Andales warns of graft raps over Carbon JVA

CEBU, Philippines — Cebu City officials could face graft charges after the Commission on Audit (COA) flagged multiple deficiencies in the joint venture agreement (JVA) between the city government and Megawide Construction Corp., including the non-remittance of the city's guaranteed annual share, allegedly disadvantageous provisions, and millions in unpaid stallholder obligations, Councilor Sisinio Andales warned.

In a privilege speech before the City Council, Andales cited COA's 2025 Annual Audit Report, saying it exposed lapses that undermined the city's fiscal interests and could expose responsible officials to liability under Republic Act 3019, or the Anti-Graft and Corrupt Practices Act.

“The collections averaging P80 million annually remain above the P50 million guaranteed shares throughout five years, which have not been remitted to the city of Cebu,” Andales declared.

He said the audit showed a pattern of governance failures that weakened Cebu City's control over one of its largest economic enterprises.

“The report of COA showed a disadvantageous pattern to the city of Cebu and undermine its fiscal autonomy, management of economic enterprises wherein the officials of the city of Cebu may be charged for graft and corrupt practices under Republic Act 3019 as amended, for grossly causing undue injury to the city of Cebu,” Andales stressed.

Andales reminded fellow councilors that the JVA for the Carbon Public Market redevelopment was approved in January 2021 and signed by then mayor Edgardo Labella.

A supplemental agreement approved in June 2022 increased Megawide's investment from P5.5 billion to P8 billion and authorized the company to collect revenues from redevelopment components, including the public market.

According to Andales, the arrangement effectively ceded too much authority to the private partner.

“We gave them wide discretion to impose higher rental rates, to enter into lease and outsourcing agreements, to invite investors to form consortiums—all to the prejudice of the city government,” he said.

The councilor also cited COA's finding of more than P5 million in unpaid rentals, surcharges and garbage fees owed by 188 delinquent stallholders.

“This compounds the city’s financial losses,” Andales stressed, adding that the absence of lease contracts since 2017 had deprived the city of the legal basis to compel payment.

Andales proposed requiring the Office of the Mayor, the JVA Selection Committee and the City Treasurer's Office to submit all revenue-sharing records from 2022 onward. He also sought the creation of a special review committee composed of councilors, technical experts and vendor representatives to recommend amendments to the JVA.

He further urged the City Treasurer's Office and the Cebu City Markets Authority to strictly enforce lease agreements against delinquent stallholders, including the possible termination of stall assignments and disqualification of violators.

Councilor Joel Garganera acknowledged COA's observations but disputed the interpretation of the revenue figures cited by Andales.

“When we talk about P80 million, that’s gross, and all of it goes to the coffers of the city—none goes to them,” Garganera explained.

He maintained that Megawide had not collected payments directly from market vendors.

“Wa pa gyud sila kakolekta sa mga vendors,” he added, explaining that the revenues had instead been used to cover maintenance, labor, electricity and other operating expenses.

Garganera also questioned the need to establish another review body, noting that previous committees had already been formed but produced little progress.

Councilor Alvin Arcilla likewise said responsibility for collecting unpaid rentals rests with the Cebu City Markets Authority, which has the authority to approve or revoke stall permits.

He said the existing rules are sufficient and that the real problem lies in enforcement rather than the absence of policies.

Despite the reservations raised during deliberations, the City Council approved Andales' resolution.

COA AUDIT FINDINGS

COA's 2025 audit report identified several weaknesses in the implementation of the Carbon Public Market redevelopment project, raising concerns over revenue collection, contract enforcement, revenue-sharing arrangements and compliance with national public-private partnership guidelines.

Among the findings, COA reported P5,072,450.78 in unpaid rentals, surcharges and garbage fees involving 188 stallholders. Warwick Barracks accounted for P2,797,309.24, followed by Freedom Park with P1,014,839.60, Unit I with P553,709.25, Unit II with P546,024.14 and Unit III with P160,568.55.

The audit noted that some accounts had remained unpaid for as long as two years, while others carried forward outstanding balances without adequate documentation.

The City Treasurer's Office told auditors that demand letters had been sent only to some delinquent stallholders because many could no longer be located. COA said the problem was aggravated by the absence of an updated master list and a lack of reconciliation with records of the Office of the City Markets.

COA also found that no lease contracts had been executed since 2017 despite the Cebu City Market Code requiring renewable two-year lease agreements. The audit said the lapse weakened the city's legal position in collecting unpaid obligations and affected its cash flow.

The audit further questioned the financial basis for the supplemental JVA signed in 2022, which guaranteed the city at least P50 million annually, subject to a 10-percent escalation beginning in the 11th year.

According to COA, the city failed to provide a financial evaluation, valuation of contributed assets or a value-for-money analysis to justify the guaranteed amount.

Historical records showed Carbon Market generated average annual revenues of P80.72 million from 2021 to 2025, already exceeding the guaranteed share. COA estimated that with the implementation of the 2023 Market Code, which increased stall rentals, garbage fees, parking charges and entrance fees, annual revenues could rise to P120.52 million, or 119.42 percent higher.

The audit said the absence of supporting financial studies raised concerns that the city could be foregoing higher revenues while granting exclusive rights over a major income-generating public asset.

COA also found that Cebu City allowed only 17 to 37 days for the competitive challenge process involving the original project proponent, well below the 120-day minimum prescribed under National Economic and Development Authority (NEDA) and Department of the Interior and Local Government (DILG) guidelines.

The audit said the shortened period undermined transparency and competitiveness in the award of the P8-billion redevelopment project and noted that Ordinance No. 2154, which governed the process, was inconsistent with national guidelines.

COA recommended that the City Legal Office justify the deviation in writing, review the risks to the city and amend the ordinance to align it with national standards.

The audit likewise noted that although the supplemental agreement required payment of the city's guaranteed annual share upon signing, the City Treasurer's Office admitted during the exit conference that no supporting documentation existed for the revenue-sharing arrangement and that collections remained under city control pending resolution.

The market overseer also informed auditors that the 2023 Market Code had yet to be fully implemented because consultations with stallholders on the new rates had not been completed.

COA recommended that the city establish a verifiable basis for the compensation structure, undertake a comprehensive financial analysis and seek technical assistance from the Public-Private Partnership Center to protect the city's financial interests. — /FPL (FREEMAN)