Government spends P45m on road to lot Arroyo sold for P42m

Second of Three Parts

SAN RAFAEL, BULACAN – This bucolic and remote municipality just about 60 kilometers north of Manila may not inspire dreams of wealth among many people, but municipal assessor Teresa Perez remembers a time when land developers flocked here and began driving up land prices. That was during the 1990s, she says, when the urban sprawl looked as if it would reach this area. But the investor interest was apparently short-lived, and now Perez says San Rafael’s real estate market is in another slump.

“Land prices are going down here in San Rafael,” she says. “No one’s buying, that’s why land owners are forced to lower their price just so they could sell.”

Last December, however, documents that found their way to Perez’s desk told of a land sale in Barangay Pulo, east of San Rafael, in which the purchase price was at least six times what Perez would have thought fair. But aside from the price tag of P41.5 million for a 29,630-square meter agricultural lot, what caught Perez’s attention was the name and signature of the seller: Jose Miguel Arroyo. President Gloria Macapagal Arroyo’s signature was also affixed in the deed of absolute sale, affirming her consent to the sale of the land to a Richard Lim of Quezon City.

“We do not know of any agricultural land here that sells at that amount,” says Perez, who has been with the municipal assessor’s office for the last two decades. “That’s definitely high.”

Astute investor

At the very least, the transaction may help explain the sudden increase in President Arroyo’s net worth from 2007 to 2008. Some may also take it as proof of the astute real estate acumen of the First Gentleman — whose clan’s landholdings are legendary – which could be partly why the First Family’s wealth has remained impervious to any economic slowdown. Yet from several angles, it is a deal that invites more questions than the answers it purportedly provides.

Just three months ago, President Arroyo declared a net worth of P144.5 million in her 2008 Statement of Assets, Liabilities, and Net Worth (SALN). Together with husband Jose Miguel ‘Mike’ Arroyo, she had become richer by P44.9 million, compared to her declared 2007 net worth of P99.6 million.

The SALN is one of the documents public officials and employees have an obligation to accomplish and make public under Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees. Theoretically, the information provided in the SALNs would help the public hold government officials accountable for any sudden increase in their wealth.

But like many government officials, President Arroyo provides few specific details in her SALNs. The media had to ask Press Secretary Cerge Remonde why her net worth rose so much between 2008 and 2007, and received the explanation that the Arroyos had sold a three-hectare lot that was worth some P40 million.

True enough, the San Rafael, Bulacan property that Arroyo had listed consistently in her SALNs from 1995 onward was no longer in her 2008 SALN.

Profitable investment

Arroyo was still senator when she first declared the San Rafael property as among her real estate assets. According to her 1995 SALN, the property’s purchase price, as well as its then current fair market value, was P1.2 million.

The deed of absolute sale prepared for the transfer of ownership of the same 2.9-hectare property and certificate authorizing registration issued by the Bureau of Internal Revenue (BIR), however, show that Mike Arroyo had bought the property from a Leonardo de la Cruz at a considerably lower price: P100,000.

Getting all the paperwork done also seemed too slow, since both documents were issued on June 14, 1996, or two months after then Senator Arroyo subscribed and sworn to the information she declared in her 1995 SALN on April 17, 1996. This means that the property was still under the name of de la Cruz when Arroyo declared it in her SALN.

In any case, it would turn out to be a profitable investment. Beginning 1997 until 2007, Gloria Arroyo’s SALNs would peg the current fair market value of the San Rafael property at P4.7 million, or P159 per square meter. Given its acquisition cost of P3.37 per square meter or P100,000, the value of land had thus appreciated by over 4,600 percent. (See Table)

As it turned out, the price was to climb even higher. In 2008, the First Gentleman finally sold the lot at P1,400 per square meter, or for a total of P41,482,000. This is 400 times than the P100,000 the Arroyos paid for back in 1996, and also eight times higher than its latest recorded fair market value.

Current prices of agricultural lots in San Rafael, according to Perez, range from P100 to P250 per square meter, with properties located near the highway fetching top price. The San Rafael property is located at the foothills of the Sierra Madre, but assuming it was able to command a price of P250 per square meter, its total value would be P7,407,500.

The PCIJ tried to secure comments from the spokesperson of the First Gentleman, and was referred to Arroyo lawyer Ruy Rondain, who in turn promised to call. He has yet to do so as of press time.

A visit to the site, some 30 minutes from the municipal hall by car, reveals an unkempt lot, its unattractiveness made starker by a well-maintained property beside it, stocked with huge mango trees.

“Parang jungle,” says one resident in the area, referring to the lot that he says belongs to the Arroyos, apparently unaware that it had been sold. “We caught a big snake there the other day. It was fat; it ate one of our chicks.”

But another resident says part of the property the Arroyos used to own had been planted with 100 mango seedlings and 5,000 mahogany seedlings fairly recently. He adds that it was Bulacan Representative Lorna Silverio who paid for the seedlings because the president had “given” the legislator “big road projects.”

Conflict of interest?

PCIJ sought Silverio for comment, but she was out of the country. The Department of Public Works and Highways (DPWH) database, meanwhile, shows that five road projects worth P44.8 million in all were constructed in Barangay Pulo – which has a population of just a little more than 3,000 – from 2004 to 2007.

The projects were enrolled in the DPWH database of civil works contracts, which showed these to have involved the improvement and concreting of the Pulo-Tukod Road leading to the ex-Arroyo property.

The huge spending means that the DPWH infused P13,812 worth of projects per person in Pulo. The roads were connected to the next barangay, Tukod, which has 2,360 residents. In all, the five projects translate to a per capita spending by the DPWH of P7,997 in the two barangays – six times higher than the P1,437 the DPWH spends on average for every Filipino across the nation.

For sure, the road projects have made it easier to travel to and from the property. But they also may have exposed President Arroyo to a possible conflict-of-interest situation since they were approved and completed while she and her husband still owned the property.

Republic Act 6713 states that “conflict arises when a public official or employee is a member of a board, an officer, or a substantial stockholder of a private corporation or owner or has a substantial interest in a business, and the interest of such corporation or business, or his rights or duties therein, may be opposed to or affected by the faithful performance of official duty.”

In addition, the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) cites among the “corrupt practices of public officers” the act of “directly or indirectly requesting or receiving any gift, present, share, percentage, or benefit, for himself or for any other person, in connection with any contract or transaction between the Government and any other part, wherein the public officer in his official capacity has to intervene under the law.”

By all indications, the road projects helped push up the value of the ex-Arroyo lot. So did the seedlings supposedly paid for by Rep. Silverio, although when asked to appraise the value of the property including the new mango and mahogany plants, the municipal assessor’s office comes up with P7.7 million, or just P300,000 more than the estimated top price without these.

‘Good for mining’

When reached by PCIJ, however, the property’s buyer, Richard Lim, says he is more interested in what is under the ground. In an emailed response to PCIJ’s queries, Lim says that he had first heard about the property from a “geologist friend” who had apparently done a study on the area “showing its vast potential in mineral contents.”

Lim had dodged requests for a face-to-face interview, even after the PCIJ paid him a visit at his house in Quezon City.

In his email, Lim says that he was fully aware of the current market price of agricultural lands in San Rafael, but that the First Gentleman also knew of the mineral deposits in the property. “That is why he demanded a price high above its average,” Lim says.”(We) started haggling from market price till we reached the acquisition cost.”

Lim has paid some P42.3 million in the process of buying the land – P850,381 in documentary stamp and transfer taxes to the government and P41.5 million to the First Gentleman. Official records show that the First Gentleman paid P2.5 million of capital gains tax to complete the transaction.

According to Lim, an initial assessment of the property indicates an estimated reserve of 600,000 metric tons of pozzolan, 266,000 metric tons of silica, and 148,000 cubic meters of aggregates.

Engineer Leo Jasareno of the Mines and Geosciences Bureau describes pozzolan as a new generation raw material used in cement production. He says that Bulacan is one of the areas in the country where pozzolan is abundant, adding that this is why there are many cement plants in the province.

Last March, Lim filed an application for small-scale mining permit with the Bulacan Environment and Natural Resources Office (ENRO), which has yet to process it pending Lim’s completion of various requirements..

“There are great demands in cement production and big construction companies,” he says. “My calculation dictates that aggregates alone would easily cover the cost of my investment.”

Losing proposition?

The businessman says he expects to earn P13.5 million gross annually since small-scale mining only allows 50,000 metric tons of extracted minerals per year. By Lim’s estimates, he would be selling one metric ton of pozzolan at P270.

Because of the 50,000-metric ton annual limit for small-scale mining, it will take 12 years for all of the property’s estimated pozzolan reserve of 600,000 metric tons to be extracted.

Jasareno, who puts the current price of pozzolan at around P200 per metric ton, is not too enthusiastic over Lim’s business projections. “In the immediate term, it does not make sense,” he says. “It does not seem balanced, the way I see it, he might even be losing money if you would compare the purchase cost of the land and his immediate income in the first four years.”

A small-scale mining permit lasts for two years, and is renewable only for another two years. An individual is thus entitled to engage in small-scale mining for a maximum of only four years.

During the first four years or the maximum life span of Lim’s small-scale mining permit, the businessman would earn a gross estimate of P54 million at P13.5 million for 50,000 metric tons of pozzolan per year.

Jasareno says that assuming quarrying costs would amount to half of the gross earnings or P27 million, Lim’s net earnings would not cover what he paid for the land.

“His property (value) should be lesser than the gross sale,” Jasareno says, noting that in mining, the return of investment must not be lower that 15 percent. “Otherwise, if it’s lower, you should have not bought it for quarrying. You should have invested your money in other businesses.”

Jasareno also points out that 2.9 hectares is relatively small for quarrying since 20 hectares is the maximum area allowed in small-scale mining. “At the very least, the life of quarrying must be around 10 years to cover your investment,” he says. “So if you quarry and it’s small and might only take two to four years, it may not be enough to recover your investment.”

Jasareno admits, though, that the law does not prohibit a relative or business partner of Lim to continue and apply in his stead once he uses up his maximum four years to engage in small-scale mining on his property. Jasareno also says that Lim may have other plans for the property aside from mining.

That means Lim would need to fork out more money – considerable amounts of it, in fact. “He would have to spend for the rehabilitation of the land because he cannot just abandon it after mining,” says Jasareno. “After rehabilitation, it can be converted into a tree plantation. But that’s another investment. Before you can convert into tree plantation, you would need to spend again.” – PCIJ, August 2009