THE House of Representatives on Monday approved on third and final reading the bill granting San Miguel Corp. (SMC) a franchise for the construction of the “New Manila International Airport” in Bulacan.
Voting 218 affirmative, 6 negative, with two abstentions, House members passed House Bill 7507 granting San Miguel Aerocity Inc. a franchise to establish the domestic and international airport in the Municipality of Bulakan, and develop an adjacent airport city.
The bill will now be transmitted to the Senate for its own deliberations.
To be built on a 2,400-hectare property in Bulakan, Bulacan, just north of Metro Manila, the $15-billion airport complex will have four runways, eight taxiways and three passenger terminals. It also has provisions for future expansion to sport six runways and to accommodate 200 million passengers per year.
It is also expected to help raise tourism levels to 30 million visitors annually, generate over a million direct and indirect jobs, and contribute roughly P900 billion annually to Philippine GDP by 2025.
Moreover, the bill mandates the grantee to secure the appropriate permits and licenses for the construction, development, establishment, operation and maintenance of its airport properties or facilities from the Civil Aviation Authority of the Philippines (CAAP).
The bill also requires the grantee to commence construction of the airport within one year from the effectivity of the proposal, complete the construction for 10 years and to commence operations within one year from the approval of the operating permit from the CAAP.
50-year franchise
It also entails the grantee to turn over the ownership of the airport to the government agency or local government unit concerned after the expiration of the 50-year franchise period.
The bill also reserves the right of the President of the Philippines to temporarily take over and operate the airport properties or facilities of the grantee, to temporarily suspend the operation of the airport in the interest of public safety, security and public welfare, or to authorize the temporary use and operation thereof by any agency of the government in times of war, rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order.
It prohibits the grantee from leasing, transferring, selling or assigning the franchise or the controlling interest thereof without the prior approval of the Congress of the Philippines. It requires the grantee to offer to Filipino citizens at least 30 percent of its outstanding stock in any security exchange in the Philippines or through other methods of encouraging public participation by citizens and corporations operating public utilities as allowed by law.
The measure also provides the grantee the authority to either purchase or negotiate any private lands for the acquisition and consolidation of lands for the development of the airport and acquisition of right of way to the airport.
During the term of the franchise and after a competent authority determines the grantee has fully recovered its investment cost, the grantee shall be entitled to generate income from the Airport City equivalent to a project Internal Rate of Return (IRR). If the Airport City IRR exceeds 12 percent per annum, the grantee shall remit to the national government.
Under the bill, during the 10-year construction period, the grantee shall be exempt from any and all direct and indirect taxes and fees of any kind, nature or description, which emanates exclusively from the construction, development, establishment and operation of the airport and airport city, including income taxes, value-added taxes, percentage taxes, excise taxes, documentary stamp taxes, customs duties and tariffs, taxes on real estate, buildings and personal property, business taxes, franchise taxes, and supervision fees, levied, established or collected, or may be levied, established or collected, by any city, municipal, provincial or national authority.
After the 10-year construction period and during the remaining term of the franchise, the grantee shall be exempt from income taxes and taxes on real estate, buildings and personal property, levied, established or collected, or may be levied, established or collected, by any city, municipal, provincial or national authority.
However, such exemption shall expire as soon as it is determined by competent authority that the grantee has fully recovered its investment cost and expenses on the airport and on the Airport City, including financing and borrowing expenses. Then, the grantee shall be subjected to all taxes under the National Internal Revenue Code and Customs Modernization and Tariff Act.
Forgone revenue
House Committee on Ways and Means Chairman Joey Sarte Salceda said his committee is looking at forgone revenues of around P38 billion in national revenues from the period of construction, and around P1.5 billion to P2 billion annually once the airport begins to operate.
“Let me remind you, however, that most of this is notional. If the airport doesn’t happen, much of this would not be raised in the first place,” he said.
“Considering the P740 billion in new direct construction spending that this airport will create, the appreciation in real property values in the region, the new jobs and downstream development that the new airport will create, and the returns to government above the 12-percent profit margin, the fiscal cost is worth it. We can’t build it ourselves with that fiscal cost, for sure,” he added.
Earlier, Finance Assistant Secretary Teresa Habitan rejected the proposal to grant tax incentives for the proposed Bulacan airport.
“Typically for unsolicited bid under the BOT [Built-Operate-and Transfer] law, it says that government is now allowed to give subsidy, or guarantee or even equity. We are not supportive of giving the corporation or the unsolicited bidder any tax exemption and we have not done that in the past for all other PPP projects that have been approved and now being implemented,” Habitan said.