receive from SM annual revenue “exclusively” from the transport terminal operations. Income derived from the stalls and other revenues is not included in the 5%.

Another provision forming part of the warranties by the city government under the Agreement that “ should the city decide to enter into an agreement for the establishment and/or operation of a terminal within the city during the effectivity of the Agreement. The LGU shall first offer such opportunity to SM prior to soliciting any proposal from other private entities…” and the City through the Sangguniang Panglungsod will not promulgate any ordinance or resolution which will directly or indirectly curtail or adversely affect the operation of SITEX.

The grant to SM of all tax incentives/exemptions for their SITEX investment.

Another provision in the Agreement “ upon its ratification and approval, shall be valid and binding between the Parties, it shall continue to be in full force and effect for a period of twenty-five(25) years from the first day of operation of the SITEX. Said period shall be renewable for another twenty-five(25)years, subject to the mutual agreement of the Parties”

The Non-Assignment clause states “ No Party shall assign this Agreement or any portion thereof to a third party without the prior written consent of the other, except that SM may validly assign its rights and /or subcontract its obligations hereunder without prior written approval, Provided, That the said assignee shall continue to be liable for its obligations hereunder…”

Concessions of Sorsogon City to SM Prime Hoilding Inc.

The operation, management and administration of the SITEX shall be the primary responsibility and prerogative of SM as stated in Section 3 was advanced for SM Prime Holding, Inc. may do whatever it may want in operating SITEX. The use of the word prerogative binds the City government to agree on the management and operation of the terminal.

The city council failed to examine the feasibility studies regarding the investment in the terminal and the revenues derived from it since the 5% annual revenue was not estimated in pesos but was ultimately accepted. If only the then 7^th city council emboldened to analyze the actuarial computation of the income derivable from the terminal operations the 5% is a low projection. This can be seen as disadvantageous to the government.

Forming part of the warranties of the City government is the provision favoring SM in the event that the city decides to enter into an agreement in the establishment and/or operation of a terminal within the city while the contract is effective, such opportunity will be first offered to SM before any proposal will be offered to any private entities. It clamped the city government for the next twenty-five years with SM not rationalizing possible population and economic growth in other areas of the city that may need a transport terminal. Even the ants will dislike this sweetener.

, except that SM may validly assign its rights and /or subcontract its obligations hereunder without prior written approval, Provided, That the said assignee shall continue to be liable for its obligations hereunder…” This is the reason why the operation of the Sorsogon Integrated Terminal Exchange is operated by Parks Solutions. Park Solutions for the longest time been partnering with SM Prime Holding in the operation of a transport terminal within its premises. The clause re-iterates part of the provision of Section 3 of the Memorandum.