Bureau of Local Government Finance Opinion

March 20, 2001 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon. Rosenda Ann Ocampo Representative, 6th District, Manila House of Representatives Quezon City M a d a m : This has reference to your letter dated 6 September 2000, relative to your appeal in behalf of the two (2) Homeowner's Associations for reconsideration of the land valuation/purchase price as offered by the PNR Management. Based on the documents submitted, it appears that the subject property is owned by the Philippine National Railways (PNR). It pertains to that portion of the Guadalupe line located after Sta. Mesa Station up to San Juan river. The property has a total area of 9,076.29 square meters more or less. The inhabitants of the subject property organized two (2) homeowners' association, the COSHOWASSI Homeowner's Association' (COSHOWASSI) and the BACORBA Homeowner's Association (BACORBA). COSHOWASSI intends to purchase about 3,618.24 sq. in. while BACORBA will purchase about 5,458.08 sq. m. On 11 February 1991, the PNR Board of Directors approved the sale to the two (2) Associations. The price was pegged at P1,026.00 per sq. m. Both sales were under the Community Mortgage Program of NHMFC. The COSHOWASSI will acquire the property with the NHA as their originator. However, in the case of BACORBA, the City government of Manila expressed its willingness to shoulder the cost of the property in its behalf. Because of this development, on 21 April 1995, the PNR Management resubmitted the proposal of BACORBA to the Board because the originator would then be the City government of Manila. The price was recommended at P1,026.00/sq.m. The Board deferred action on the matter and directed PNR Management to reassess the price considering the gap of four years since it was approved by the Board. The PNR Management inquired from the Bureau of Internal Revenue (BIR) the zonal valuation of the subject property. The BIR Commissioner in a reply dated 28 November 1997 informed that the zonal value for the subject property is P5,500.00/sq. m. This is now the subject matter of your appeal for reconsideration. cHSIAC It is your contention that the zonal valuation for this specific PNR property is too high. It is stressed that although it is situated adjacent to a developed residential area, this particular stretch of PNR property is a right of way cutting through the residential area. The only access to the road is where city streets intersect the railroad tracks. Houses lined up the railroad tracks. Further, it is explained that there are other factors which if considered may justify the reduction of the zonal valuation of the subject property. We agree with the observation of the Commission on Audit (COA) in its letter dated 25 August 2000 addressed to your office, that inasmuch as the subject property is intended for socialized housing, the guidelines and procedure for equitable land valuation under R.A. 7279 (Urban Development and Housing Act of 1992) should be made the basis of the land valuation. Local Finance Circular No. 1-97 dated 16 April 1997 was issued by the Department of Finance to implement certain provisions of R.A. 7279 (Urban Development and Housing Act of 1992). Under Sec. 7 of the said Circular, downward adjustment factors may be applied to the market values of sites which are already occupied by program beneficiaries. Considering that the PNR property is intended for socialized housing, the provision is applicable provided that the property is considered "blighted land", as certified by the Local Government Unit (LGU) concerned through its assessor, in coordination with the National Housing Authority (NHA). In this connection, enclosed for your reference is a copy of Local Finance Circular No. 1-97 dated 16 April 1997 of the Department of Finance (DOF), which supplements Local Finance Circular No. 3-92 dated 11 September 1992 (copy also attached), also of the DOF, insofar as the valuation of lands for Socialized Housing is concerned. Section 7 of the abovementioned Local Finance Circular No. 1-97 is quoted hereunder: "Sec. 7. Determination of Market Values of 'Blighted Lands' . As supplement to Local Finance Cir cular No. 3-9 2 (Guidelines for Equitable Land Valuation for Socialized Housing), the market values of sites, which are already occupied by program beneficiaries, where the land is considered 'blighted land', as certified by the LGU concerned thru its assessor, in coordination with the National Housing Authority , shall be computed primarily on the basis of the land market value determined or arrived at in accordance with Section 3(1) of the said Local Finance Circular, which states: 'Section 3. Land Valuation. . . . '(1) As a general rule, the zonal. value shown in the approved zonal valuation of real properties for the area or locality applicable to the corresponding period shall be used as the basis for computing the fair market value of the subject land. STaCIA 'xxx xxx xxx.' "Thereupon, the market value of 'blighted land' may be determined by applying any or a combination of the following downward adjustment factors: "(a) Depth or Distance from main roads or streets by using the 'stripping method', where a 'strip' shall consists of not less than twenty (20) meters from the main road or street for the first 'strip' and not less than ten (10)meters for 'each succeeding strip' . . . 20% for the first 'strip' and 10% for every 'strip' "(b) Low or sunken area easily flooded by high tides or occasional rains . . . not more than 20% "(c) Congestion, or inaccessibility of the area even by non- motorized pedicabs or animal driven vehicles like 'calesas' . . . not more than 10% "(d) Unsanitary or squalid condition of the area due to lack of basic facilities such as water supply and solid waste disposal systems, streetlights, etc. . . . not more than 1.0% "Altogether, the resulting or final market value of any 'blighted' land or area shall not be less than thirty percent (30%) nor more than sixty percent (60%) of the market value of such land or area as may be initially arrived at as discussed in the foregoing provisions of this Section. " The resulting or final market values of 'blighted' lands or areas shall be determined by the City Assessor, the Municipal Assessor in the case of municipalities within the Metropolitan Manila Area, and by the Provincial Assessor in the case of municipalities outside Metropolitan Manila . At his discretion, the City Mayor, the Municipal Mayor of the municipality within Metropolitan Manila, and the Provincial Governor, as the case may convene the local Appraisal Committee to review the valuation arrived at by the Assessor concerned for the Committee's comments and recommendation." (emphasis supplied) Accordingly, the City of Manila, thru its Assessor, in coordination with the National Housing Authority (NHA), should determine whether the subject property may be considered " blighted " as defined under Section 2(g) thereof, which provides: "Section 2. Definition of Terms. As used herein, the following terms shall be construed to mean "xxx xxx xxx. "(g) 'Blighted areas' refer to the areas where 50% of the structures are dilapidated, obsolete and unsanitary, tending to depreciate the value of the land and prevent normal development and use of the area. The blighted status of the area shall be certified by the LGU concerned thru its assessor ." (emphasis supplied) If the subject property falls under the "blighted" category, its valuations by the City Assessor of Manila should, therefore, consider the adjustment factors as prescribed under the abovecited Section 7 of the said Local Finance Circular, which may be reviewed by the City Appraisal Committee of the said city. cTAaDC It is hoped that the information herein provided will be of assistance to your cause. Very truly yours, (SGD.) BENJAMIN A. GERONIMO Executive Director