CJHDevCo says it is ready to rescind contract with BCDA

Camp John Hay Development Corp. (CJHDevCo) is ready to rescind its contract with the Bases Conversion Development Authority (BCDA) if the BCDA continues to refuse to abide by its contractual obligations with CJHDevCo.

According to lawyer Ma. Georgina A. Alvarez, CJHDevCo senior vice president for legal and corporate services, rescinding the contract, however, would be the last resort in a worst case scenario.

In the meantime, though, CJHDevCo is still willing to try arbitration to resolve its dispute with BCDA.

In a suit filed before the Philippine Dispute Resolution Center, Inc. at Pasig City last Friday, May 13, CJHDevCo wants BCDA to honor its contractual warranties or pay CJHDevCo P10.9 billion in damages.

Primarily, CJHDevCo wants BCDA to abide by its promise of granting tax incentives to CJHDevCo.

Following a Supreme Court ruling which effectively removed the grant of tax incentives, CJHDevCo faces the possibility of paying up to P5 billion in taxes to the government.

The P5 billion is based on an estimate made by the accounting firm SGV. CJHDevCo has an outstanding tax obligation of P2.8 billion since 2003 and an additional P2.1 billion is estimated following the SC ruling.

CJHDevCo wants BCDA to abide by its enticements back in 1996 whereby developers of Camp John Hay would only have to pay a five percent tax in lieu of all taxes.

CJHDevCo took up the offer and has since invested P2.6 billion to develop the former US military leisure facility in Baguio City.

However, CJHDevCo has also had problems in meeting its rental obligations to BCDA.

CJHDevCo has been trying to restructure some P1.08 billion in back rental, although the BCDA figure places the amount at P2.1 billion.

According to BCDA president and chief executive officer Narciso Abaya Jr., CJHDevCo had stopped its rental payments for the Baguio property in December 2003 after the Supreme Court ruled that CJHDevCo was not entitled to incentives.

The BCDA and CJHDevCo had reached a second debt restructuring agreement March 2003 and CJHDevCo was able to make a payment in July 2003.

However, following the SC decision in October 2003, CJHDevCo stopped rental payments anew to BCDA.

CJHDevCo had first sought a debt restructuring of its rental/lease payments to BCDA in 1999 with the original amount involved of P425 million.

However, by 2002, CJHDevCo had started defaulting on its payments until the back rental involved ballooned to P1.1 billion.

The second restructuring in March 2003 covered the P1.1-billion back rental.