Expropriations in local PPPs

Expropriations in local PPPs

CAN a local government unit (LGU) expropriate private property and contribute the use of that property in a public-private partnership (PPP)? Yes!

Eminent domain defined. This power, also referred to as the power to expropriate, is delegated to all LGUs. Under the 1991 Local Government Code, an LGU may, through its local chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose or welfare for the benefit of the poor and the landless, upon payment of just compensation to be determined by the courts.

Same purpose as PPPs. Eminent domain and PPPs share the same objective, i.e., the public good, purpose and welfare. All local PPP projects, which are projects undertaken through the collaboration between an LGU and a PSP, must redound to benefit of the public.

Possible objects of expropriation for PPPs. An LGU monorail, socialized housing, bridge, road, expressway, fiber optic, realty redevelopment or expansion, power plant or sewerage project, may require the use of land which neither the LGU nor the PSP owns or has beneficial use over.

The LGU, if it so desires, may have to take the properties of others, if the owners are not willing to sell, so that the project
may happen.

Show genuine necessity. The LGU must be able to establish the genuine necessity of the taking. The regional trial court, at the first instance, must accept the indispensability of the property, i.e., no-project-if-no-expropriation-of-that-property.

LGU must be contractually bound. The exercise of this power must be incorporated in the PPP contract. This may be one of the post-award LGU obligations or conditions precedent, i.e., if the LGU does not expropriate, there will be no project or no notice to proceed, unless there is a substitute obligation.

Is this allowed under PPP laws? Yes. Expropriating land, under the BOT law, may take the form of “cost sharing” since the LGU provides for access infrastructure or right-of-way or “direct government subsidy” since the LGU shoulders a portion of the project cost or contributes the expropriated property to the project. In a joint venture under its PPP or JV ordinance, the LGU may contribute the expropriated property and on this basis, be entitled to a share in the revenues or profit. The template PPP ordinance of the Department of the Interior and Local Government categorically permits this when it provides that the LGU in a PPP may exercise police power, perform devolved powers and expropriate property.

Reimbursed or not. This option lies with the LGU. The PPP contract may provide that the LGU gets reimbursed or not by the PSP. If the LGU recovers what it compensates the private landowner, then the LGU only contributes the exercise of the power; if not, then the LGU contributes the exercise of the power and the consideration or purchase price, in which case, it has a greater share from the proceeds of the PPP.

Under the first scenario, the counterpart obligation of the PSP is to pay the LGU. The LGU will normally place the funds in a trust/special account.

So, let us do it.

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