Professional Documents
Culture Documents
PD 198 Provincial Water Utilities Act of 1973 Complete
PD 198 Provincial Water Utilities Act of 1973 Complete
table of contents
SEC TION 1
SECTION
Presidential Decree 198 3
SEC TION 2
SECTION
Local W ater Utilities
Water
A dministr
Administr ation LLaaw
dministration 16
SEC TION
SECTION 3
Presidential Decree 768 24
SEC TION 4
SECTION
Letter of Instructions No. 683 35
SEC TION 5
SECTION
Letter of Instructions No. 700 37
SEC TION 6
SECTION
Presidential Decree 1479 39
SEC TION 7
SECTION
Letter of Instructions No. 744 42
SEC TION
SECTION 8
Executive Order No. 68 44
SECTION 9
SECTION
Supr eme Court Ruling on W
Supreme ater
Water
Districts as Government Owned
and Controlled Corporations 45
SEC TION 1100
SECTION
Executive Order No. 286 57
SEC TION 1111
SECTION
Executive Order No. 279 63
Implementing Rules & Regulations
of Executive Order No. 279 71
SECTION 12
SECTION
Republic A ct No. 9286
Act 79
SECTION 13
SECTION
Executive Order No. 387 81
SECTION 14
SECTION
Executiv
Executivee Or der No. 42
Order 4211 83
SECTION 15
SECTION
Department of Justice Ruling on
Water District TTax
ax Exemption 89
2
amended pd 198 and other related issuances
section 1
MALACAŃANG
MANILA
3
amended pd 198 and other related issuances
RA TIONALE
RATIONALE following measures have been decreed,
ordered and made as part of the law of the
One of the prerequisites to the orderly and land.
well-balanced growth of urban areas is
an effective system of local utilities, the
absence of which is recognized as a TITLE I
deterrent to economic growth, a hazard
to public health and an irritant to the PRELIMINAR
PRELIMINARYY PRO VISIONS
PROVISIONS
spirit and well being of the citizenry;
SEC. 1. Title. This Decree shall be known
Domestic water systems and sanitary and referred to as the “Provincial Water
sewers are two of the most basic and Utilities Act of 1973.”
essential elements of local utility systems, SEC. 2. Declar ation of PPolic
Declaration olic
olicyy. The
which, with a few exceptions, do not Creation, operation, maintenance and
exists in provincial areas in the expansion of reliable and economically viable
Philippines; and sound water supply and wastewater
disposal systems for population centers of
Existing domestic water utilities are not the Philippines in hereby declared to be an
meeting the needs of the communities they objective of national policy of high priority.
serve; water quality is unsatisfactory; For purposes of achieving said objectives, the
pressure is inadequate and reliability of formulation and operation of independent,
service is poor, in fact many persons receive locally controlled public water district is found
no piped water service whatsoever; and declared to be the most feasible and
favored institutional structure. To this end, it
Conditions of service continue to worsen is hereby declared to be in the national interest
for two apparent reasons, namely: (1) that that said district be formed and that water
key elements of existing system are supply wastewater disposal system be
deteriorating faster than they are being operated by and through such district to the
maintained or a placed, and (2) that they greatest extent practicable. To encourage the
are not being expanded at a rate sufficient formulation of such local water districts and
to match population growth; and the transfer thereto of existing water supply
and wastewater disposal facilities, this Decree
Local water utilities should be locally- provides by general act the authority for the
controlled and managed, as well as have formation thereof, on a local option basis. It
support on the national level in the area is likewise declared appropriate, necessary
of technical advisory service and and advisable that all funding requirements
financing. for such local revenues, should be channeled
through and administered by an institution
By Proclamation No. 1081 dated on the national level, which institution shall
September 21, 1972, and General Order No. 1 be responsible for and have authority to
dated September 22, 1972, as amended, the promulgate and enforce certain rules and
4
amended pd 198 and other related issuances
regulations to achieve national goals and the the initial appointments made by the governor
objective of providing public waterworks in whose province the greatest number of
services integration or joint investments and service connections exists. (As amended by
operations whenever economically warranted Sec. 1, PD 768).
and to assure the maintenance of uniform (c) Administration. The Local Water
standards, training of personnel and the Utilities Administration chartered in Title III
adoption of sound operating and accounting of this Decree.
procedures. (d) NEDA. The National Economic and
SEC.3. Definitions. As used in this Development Authority. (Note: This paragraph
Decree, the following words and terms shall should properly have been deleted).
have the meanings herein set forth, unless a (e) Board or Board of Directors. The
different meaning clearly appears from the Board of Directors of a district.
context. The definition of a word or term (f) Contracts. All agreements, including
applies to any its variants. leases, conveyances and obligations
(a) Act. This Provincial Water Utilities Act (f) District. A local water district formed
of 1973. pursuant to Title II of this Act.
(b) Appointing Authority. The person (h) Local Water Utilities. Any district, city,
empowered to appoint the members of the municipality, province, investor-owned public
Board of Directors of a local water district utility or cooperative corporation which owns
depending upon the geographic coverage and or operates a water system serving an urban
population makeup of the particular district. center in the Philippines, except that said term
In the event more than seventy-five percent of shall not include the Metropolitan Waterworks
the total active water service connections of a and Sewerage System (MWSS) or any system
local water district are within the boundary operated by the Bureau of Public Works as
of any city or municipality, the appointing successor to the Walls and Springs
authority shall be the mayor of the city or Department of the National Waterworks and
municipality, as the case may be; otherwise, Sewerage Authority.
the appointing authority shall be the governor (I) Person. A natural person, corporation,
of the province within which the district is cooperative, partnership, association, city,
located: Provided, That if the existing municipality or other juridical entity.
waterworks system in the city or municipality (j) Property. All real and personal
established as a water district under this property, including but not limited to: water,
Decree is operated and managed by the water rights, works, easements, rights of way.
province, initial appointment shall be extended (k) Street. Includes road, alley, avenue,
by the governor of the province. Subsequent and highway of other public way.
appointments shall be as specified herein. (I) Trustees or Board of Trustees. The
If portions of more than one province are Board of Trustees of the Administration.
included within the boundary of the district,
and the appointing authority is to be the
governor, then the power to appoint shall
rotate between the governors involved with
5
amended pd 198 and other related issuances
appointment from the list submitted on or secretary of the district for nominations and
before December 15. In the event the within 30 days thereafter a list of nominees
appointing authority fails to make his shall be submitted to the appointing authority
appointments on or before December 15, for his appointment of a replacement directors
selection shall be made from said list of from the list of nominees. In the absence of
nominees by majority vote of the seated such nominations, the appointing authority
directors of the district constituting a quorum. shall make such appointment. If within 30
Initial nominations for all five seats of the days after submission to him of a list of
board shall be solicited by the legislative body nominees the appointing authority fails to
or bodies at the time of adoption of the make an appointment, the vacancy shall be
resolution forming the district. Thirty days filled from such list by a majority vote of the
thereafter. A list of nominees shall be remaining members of the Board of Directors
submitted to the provincial governor in the constituting a quorum. Vacancies occurring
event the resolution forming the district is by within the last six months of an unexpired
a provincial board, or the mayor of the city or term shall also be filled by the Board in the
municipality in the event the resolution above manner. The director thus appointed
forming the adoption of the district is by the shall serve the unexpired term only. (As
city or municipal board of councilors, who amended by Sec. 12. PD 768)
shall select the initial directors there from SEC. 13. Compensation
Compensation. Each director
within 15 days after receipt of such shall receive per diem, to be determined by the
nominations. Board, for each meeting of the Board actually
SEC. 11. Term of Office
Office.. Of the five initial attended by him, but no director shall receive
directors of each newly formed district, two per diems in any given month in excess of the
shall be appointed for a maximum term of equivalent of the total per diem of four
two years, two for a maximum term of four meetings in any given month. No director shall
years, and one for a maximum term of six receive other compensation for service to the
years. Term of office of all directors in a given district.
district shall be such that the term of at least Any per diem in excess of One Hundred
one director, but not more than two, shall Fifty pesos (P150.00) shall be subject to
expire on December 31 of each even-numbered approval of the Administration. In addition
year. Regular terms of office after the initial thereto, each director shall receive allowances
terms shall be for six years commencing on and benefits as the Board may prescribe
January 1 of odd-numbered years. Directors subject to the approval of the Administration.”
may be removed for a cause only, subject to (As amended by Sec. 7. PD 768; R.A. 9286)
review and approval of the Administration. SEC. 14. Per sonal Liability
ersonal Liability.. No director
(As amended by Sec. 5, PD 768) may be held to be personally liable for any
SEC. 12. Vacancies
acancies.. In the event of a action of the district.
vacancy in the Board of Directors occurring
more than six months before expiration of any Chapter 1V - The Board
director’s term, the remaining directors shall SEC. 15. Organizational Meeting. The
within 30 days, serve notice to or request the Board shall hold its first meeting as soon as
8
amended pd 198 and other related issuances
practicable after appointment of the first practicable, prescribe and define by resolution
directors, and not later than 45 days after a system of business administration and
formation of the district. At said first meeting accounting for the district, which shall be
of the district Board, and thereafter at the patterned upon and conform to the standards
first meeting of each odd-numbered years, the established by the Administration. Auditing
Board shall elect a chairman, a vice-chairman, shall be performed by a certified public
a secretary and a treasurer. Such secretary accountant not in the government service. The
and treasurer may, but need not be members Administration may, however, conduct annual
of the Board, and the offices of the secretary audits of the fiscal operations of the district
and treasurer may be held by the same person. to be performed by an auditor retained by the
SEC. 16. Quorum. A majority of the Administration. Expenses incurred in
Board present in person shall constitute a connection therewith shall be borne equally
quorum for the transaction of business; by the district and the Administration. (As
Provided, however, That no resolution or amended by Sec. 8, PD 768)
motion shall be adopted or become effective SEC. 21. Depository
Depository.. The district’s
without the affirmative vote of a majority of depository shall be the Philippine National
the authorized number of members of the Bank, unless use of such bank is impractical:
Board. Provided, however, That any and all reserves
accumulated for capital improvement may be
Chapter V - PPoowererss and Duties of the Boar
Boardd deposited with the Administration.
SEC. 17. Performance of District SEC. 22. Contracts. All contracts of the
Powererss. All powers, privileges, and duties of district shall be entered into by or pursuant to
the district shall be exercised and performed authority of the Board: Provided, however,
by and through the Board: Provided, however, That the Board may by resolution delegate
That any executive, administrative or and redelegate to officers or agents of the
ministerial power shall be delegated and district under conditions and restrictions as
redelegated by the Board to officers or agents shall be fixed by the Board, the power to bind
designated for such purpose by the Board. the district by contract.
SEC. 18. Functions Limited to PPolicolicy-
olicy-
Making. The function of the Board shall be to Chapter VI - Officers and Employees
establish policy. The Board shall not engage SEC. 23. The Gener al Manager
General Manager.. At the
in the detailed management of the district. first meeting of the Board, or as soon
SEC. 19. By Laws
Laws. At its first meeting, thereafter as practicable, the Board shall
the Board shall adopt, and may thereafter appoint, by a majority vote, a general manager
from time to time amend by-laws for the and shall define his duties and fix his
operation of business and affairs of the Board compensation. Said officer shall not be
and the district. By-Laws may not be amended removed from office, except for cause and after
without 30 days public notice to that effect, due process. (As amended by Sec. 9, PD 768.
and a public hearing held. Also see amendment under R.A. 9286.)
SEC. 20. System of Business SEC. 24. Duties. The duties of the General
Administration. The Board shall, as soon as Manager and other officers shall be determined
9
amended pd 198 and other related issuances
and specified from time to time by the Board. A district may provide service to public
The General Manager, who shall not be a faucets or hydrants provided that it shall first
director; shall have full supervision and control have executed an application and service
of the maintenance and operation of water contract with the Government entity to
district facilities, with power and authority establish or maintain such faucets or hydrants
to appoint all personnel of the district: within the district. The district will be paid
Provided, That the appointment of personnel for such service in the same manner as regular
in the supervisory level shall be subject to domestic service and pursuant to the adopted
approval by the Board. (As amended by Sec. rules and regulations of the district.
10, PD 768) Any district holding a valid Certificate
of Conformance or a Conditional Certificate
Chapter VII - PPoowererss of Districts of Conformance from the Administration shall
SEC. 25. Authorization. The district may be exempt from regulation by the Public
exercise all the powers which are expressly Service Commission or its successors. (As
granted by this Title or which are necessary, amended by Sec. 5, PD 1479)
implied from, or incidental to the powers and SEC. 28. Sewerage. A district may
purposes herein stated. For the purpose of require, construct, operate and furnish
carrying out the objectives of this Act, a district facilities and services, within or without the
is hereby granted the power of eminent district, for the collection, treatment and
domain, the exercise thereof shall, however, disposal of sewerage, waste, and storm water.
be subject to review by the Administration. The district may only furnish such service
(As amended by Sec. 4, PD 1479) outside the district by means of facilities
SEC. 26. Acquisition of W aterw
Waterw
aterworkork
orkss. A designed primarily to serve inside the district.
district may purchase, construct, or otherwise Upon providing a sewer system in any area of
acquire works, water, water rights, land rights the district, the district may acquire all
and privileges useful or necessary to convey, buildings used by human beings to be
supply, store, collect, threat, dispose of or connected to the sewer system within such
make other use of water for any purpose reasonable times as may be prescribed by the
authorized by this Title. In the acquisition of district, provided that the property upon
water or water rights the district shall which such building to be connected stands is
cooperate with existing agencies of the located within 35 meters of an existing main
government of the Philippines. (As amended of the district’s sewer system. The district
by Sec. 5, PD 1479) may declare the further maintenance or use
SEC. 27. Sale of W ater
ater.. The district shall
Water of cesspools, septic tanks, or other local means
have the power to sell water pursuant to of sewerage disposal in such area to be a
generally applicable rules and regulations, to public nuisance and, after notice in writing of
any person for use within the district. As a at least 10 days, deprive said property owner
condition of such sale, the district may require of any and all services provided by the district,
the filing of a written application for service, which sanction may be co-extensive with the
payment of established charges or deposits period during which the property owner
and execution of a water service contract. persists in refusing to connect with the
10
amended pd 198 and other related issuances
district’s sewer system. (As amended by Sec. adversely affect or impair the fiscal position
5, PD 1479) and operations of the district as verified by
SEC. 29. Rights of W Waay. The right of the Administration. (As amended by Sec.11,
way is hereby granted to locate, construct PD 768: Sec. 5, PD 1479)
and maintain works of the district on any (c) MWSS Agreement. In the event the
land which is now, or hereafter may be, owned city, municipality or province has not reached
by the Government of the Philippines or by agreement with the Metropolitan Waterworks
any of its political subdivisions, and/or and Sewerage System pursuant to Section
instrumentalities. A district may construct 15 and 17 of R.A. 6234, a district, may, with
any works along, under or across any street, the consent of the local government, act for
watercourse, railway, or conduit in any and in behalf of the local interests in
manner, which will afford security for life and negotiating and executing such contract for
property. Provided, That in planning any such final settlement of the consequences of
works, the environmental aspects shall also MWSS involvement in the operation of the
be considered. (As amended by Sec. 5, PD 1479) water system.
Sec. 30. Contr acts
acts.. A district shall have
Contracts SEC. 31. Pr otection of W
Protection ater
aterss and
Water
the power to enter into contracts with any Facilities of District. A district shall have the
person for the purpose of performing any right to:
function of the district: Provided, That the (a) Commence, maintain, intervene in,
Board of Directors may not by contract defend and compromise actions or proceedings
delegate any of the discretionary powers to prevent interference with or deterioration
vested in the Board by this Title. Specifically, of water quality or the natural flow of any
but without limiting said general power, a surface, stream or ground water supply which
district may enter into the following contracts: may be used or useful for any purpose of the
(a) Cooperation. Agreement with the district or be a common benefit to the lands
Government of the Philippines or any of its or its inhabitants. The ground water within a
agencies or political subdivisions for the district is necessary to the performance of the
cooperative or joint performance of any district’s powers and such district is hereby
function of the district. authorized to adopt rules and regulations
(b) In-Lieu Share. As an incident to the subject to the approval of the National Water
acquisition of the existing water system of a Resources Council governing the drilling,
city, municipality, or province, a district may maintenance and operation of wells within
enter into a contract to pay in-lieu share for its boundaries for purposes other than single
such utility plant, an annual amount not family domestic use on overlaying land. Any
exceeding three percent (3%) of the district’s well operated in violation of such regulations
gross receipts from water sales in any year: shall be deemed an interference with the water
Provided, however, That no contract of this of the district.
nature shall be executed during the first five (b) Require a develop or builder of any
years of the existence of the district; and structure within the service areas of the district
Provided, further, that the Board of Directors to extend or connect its pipeline facilities to
shall determine that such contract will not the district facilities whenever such
11
amended pd 198 and other related issuances
(As amended by Sec. 14, and 15, PD 768, Sec. The district, as far as practicable, shall fix
7, PD 1479). such rates and charges for water as will result
SEC. 35. Authority for Subsequent in revenue which will;
Borrowings. Where a water district has (a) Provide for reimbursement from all
borrowed money from the Administration, the new water customers for the cost of
district shall not borrow money or incur installation of new services and meters;
further obligations from other sources without (b) Provide for revenue from all water
the prior written consent of the deliveries and services performed by the
Administration. (Sec. 16, PD 768; Sec 7 PD district;
1479) (c) Pay the operating expenses of the
Sec. 36. Default - In the event of the district;
default by the district in the payment of (d) Provide for the maintenance and
principal or interest on its outstanding bonds repairs of the works;
or other obligations, any bondholder or (e) Provide a reasonable surplus for
creditor shall have the right to bring an action replacement, extension and improvements; and
before the appropriate court to compel the (f) Pay the interest and principal and
payment of such obligations. If the bondholder provide a sinking fund for the payment of
or creditor concerned is the Administration, it debts of the district as they become due and
may, without the necessity of judicial process, establish a fund for reasonable reserves. ( As
take over and operate the entire facilities, amended by Sec. 17, PD 768; Sec. 7, PD 1479)
systems or properties of the district. For this Sec. 38. Service and Stand-b
Stand-byy Char ges
ges.-.-
Charges
purpose, the Administration may designate Sewer
Sewer- A district may prescribe and collect
its employees or any person or organization rates and other charges for sewer services
to assume all powers or policy-decision and furnished. A district may also fix, levy and
the powers of management and collect a sewerage and wastewater service
administration, including but not limited to stand-by or availability charge in the event
the establishment of water rates and charges, the sewer service is available and no
the dismissal and hiring of personnel, the connections is made. Such rates and charges
purchase of supplies, equipments, and may be collected with the water charges of
materials and such other actions as may the district. In the event of failure to pay the
necessary to operate the utility efficiently. (Sec. whole or any part thereof, district may
16, PD 768; As amended by Sec. 7, PD 1479) discontinue any and all services for which
such bill is rendered, including water, shall
Chapter IX - Revenues not be construed to prohibit the district from
Sec. 37 - Rates and Char ges- W
Charges- ater
Water
ater- A collecting rates and other charges in any other
district may sell water under its control, under lawful manner. (As amended by Sec. 18, PD
schedules of rates and charges as may be 768; Sec. 7, PD 1479)
determined by the Board, to any and all water SEC. 39. Production Assessment
Assessment. In the
users within the district. Said schedule may event the Board of the district finds, after
provide for differential rates for different notice and hearing, that production of
categories of use and different quantity blocks. groundwater by other entities within the
13
amended pd 198 and other related issuances
district for commercial or industrial uses is maintenance, to be used for such purposes
injuring or reducing the district’s financial only during periods of calamities, force
condition, the Board may adopt and levy a majeure or unforeseen events.
groundwater production assessment to Third, to allocate the residue as a reserve
compensate for such loss. In connection in exclusively for expansion and improvement of
there-with, the district mat require necessary its physical facilities. (Sec. 8, PD 1479)
reports by the operator of any commercial or
industrial well. Failure to pay said assessment Chapter X - Changes in Organization
shall constitute an invasion of the waters of SEC. 42. Exclusion of a TTerritory
erritory
erritory.. Any
the district and shall entitle this district to an territory within the boundary of district may
injunction and damages pursuant to Section be excluded by resolution of the Board of
31 of this Title. (As amended by Sec. 18, PD Directors after notice to landowners within
768; Sec. 7, PD 1479) the territory proposed to be excluded, and
SEC. 40. Assessment and Stand-by upon a finding that said lands do not and will
Charges
Charges. - In order to obtain capital to finance not benefit by reason of their inclusion within
installation of sanitary sewerage, a district the district. A certified copy of said resolution
shall have the power to establish by resolution of exclusion shall be filed in the same manner
of the Board of Directors the area to be and become effective in accordance with the
benefited from such facilities. After a hearing provision applicable to the resolution forming
and upon notice to all parties affected, the the district. (As amended by Sec.18, PD 768)
district may levy and collect assessment, or SEC. 43. Annexation and Deannexation.
stand-by charges based upon available The Administration may, after notice to
capacities or upon selected characteristics of property owners within the territory proposed
property benefited by said improvements, as for annexation or deannexation, and following
determined by the Board. Said characteristics a hearing, make finding of benefit or potential
may include, but not limited to, the effective benefit, and thereafter, require filing of an
length of property counting upon the proposed appropriate resolution in the same manner as
improvement or, in terms of the area contained the filing of the resolution forming a district
within the boundary of said property. Said or of exclusion, as the case may be. (As
assessment, if unpaid, shall be and constitute amended by Sec. 18, PD 768)
a lien on the land assessed. (As amended by SEC. 44. Consolidation and Joint
Sec. 18, PD 768; Sec. 7, PD 1479) Operation. The Administration may require
SEC. 41. Disposition of Income
Income.. - The the merger or consolidation of the facilities or
income of the district shall be disposed of operation of two or more district formed
according to the following priorities: pursuant to the levy, in the event that the
First, to pay its contractual and Administration shall have determined,
statutory obligations and to meet its essential following a hearing, that such merger or
current operating expenses. consolidation is in the best interest of the
Second, to allocate at least fifty percent residents in the districts involved. (As
(50%) of the balance exclusively as a reserve amended by Sec.18, PD 768)
for debt service and operating and SEC. 45. Dissolution. A district may be
14
amended pd 198 and other related issuances
15
amended pd 198 and other related issuances
2
standards; and (4) effect systems integration,
section joint investment and operations, district
annexation and deannexation whenever
economically warranted. (As amended by Sec.
22, PD 768)
TITLE III
Chapter III - Boar
Boardd of TTrustees
rustees
LOCAL W
OCAL ATER UTILITIES
WA
SEC. 51. Composition. - The Board of
ADMINISTRATION LA
ADMINISTRATION LAWW Trustees of the Administration shall be
composed of a chairman and four other
Chapter I - Title members, all of whom shall be citizens of the
SEC. 48. Title
Title. - This Title of the Philippines.
Provincial Water Utilities Act of 1973 shall One trustee at any time shall have at
be known and referred to as the “Local Water least ten years experience in banking, finance
Utilities Administration Law”. (As amended or business. One trustee at any time shall
by Sec. 20, PD 768) possess sufficient background in the field of
economics; one trustee at any time shall have
Chapter II - Purpose and FFormation
ormation experience in management or systems
SEC. 49. Charter
Charter.. - There is hereby operations. Two trustees at any time shall be
chartered, created and formed a government civil or sanitary engineers with experience
corporation to be known as the “Local Water related to water supply or wastewater
Utilities Administration” which is hereby operations. Not more than one trustee may
attached to the Office of the President. The represent a private investor-owned utility. No
provisions of this Title shall be and constitute elected official shall be entitled to act as a
the charter of the Administration. (As trustee. At least three of the trustees must be
amended by Sec. 21, PD 768) employees of the National Government.
SEC. 50. Purposes. - The The General Manager shall be ex-officio
Administration shall primarily be a member of the Board. (As amended by Sec.
specialized lending institution for the 23, PD 768)
promotion, development and financing of SEC. 52. Appointment and TTerm erm of
local water utilities. In the implementation Office. - The trustees, with the exception of
of its functions, the Administration shall, the ex-officio member, shall be appointed by
among others: (1) prescribe minimum the President of the Philippines. They shall
standards and regulations in order to assure serve a term of five years each: Provided, That
acceptable standards of construction of the first four initially appointed, one shall
materials and supplies, maintenance, serve a term of five years, another for four
operation, personnel training, accounting and years, the third for three years, and the fourth
fiscal practices for local water utilities ; (2) for two years. Trustees may be removed for
furnish technical assistance and personnel cause only.
training programs for local water utilities; The incumbent trustees holding office as
(3) monitor and evaluate local water such upon the effectivity of this amendment
16
amended pd 198 and other related issuances
shall continue to hold such office until the which may be amended from time to time by
expiration of their original terms as defined in the affirmative vote of four Trustees.
their appointments. (As amended by the Sec. Except as otherwise provided herein, the
24, PD 768) organizational structure and staffing pattern
SEC. 53. Vacancies
acancies.. - Vacancies in the of the Administration, the qualification of the
Board of Trustees for any reason whatsoever appointive officers and employees, the powers
shall be filled by the President of the and responsibilities of the officers, the internal
Philippines in like manner as in the case of procedure of the Administration, and such
new appointments but the trustees so other matters relative to the organization,
appointed shall serve only the unexpired management and conduct of the affairs of
portion of the term of the trustees substituted the Administration shall be as provided in by
for. (As amended by Sec. 25, PD 768) the by-laws; Provided, That the appointment
SEC. 54. Power erss. - All of the business of and disciplinary action against officers and
and affairs of the Administration shall be employees of the Administration shall be done
carried on and its powers shall be exercised and effected pursuant to guidelines
by and through the Board of Trustees. The established by the Board of Trustees. (As
function of the trustees, however, shall be to amended by Sec. 27, PD 768)
establish policy, not to engage in the detailed
management of the Administration. (As Chapter V - Officers and Employees
amended by the Sec. 25, PD 768) SEC. 57. Officers. - The Board shall elect
SEC. 55. Compensation. - The Trustees a Chairman from among its members. In
shall each receive a per diem as may be fixed addition, the Board shall select a secretary
by the Board for each meeting actually and a corporate legal counsel, each of whom
attended by them: Provided, That the total of shall not be a trustee (As amended by Sec. 28,
such per diem in any one month for each PD 768).
Trustee, shall not exceed the equivalent of the SEC. 58. The General Manager and
per diems for four meetings: Provided, further, Other Emplo
Employyees
ees. - The Trustees shall select
That per diems in excess of three hundred pesos a general manager who shall not come from
per meeting shall be subject to the approval the appointed trustees. The general manager
of the Office of the President; and Provided, shall receive compensation in an amount as
Finally, That, in addition, each Trustee shall may be fixed by the Board, subject to the
be reimbursed his expenses incurred in approval of the President of the Philippines,
connection with the performance of his but in no case less than fifty-four thousand
functions in such amounts as may determined pesos per annum. The general manager shall
by the Board of Trustees. (As amended by Sec. employ and appoint all additional personnel;
26, PD 768) Provided, That the appointment of personnel
in the supervisory level shall be subject to
Chapter IV - By Laws confirmation by the Board.
SEC. 56. By-Laws. - The Board of The incumbent manager holding office
Trustees shall adopt a code of by-laws for the as such upon the effectivity of this amendment
conduct of the affairs of the Administration shall continue to hold such office unless sooner
17
amended pd 198 and other related issuances
debts of the district as they become due and Certificate of Completion for the satisfactory
establish fund for reasonable resources. completion of a specified course of instruction.
The rates or charges established by such In the case of operational personnel,
local district, after hearing shall have been Administration may conduct appropriate
conducted for the purpose, shall be subject to examinations and issue corresponding
review by the Administration to establish Certificate of Competence to assist local water
compliance with the above-stated provisions. utilities to meet the personnel standards set
Said review of rates or charges shall be pursuant to Section 62 (e) of this Title.
executory and enforceable after the lapse of SEC. 66. Certificate of Conformance. -
seven calendar days from posting thereof in a Administration may require report from all
public place in the locality of the water district, water utilities, conduct field investigations and
without prejudice to an appeal being taken review all available information to determine
therefrom by a water concessionaire to the whether there has been conformance to its
National Water Resources Council whose standards and procedures established
decision thereon shall be appealable to the pursuant to Section 62 of the Title. Upon
Office of the President. An appeal to the finding that said standards are met, the
Council shall be perfected within thirty days Administration shall issue a Certificate of
after the expiration of the seven-day period of Conformance to any such water utility. Said
posting. The council shall decide an appeal Certificate may be revoked after due notice
within thirty days from perfection. (As and hearing as to any local water utility which
amended by Sec.11, PD 1479) thereafter fails to continue conformance with
SEC. 64. Technical A ssistance
Assistance
ssistance. - such standards. A Conditional Certificate of
Administration shall provide technical Conformance may be issued where procedures
assistance to local water utilities their boards, and practices have been adopted to assure
management, and operating personnel, to aid conformances and reasonable time schedule
in meeting the standards and criteria has been adopted. Failure, to reach
established by the Administration, and to conformance as contemplated shall be cause
encourage the upgrading of the operations for revocation of such conditional certificate,
and management of such local water utilities. without hearing or other cause.
Said technical assistance should consist of
those matters which are practical to finance Chapter VII - Financial Provision
or develop on a national basis but are beyond SEC. 67. Capital Stock. - The authorized
the capability of the individual local water capital of the Local Water Utilities
utility, as such. Administration is Two Billion Five Hundred
SEC. 65. Tr aining Pr ogr
Progr ams
ograms
ams. - Million Pesos divided into Twelve Million Five
Administration shall establish training Hundred Thousand shares of stock with a par
programs and seminars for personnel of local value of Two Hundred Pesos per share which
water utility. Programs shall include the areas shall be subscribed by the National
of utility management, operation, Government and opened to subscription by
maintenance and customer service. private investors or government financial
Administration shall have the power to issue institutions. (Sec. 34, PD 768; as amended by
20
amended pd 198 and other related issuances
institution or fund sources in the name and sewerage systems in cities, municipalities,
on behalf to the administration, one or several and provinces that are covered by duly formed
loans, for the purpose of implementing the water districts shall be released directly to
Administration’s program for the promotion the Administration for the account of the
and development of local water utilities water district concerned. The Administration
through the Administration’s financing or may, however, draw from such account fees
lending operations. and charges for services rendered to the water
The President of the Philippines, by district concerned as specified in Section 70
himself or through his duly authorized of this Title. (Sec. 38, PD 768)
representative, is hereby further authorized to SEC. 76. Government Assistance to
guarantee, absolutely and unconditionally, as Non-Viable W ater Districts
Water Districts.. - There shall be
primary obligor and not as mere surety, in the included in the General Appropriations Act an
name and on behalf of the Republic of the outlay in the form of National Government
Philippines, the payments of the loans, credits aid or subsidy to meet the financial
and indebtedness up to the amount herein requirements in the development of water
authorized, over and above the amounts which supply systems of water districts which are
the President of the Philippines pursuant to determined by the Administration to be
loan agreements entered into with foreign financially nonviable in such amount as the
governments or any international financing Administration may recommend, but not
institution or fund sources. exceeding the cost of source development and
The loan credits and indebtedness main transmission line. Releases of such funds
contracted under this section shall be in accord shall be made directly to the Administration.
with the provisions of the Foreign Borrowing In the development of such water supply
Act as amended. (As amended by Sec. 36, PD systems, the Administration shall exert all
768) efforts to bring the levels of service within the
SEC. 74. Depository for Reserves. - Any cost repayment capacity of the beneficiaries.
local water utility which is accumulating (Sec. 14, PD 1479)
reserves for capital improvement may make SEC. 77. Special Projects. - Whenever
specified time deposits of the same to the required by the National Government to provide
Administration in the manner authorized for funding requirements for the development of
banks in handling trust funds. Such funds waterworks and sewerage systems in
shall not be used for operating purposes by municipalities, cities or provinces or portions
the Administration. (As amended by Sec. 37, thereof not yet covered by a duly formed water
PD 768) district, an outlay shall be provided in the
SEC. 75. Control and Supervision over General Appropriations Act, upon the request
all Releases of Appropriations for of the Administration, separate from its
Waterw
aterworkork
orkss and Se w er
Sew age Sy
erage stems . -
Systems capitalization, for the purpose of meeting the
Since the Administration is charged with the financial requirements of the project;
development of local water utilities, funds Provided, however, That in the event that
from prior and future appropriations of the funds for the project have already been
National Government for waterworks and appropriated by the National Government,
22
amended pd 198 and other related issuances
23
amended pd 198 and other related issuances
3
198 in order to hasten and make more effective
section the implementation and administration of the
program of total development and expansion
of domestic water systems;
MALACAŃANG NO
NOW W, THEREFORE, I, FERDINAND EE..
MANILA MARCOS, President of the Philippines, by
virtue of the powers vested in me by the
Presidential Decree No. 768 Constitution, do hereby order and decree the
amendment of Presidential Decree No. 198, as
AMENDING PRESIDENTIAL DECREE follows:
.198 ENTITL
NO.198
NO ENTITLED ED “DECLARING A SECTION 1. Section 3, paragraph (b) of
NA TIONAL POLIC
NATIONAL POLICYY FFA AV ORING LLOCOC
OCALAL Presidential Decree No. 198, is hereby amended
OPERA
OPERATIONTION AND CONTROL OF W ATER
WA to read as follows:
S YSTEMS; A UTHORIZING
AUTHORIZING THE “(b) Appointing Authority. The person
FORMA
FORMATIONTION OF LLOCOC
OCALAL W
WAATER DISTRIC
DISTRICT TS empowered to appoint the members of the
AND PROVIDING FOR THE GOVERNMENT Board of Directors of a local water district
AND ADMINISTRA
ADMINISTRATION TION OF SUCH depending upon the geographic coverage and
DISTRIC
DISTRICT T; CHAR TERING A NA
CHARTERING TIONAL
NATIONAL population make-up of the particular district.
ADMINISTRA
ADMINISTRATION TION TTO O FFAA CILIT
CILITAATE In the event that more than seventy-five percent
IMPRO VEMENT OF LLOC
IMPROVEMENT OC AL W
OCAL WAATER of the total active water service connections
FA CILITIES; GRANTING SSAID
AID of a local water district are within the
ADMINISTRA
ADMINISTRATION TION SUCH PO WERS AS
POWERS boundary of any city or municipality, the
ARE NECESS
NECESSAR AR
ARYY TTOO OPTIMIZE PUBLIC appointing authority shall be the mayor of
SER VICE FROM W
SERVICE WAATER UTILITY the city or municipality, as the case may be;
OPERA TIONS, AND FOR O
OPERATIONS, THER
OTHER otherwise, the appointing authority shall be
PURPOSES.” the governor of the province within which the
WHERE
WHEREAS AS
AS, it is the primary concern of district is located: Provided, That if the existing
the government to develop an orderly and waterworks system in the city or municipality
effective system of local water utilities, established as a water district under this
particularly in the area of water supply and Decree is operated and managed by the
sewerage services; province, initial appointment shall be extended
WHERE
WHEREAS, AS, under Presidential Decree by the governor of the province. Subsequent
No. 198, the Government declared as a appointments shall be as specified herein.
national policy the local operation and “If portions of more than one province
control of water systems; authorized the are included within the boundary of the
formation of local water districts provided district, and the appointing authority is to be
for the administration of such districts, and the governor, then the power to appoint shall
chartered a national administration to rotate between the governors involved with
facilitate improvement of local water utilities; the initial appointments made by the governor
WHERE
WHEREAS, AS, there is need to amend in whose province the greatest number of
certain provisions of Presidential Decree No. service connections exists.”
24
amended pd 198 and other related issuances
SEC. 2. Paragraph (b), (c), (e) and last by the Administration to conform to the
paragraph of Section 6 of the same decree, requirements of Section 6 and the policy
are hereby amended to read as follows: objectives in Section 22, the resolution shall
“x x x” be duly filed. The district shall be deemed duly
“(b) A description of the boundary of the formed and existing upon the date of such
district. In the case of a city or municipality, filing. A certified copy of said resolution
such boundary may include all lands within showing the filing stamp of the Administration
the city or municipality. A district may include shall be maintained in the office of the district.
one or more municipalities, cities or provinces, Upon such filing, the local government or
or portions thereof: Provided, That such governmentsconcerned shall lose ownership,
municipalities, cities or provinces, or portions supervision and control or any right
thereof, cover a contiguous area. whatsoever over the district except as provided
“(c) A statement transferring any and all herein.”
waterworks and/or sewerage facilities SEC. 4. Section 8 of the same decree is
managed, operated by or under the control of hereby amended to read as follows:
such city, municipality or province to such “SEC. 8. Number and Qualifications. -
district pursuant to a contract authorized by The Board or Directors of a district shall be
this Title. composed of five citizens of the Philippines
“x x x” who are of voting age and residents within
“(e) The names of the initial directors of the district. One member shall be a
the district with the date of expiration of the representative of civic-oriented service clubs,
term of office for each which shall be on the one member a representative of professional
31st of December of first, second, or third even- associations, one member a representative of
numbered year after assuming office, as set business, commercial, or financial
forth in Section 11 hereof. organizations, one member a representative
“x x x” of educational institutions and one member a
“If two or more cities, municipalities or representative of women’s organizations. No
provinces, or any combination thereof, desire public officials shall serve as director.”
to form a single district, a similar resolution “SEC. 5. Section 11 of the same decree is
shall be adopted in each city, municipality hereby amended to read as follows:
and province; or the city, municipality or “SEC. 11. Term of Office. - Of the five initial
province in which 75% of the total active directors of each newly-formed district, two
service connections are situated shall pass an shall be appointed for a maximum term of
initial resolution to be concurred in by the two years, two for a maximum term of four
other cities, municipalities or provinces.” years, and one for a maximum term of six
SEC. 3. Section 7 of the same decree is years. Terms of office of all directors in a given
hereby amended to read as follows: district shall be such that the term of at least
“SEC. 7. Filing of Resolution. - A certified one director, but not more than two, shall
copy of the resolution or resolutions forming expire on December 31 of each even-numbered
a district shall be forwarded to the office of year. Regular terms of office after the initial
the Secretary of the Administration. If found terms shall be for six years commencing on
25
amended pd 198 and other related issuances
January 1 of odd-numbered years. Directors receive other compensation for services to the
may be removed for cause only, subject to district.
review and approval of the Administration.” “Any per diem in excess of P50 shall be
“SEC. 6. Section 12 of the same decree is subject to approval of the Administration.”
hereby amended to read as follows: SEC. 8. Section 20 of the same decree is
“SEC. 12. Vacancies. - In the event of a hereby amended to read as follows:
vacancy in the board of directors occurring “SEC. 20. System of Business
more than six months before expiration of any Administration. - The Board shall, as soon as
director’s term, the remaining directors shall practicable, prescribe and define by resolution
within 30 days, serve notice to or request the a system of business administration and
secretary of the district for nominations and accounting for the district, which shall be
within 30 days there-after a list of nominees patterned upon and conform to the standards
shall be submitted to the appointing authority established by the Administration. Auditing
for his appointment of a replacement director shall be performed by a certified public
from the list of nominees. In the absence of accountant not in the government service. The
such nominations, the appointing authority Administration may, however, conduct annual
shall make such appointment. If within 30 audits of the fiscal operations of the district
days after submission to him of a list of to be performed by an auditor retained by the
nominees the appointing authority fails to Administration. Expenses incurred in
make an appointment, the vacancy shall be connection therewith shall be borne equally
filled from such list by a majority vote of the by the water district concerned and the
remaining members of the Board of Directors Administration.”
constituting a quorum. Vacancies occuring SEC. 9. Section 23 of the same decree is
within the last six months of an unexpired hereby amended to read as follows:
term shall also be filled by the Board in the “SEC. 23. The General Manager. - At the
above manner. The director thus appointed first meeting of the board, or as soon
shall serve the unexpired term only.” “If as thereafter as practicable, the board shall
practicable, the board shall appoint, by a appoint, by a majority vote, a general manager
majority vote, a general manager and shall and shall define his duties and fix his
define his duties and fix his compensation. compensation. Said officer shall serve at the
Said officer shall serve at the pleasure of the pleasure of the board.”
board.” “SEC. 10. Section 24 of the same decree
“SEC. 7. Section 13 of the same decree is is hereby amended to read as follows:
hereby amended to read as follows: “SEC. 24. Duties. - The duties of the
“SEC. 13. Compensation. - Each director General Manager and other officers shall be
shall receive a per diem, to be determined by determined and specified from time to time
the board, for each meeting of the board by the board. The general manager, who shall
actually attended by him, but no director shall not be a director, shall have full supervision
receive per diems in any given month in excess and control of the maintenance and operation
of the equivalent of the total per diem of four of water district facilities, with power and
meetings in any given month. No director shall authority to appoint all personnel of the
26
amended pd 198 and other related issuances
district: Provided, That the appointment of maintenance and operation of wells within
personnel in the supervisory level shall be its boundaries for purposes other than a single
subject to approval by the board.” family domestic use on overlying land. Any
SEC. 11. Paragraph (b) of Section 31 of well operated in violation of such regulations
the same decree is hereby amended to read as shall be deemed in interference with the waters
follows: of the district.
“(b) In-Lieu Share. - As an incident to the “(b) Require a developer or builder of any
acquisition of the existing water system of a structure within the service areas of the district
city, municipality, or province, a district may to extend or connect its pipeline facilities to
enter into a contract to pay in-lieu share for the district facilities whenever such
such utility plant, an annual amount not development or structure is within one hundred
exceeding three percent (3%) of the district’s meters of existing district facilities or
gross receipts from water sales in any year: whenever the district is willing to extend its
Provided, however, That no contract of this facilities within one hundred meters of said
nature shall be executed during the first five development or structure. For the purpose of
years of the existence of the district; and this section, development shall include the
Provided, further, That the Board of Directors subdivision of land for any purpose other than
shall determine that such contract will not agricultural purpose, and structure shall mean
adversely affect or impair the fiscal position any building or facility to be used for
and operations of the district as verified by residential, commercial or industrial purposes.
the Administration.” “(c) Prohibit any person, firm or
SEC. 12. Section 32 of the same decree corporation from vending, selling, or otherwise
is hereby amended by adding four new disposing of water for public purposes within
subsections therein, which shall read as the service area of the district where district
follows: facilities are available to provide such service,
“SEC. 32. Protection of Waters and, or fix terms and conditions by permit for such
Facilities of District. - A district shall have the sale or disposition of water.
right to: “(d) Safeguard and protect the use of its
“(a) Commence, maintain, intervene in, waters. For this purpose, any person who
defend and compromise actions or proceedings installs any water connection without the
to prevent interference with or deterioration previous authority from the water district
of water quality or the natural flow of any established under this Decree; tampers water
surface, stream or ground water supply which meters or uses jumpers or other devices
may be used or useful for any purpose of the whereby water is stolen; steals or pilfers water
district or be a common benefit to the lands or water meters; knowingly possesses stolen
or its inhabitants. The ground water within a or pilfered water or water meters shall, upon
district is necessary to the performance of the conviction, be punished by prision correccional
district’s powers and such district is hereby in its minimum period or a fine ranging from
authorized to adopt rules and regulations two thousand pesos to six thousand pesos, or
subject to the approval of the National Water both. If the violation is committed with the
Resources Council governing the drilling, connivance or permission of an employee or
27
amended pd 198 and other related issuances
officer of the water district, an employee or Section 37, respectively, which shall read as
officer shall, upon conviction, be punished by follows:
a penalty one degree lower than prision “SEC. 36. Authority for Subsequent
correccional in its minimum period and Borrowings. - Where a water district has
forthwith be dismissed and perpetually borrowed money from the Administration, the
disqualified from employment in any utility district shall not borrow money or incur
or service company owned or controlled by further obligations from other sources without
the government.” the prior written consent of the
Sec. 13. Section 34 of the same decree is Administration.
hereby amended to read as follows: “SEC. 37. Default. - In the event of the
“SEC. 34. Receipt, Deposit and Payment default by the district in the payment of
of District Funds. - The treasurer shall receive, principal or interest on its outstanding bonds
to the credit of the district and in trust for its or other obligations, any bondholder or
use and benefit, all monies belonging to the creditor shall have the right to bring an action
district. All monies belonging to the District before the appropriate court to compel the
shall, where practicable, be deposited by the payment of such obligation. If the bondholder
treasurer in the Philippine National Bank.” or creditor concerned is the Administration, it
SEC. 14. Section 35 of the same decree may, without the necessity of judicial process,
is hereby repealed. take over and operate the entire facilities,
SEC. 15. Section 36 of the same decree systems or properties of the district. For the
is hereby amended to be known as Section 35 purpose, the Administration may designate
to read as follows: its employees or any person or organization
“SEC. 35. Bonds or Other Evidence of to assume all powers of policy-decision and
Indebtedness. - A district may borrow money the powers of management and
to raise funds to pay all cost of any public administration, including but not limited to
improvements authorized by this Title and the establishment of water rates and charges,
may issue negotiable or non-negotiable the dismissal and hiring of personnel, the
bonds, promissory notes or other evidence of purchase of supplies, equipment and materials
indebtedness to support such borrowings. and such other actions as may be necessary
These obligations may be secured by a to operate the utility efficiently.”
mortgage, pledge, deed of trust of or any other SEC. 17. Section 37 of the same decree
encumbrance upon any of its then owned or is hereby amended to read as Section 38 as
after-acquired real or personal property, assets follows:
or revenues and the same shall constitute a “SEC. 38. Rates and Charges - Water. - A
lien as to the principal and interest thereon, district may sell water under its control, under
on all such properly, assets or revenues. The schedules of rates and charges as may be
interests on such bonds or notes are exempt determined by the Board, to any and all water
from all taxes, duties, fees, imposts, or other users within the district. Said schedule may
charges of the national or local governments.” provide for differential rates for different
SEC. 16. Two new sections are hereby categories of use and different quantity blocks.
inserted to be known as Section 36 and The district, as far as practicable, shall fix
28
amended pd 198 and other related issuances
such rates and charges for water as will result Sections 46, 47 and 48, respectively.
in revenues which will: SEC. 21. Section 48 of the same decree is
“(a) Provide for reimbursement from all hereby amended to read as Section 49 as
new water customers for the cost of follows:
installation of new services and meters; “SEC. 49. Charter. - There is hereby
“(b) Provide for revenue from all water chartered, created and formed a government
deliveries and services performed by the corporation to be known as the ‘Local Water
district; Utilities Administration’ which is hereby
“(c) Pay the operating expenses of the attached to the Office of the President. The
district; provisions of this Title shall be and constitute
“(d) Provide for the maintenance and the charter of the Administration.”
repairs and of the works; SEC. 22. Section 49 of the same decree
“(e) Provide a reasonable surplus for is hereby amended to read as Section 50 as
replacement, extension and improvement; and follows:
“(f) Pay the interest and principal and “SEC. 50. Purposes. - The Administration
provide a sinking fund for the payment of shall primarily be a specialized lending
debts of the district as they become due and institution for the promotion, development and
establish a fund for reasonable reserves.” financing of local water utilities. In the
SEC. 18. Sections 38, 39, 40, 41, 42 and implementation of its functions, the
43 of the same decree are hereby amended to Administration shall, among others: (1)
read as Sections 39, 40, 41, 42, 43 and 44, prescribe minimum standards and regulations
respectively. in order to assure acceptable standards of
SEC. 19. Section 44 of the same decree construction materials and supplies,
is hereby amended to read as Section 45 as maintenance, operation, personnel training,
follows: accounting and fiscal practices for local water
“SEC. 45. Dissolution. - A district may utilities; (2) furnish technical assistance and
be dissolved by resolution of its board of personnel training programs for local water
directors filed in the manner of filing the utilities; (3) monitor and evaluate local water
resolution forming the district: Provided, standards; and (4) effect system integration,
however, That prior to the adoption of any joint investment and operation, district
such resolution: (1) another public entity has annexation and deannexation whenever
acquired the assets of the district and has economically warranted.”
assumed all obligations and liabilities SEC. 23. Section 50 of the same decree
attached thereto; (2) all bondholders and other is hereby amended to read as Section 51 as
creditors have been notified and they consent follows:
to said transfer and dissolution, and (3) a court “SEC. 51. Composition. - The Board of
of competent jurisdiction has found that said Trustees of the Administration shall be
transfer and dissolution are in the best interest composed of a chairman and four other
of the public.” members, all of whom shall be citizens of the
SEC. 20. Sections 45, 46 and 47 of the Philippines.
same decree are hereby amended to read as “One trustee at any time shall have at
29
amended pd 198 and other related issuances
least ten years experience in banking, finance by the Board for each meeting actually
or business. One trustee at any time shall attended by them: Provided, That the total of
possess sufficient background in the field or such per diem in any one month for each
economics; one trustee at any time shall have Trustees, shall not exceed the equivalent of
experience in management or systems the of the per diems for four meetings; Provide,
operations. Two trustees at any time shall be further, That per diems in excess of three
civil or sanitary engineers with experience hundred pesos per meeting shall be subject to
related to water supply or wastewater approval of the Office of the President; and
operations. Not more than one trustee may Provided, finally, That, in addition, each
represent a private investor-owned utility. No Trustee shall be reimbursed his expenses
elected official shall be entitled to act as a incurred in connection with the performance
trustee. At least three of the trustees must be of his functions in such amount as may be
employees of the National Government. determined by the Board of Trustees.”
“The General Manager shall be ex-officio SEC. 27. Sections 55 and 56 of the same
member of the Board.” decree are hereby amended to read a Section
SEC.24. Section 51 of the same decree is 56 as follows:
hereby amended to read as Section 52 as “SEC. 56. By-Laws. - The Board of
follows: Trustees shall adopt a code of by-laws for the
“SEC. 52. Appointment and Term of conduct of the affairs of the Administration
Office. - The trustees, with exception of the ex- which may be amended from time to time by
officio member, shall be appointed by the the affirmative vote of four Trustees.
President of the Philippines. They shall serve “Except as otherwise provided herein, the
a term of five years each: Provided, That of organizational structure and staffing pattern
the first four initially appointed, one shall of the Administration, the qualification of the
serve a term of five years, another for four appointive officers and employees, the power
years, the third for three years, and the fourth and responsibilities of the officers, the internal
for two years. Trustees may be removed for procedure of the Administration, and such
cause only. other matters relative to the organization,
“The incumbent trustees holding office management and conduct of the affairs of
as such upon the effectivity of this amendment the Administration shall be as provided in the
shall continue to hold such office until the by-laws; Provided, That, the appointment of
expiration of their original terms as defined in and disciplinary action against officers and
their appointments.” employees of the Administration shall be done
SEC. 25. Sections 52 and 53 of the same and effected pursuant to guidelines
decree are hereby amended to read as Sections established by the Board of Trustees.”
53 and 54, respectively. SEC. 28. Section 57 of the same decree
SEC. 26. Section 54 of the same decree is hereby amended to read as follows:
is hereby amended to read as Section 55 as “SEC. 57. Officers. - The Board shall elect
follows: a chairman from among its members. In
“SEC. 55. Compensation. - The Trustees addition, the Board shall select a secretary
shall each receive a per diem as may be fixed and a corporate legal counsel, each of whom
30
amended pd 198 and other related issuances
shall not be a trustee.” for any proposed project for which loan funds
SEC. 29. The first paragraph of Section are sought may be undertaken by the water
58 of the same decree is hereby amended to district, the Administration or by a consultant
read as follows: prequalified by the Administration.
“SEC. 58. The General Manager and “(c) Security. - The Administration may
Other Employees. - The Trustees shall select a take as security for such loans the authorized
general manager who shall not come from bonds or other evidence of debt by the water
the appointed trustees. The general manager district and a mortgage on its properties;
shall receive compensation in an amount as “(d) Loan Documents and Procedure, - The
may be fixed by the Board, subject to the Board of Trustees shall adopt rules, loan
approval of the President of the Philippines, documents and procedures to be used in the
but in no case less than fifty-four thousand granting of loans. Such rules shall include
pesos per annum. The general manager shall provisions for security, payment and default.
employ and appoint all additional personnel; “(e) Default. - In the event of default by
Provided, That the appointment of personnel the local water district in the payment of
in the supervisory level shall be subject to principal or interest on its outstanding bonds
confirmation by the Board. or other obligation to the Administration, the
“The incumbent manager holding office latter any, without the necessity of judicial
as such upon the effectively of this process, take over and operate the facilities
amendment shall continue to hold such office or properties of the district. For this purpose,
unless sooner terminated by competent the Administration may designate its
authority. employees or any person or organization to
SEC. 30. Section 60 of the same decree assume both the policy-making authority and
is hereby amended to read as follows: the powers of management, including but not
“SEC. 60. Borrowing and Security limited to, the establishment of water rates
Therefor. - The Administration may borrow and service charges, the dismissal and hiring
funds as authorized in Section 72 of this Title, of personnel, the purchase of equipment,
and issue as security therefore debentures or supplies or materials and such other actions
other evidence of indebtedness constituting a may be necessary to operate the water district
lien on any and all securities, covenants and efficiently. Such policy-making and
obligations of local water utilities held by the management prerogatives may be returned to
Administration as security for loans made to the Board of Directors and the general
such local water utilities. manager of the water district, respectively,
SEC. 31. Paragraph (b), (c), and (d) of when all of its overdue accounts have been
Section 61 of the same decree are hereby paid, all its reserve requirements have been
amended to read, and a new paragraph is satisfied and all the causes of default have
hereby inserted which shall read, as follows: been met.”
“SEC. 61. Loans - x x x x SEC. 32. Paragraph (e) Section 62 of the
“(a) x x x x same decree is hereby amended to read as
“(b) Feasibility Study. - A feasibility study follows:
which may be required by the Administration “SEC. 62. Regulations. - x x x x
31
amended pd 198 and other related issuances
whatsoever, it shall issue its own receipts and loans, for the purpose of implementing the
provide for their safekeeping and investment Administration’s program for the promotion
under policy guidelines as may be established and development of local water utilities
by the Board of Trustees in accordance with through the Administration’s financing or
Department of Finance regulations.” lending operations.
SEC. 35. Section 70 of the same decree “The President of the Philippines, by
is hereby repealed. himself or through his duly authorized
SEC. 36. Section 71 of the same decree is representative, is hereby further authorized to
hereby amended to read as Sections 71 and guarantee, absolutely and unconditionally, a
73 as follows: primary obligor and not as mere surety, in the
“SEC. 72. Domestic Borrowing Authority. name and on behalf of the Republic of the
- The Administration shall have the authority Philippines, the payments of the amount
to borrow money from all domestic loan herein authorized, over and above the amounts
sources whether government or private; which the President of the Philippines
Provided, That its loans outstanding from pursuant to loan agreements entered into with
domestic sources at any one time shall not foreign governments or any international
exceed One Billion Pesos.” financial institution or fund sources.
“SEC. 73. Authority to Contract Foreign “The loans, credits and indebtedness
Loan. - The Administration is hereby contracted under this section shall be in accord
authorized to contract loans, credits, in any with the provisions of the Foreign Borrowing
convertible foreign currency or capital goods, Act as amended.”
and to incur indebtedness from time to time SEC. 37. Section 72 of the same decree
with foreign governments, or any international is hereby amended to read as Section 74 as
financial institutions or fund sources, follows:
including suppliers credits or deferred payment “SEC. 74. Depository for Reserves. - Any
arrangements, the total outstanding amount local water utilities which is accumulating
of which, excluding interests, shall not exceed reserves for capital improvement may make
five hundred million United States dollars or specified time deposits of the same to the
the equivalent therefore in other currencies, Administration in the manner authorized for
on terms and conditions promulgated by the banks in handling trust fund. Such funds shall
Secretary of Finance and the Monetary Board not be used for operating purposes by the
for the accomplishment of its objectives; and Administration.”
to enter into and execute contract and other SEC. 38. Two new sections are hereby
conditions. inserted to be known as Section 75 and
“The President of the Philippines, by Section 76, which shall read as follows:
himself, or through his duly authorized “SEC. 75. Control and Supervision over
representative, is hereby authorized to All Release of Appropriations for Waterworks
negotiate and contract with foreign and Sewerage System. - Since the
governments or any international financial Administration is charge with the development
institution of fund sources in the name and of local water utilities, funds from prior and
on behalf of the Administration, one or several future appropriations of the National
33
amended pd 198 and other related issuances
Governments for waterworks and sewerage of August in the year of Our Lord, nineteen
system in cities, municipalities, and provinces hundred and seventy-five.
that are covered by duly formed water districts
shall be released directly to the Administration By the President:
for the account of the water districts
concerned. The Administration may, however,
draw from such account fees and charges for (SGD) AL EJANDRO MEL
EJANDRO
ALEJ CHOR
MELCHOR
services rendered to the water district Executive Secretary
concerned as specified in Section 70 of this
Title.
“SEC. 76. Exemption from All Taxes,
Duties, Fees, Imposts and Other Charges by
the Government. - To enable the Administration
to pay its indebtedness and obligations, and
in furtherance and effective implementation
of the policies and objectives of this Decree,
the Administration is hereby declared exempt:
“(a) From the payment of all taxes, fees,
imposts, charges, costs and restrictions by
the Government of the Republic of the
Philippines, its provinces, cities,
municipalities, and other government agencies
and instrumentalities, and filing and service
fees and other charges of courts in any court
or administrative proceedings in which it may
be a party;
“(b) From all income taxes, franchise
taxes and really taxes to be paid to the
National Government, its provinces, cities,
municipalities and other government agencies
and instrumentalities; and
“(c) From all import duties, compensating
taxes, wharfage fees on import of foreign
goods and equipment require for its operations
and projects.”
SEC. 39. Sections 73 and 74 of the same
decree are hereby amended to read as Section
77 and 78, respectively.
SEC. 40. This Decree shall take effect
immediately.
Done in the City of Manila, this 15th day
34
amended pd 198 and other related issuances
4
of water supply services for the whole country
section is a declared policy of the State and shall be
effected primarily through;
(a) The rationalization of the
Office of the President of the Philippines organizational structure for the water supply
Malacańang sector; (b) The formation of water districts,
associations, cooperatives or corporations for
Letter of Instructions No. 683 the construction, operation and maintenance
of water supply systems in preference to
ESTABLISHING BBASIC
ESTABLISHING ASIC POLICIES FOR systems directly operated and managed by
THE WATER SUPPL
WA SUPPLYY SECTOR
SECT local governments; and (c) The encouragement
of self-help and self-reliant water supply
WHERE
WHEREAS,AS, drinking water is a basic projects.
requirement to sustain life; (2) Agencies involved in water supply shall
WHEREAS, only about 40 percent of the strive to attain financial independence,
population of the Philippines is presently thereby minimizing Government subsidy, by
served with public water supply systems; increasing their own internal revenue
WHERE
WHEREAS,AS, it is primary concern of the generation capabilities and by providing
Government in promoting the welfare of the services within the cost repayment capabilities
people to hasten the availability of water of the beneficiaries.
supply in the whole country, with special (3) The levels of water supply service to
attention to the rural areas; be developed shall vary according to technical
WHERE
WHEREAS, AS, the approved Philippine economic, organizational and financial
Development Plan for 1978-1987, therefore consideration. These levels of service are as
aims to increase the public water supply follows:
coverage to about 85 percent of the total Level I - Point sources (such as rain
Philippine population within ten years; collector, wells and springs); generally for rural
WHERE
WHEREAS,AS, there is a need to restructure areas where houses are scattered too thinly
the water supply sector so that gaps and to justify a distribution system.
overlaps in responsibility will be eliminated; Level II - Communal faucet systems;
and generally for rural areas where houses are
WHERE
WHEREAS,AS, it is necessary to establish clustered densely enough to justify a piped
certain basic policies to attain these objectives distribution system with a faucet provided
in the most efficient manner; for a number of households.
NO
NOW W, THEREFORE, I, FERDINAND EE.. Level III - Individual house connections;
MARCOS, President of the Philippines, by generally for urban areas.
virtue of the powers vested in me by the (4) The rationalization of the water
Constitution, do hereby order the supply sector structure shall be pursued in
implementation of the following basic policies accordance with the following strategies:
for the water supply sector; (a) The Metropolitan Waterworks and
(1) The attainment of complete coverage Sewerage System shall concentrate its
35
amended pd 198 and other related issuances
5
(d) On a case-to-case basis, defer loan
section amortization payments until improvements
are completed and actually in operation;
(e) Assist water districts improve their
Office of the President of the Philippines operational efficiency through skills/
Malacańang managerial training and systems development;
(f) Ensure that the water rates are not
Letter of Instructions No. 700 abruptly increased beyond the water users
ability to pay, seeing to it that each increase
PROVIDING ME
PROVIDING ASURES TTO
MEASURES O CONTROL if warranted, does not exceed 60% of the
AND REGULATE INCRE
REGULATE ASES IN W
INCREASES ATER
WA current rate;
RA TES
RATES (g) Limit charges for feasibility and
engineering studies to not more than 15% of
WHERE
WHEREAS, AS, there is a need to help the actual construction cost of the project
depressed or newly formed water districts implemented;
develop their financial viability, but at the (h) Require 100% metering to insure
same time avoid too abrupt increases in their correct charging of water actually consumed
water rates; and to discourage its wasteful use;
WHERE
WHEREAS,AS, there is a need to prescribe (i) Where indicated, consider the
certain measures whereby increases of rates adoption of lower standards of service,
imposed by water districts are controlled or especially for the marginally feasible areas,
regulated; to reduce project cost; and;
NO
NOW W, THEREFORE, I, FERDINAND EE.. (j) Reduce required reserves accumulation
MARCOS, President of the Philippines, by for meeting emergency and contingency needs
virtue of the powers vested in me by the as will be appropriate.
Constitution, do hereby order the (2) The National Electrification
implementation of the following measures in Administration and the National Power
the operation and development of water Corporation shall study ways and means to
districts; grant special reduce electric power rates to
(1) The Local Water Utilities the water districts concerned. Where feasible,
Administration (LWUA) shall: the National Power Corporation shall also
(a) Implement a socialized pricing scheme determine ways by which the water districts
for water districts in setting up water rates can directly tap the power lines.
whereby the more affluent, heavy users pay (3) The Budget Commission shall provide
more per unit than the low income, minimal in the national government annual operating
users of water, LWUA shall prescribe guidelines budget starting with CY 1979 such amount as
for this purpose; shall be requested by LWUA and recommended
(b) Provide institutional development by the National Economic and Development
services to water districts free of charge; Authority for the conduct of feasibility studies
(c) Grant capital improvement loans to for the development of waterworks systems
water districts on concessionary terms; in established water districts. Such national
37
amended pd 198 and other related issuances
38
amended pd 198 and other related issuances
6
form and maintain a district. For purposes of
section this Act, a district shall be considered as a
quasi-public corporation performing public
service and supplying public wants. As such,
MALA
MALACCAŃANG a district shall exercise the powers, rights and
Manila privileges given to private corporations under
existing laws, in addition to the powers
PRESIDENTIAL DECREE NO
NO.. 1479 granted in, and subject to such restrictions
imposed, under this Act.
FURTHER AMENDING PRESIDENTIAL
FURTHER xxx
DECREE NO
NO.. 198 OTHERWISE KNO
THERWISE
OTHER WN AS
KNOWN (c) A statement completely transferring
THE “PRO VINCIAL W
“PROVINCIAL ATER UTILITIES A
WA ACCT any and all waterworks and/or sewerage
OF 1973”, AS AMENDED BBYY facilities managed, operated by or under the
PRESIDENTIAL DECREE NONO.. 768 control of such city, municipality or province
to such district upon the filing of resolution
WHERE AS, Presidential Decree NO. 198,
WHEREAS, forming the district.
as amended by Presidential Decree No. 768, xxx
declares as a national policy the local SEC. 2. A new sentence is hereby added
operation and control of water systems; to Section 8 of the same decree to read as
authorizes the formation of local water follows:
districts; provides for the administration of “SEC. 8. Number and Qualifications. –
such districts and charters a national xxx Provided, however, that if the district has
administration to facilitate improvement of availed of the financial assistance of the
local water utilities; Administration, the Administration may
WHERE
WHEREAS AS
AS, in order to accelerate the appoint any of its personnel to sit in the board
development and expansion of domestic water of directors with all the rights and privileges
systems, there is a need to further amend appertaining to a regular member, for such
certain provisions of Presidential Decree No. period as the indebtedness remains unpaid, in
198, as amended. which case the board shall be composed of
NO
NOWW, THEREFORE, I FERDINAND EE.. six members.”
MARCOS, President of the Philippines, by SEC. 3. Section 25 of the same decree is
virtue of the powers vested in me by the hereby amended.
Constitution, do hereby order and decree the SEC. 4. Section 26 of the same decree is
further amendment of Presidential Decree No. hereby amended to read as Section 25 as
198, as follows: follows:
SECTION 1. The first paragraph of “SEC. 25. Authorization. The district may
Section 6 of Presidential Decree No. 198, as exercise all the powers which are expressly
amended, is hereby amended to read as granted by this Title or which are necessarily
follows: implied from, or incidental to the powers and
“SEC. 6. Formation of District. - This Act purposes herein stated. For the purpose of
is the source of authorization and power to carrying out the objectives of this Act, a district
39
amended pd 198 and other related issuances
is hereby granted the power of eminent franchise shall be granted to any other person
domain, the exercise thereof shall, however, or agency for domestic, industrial or
be subject to review by the Administration.” commercial water service within the district
SEC. 5. Sections 27, 28, 29, 30 and 31 of or any portion thereof unless and except to
the same decree are hereby amended to read the extent that the board of directors of said
as Section 26, 27, 28, 29 and 30, respectively. district consents thereto by resolution duly
SEC. 6. Section 32 of the same decree is adopted, such resolution, however, shall be
hereby amended to read as Section 31. subject to review by the Administration.”
“SEC. 31. Protection of Waters and SEC. 10. Section 61 of the same decree is
Facilities of District. A district shall have the hereby amended to read as follows:
right to “SEC. 61. Loans.
xxx xxx
(e) take over the management, Funding of Loan. When a loan is made to
administration, operation and maintenance local water utility, the necessary amount of
of all watersheds within its territorial such loan shall be programmed to assure
boundaries.” completion of the project for which such loan
SEC. 7. Sections 33, 34, 35, 36, 37, 38, was granted.”
39, 40 and 41 of the same decree are hereby SEC. 11. The last paragraph of Section
amended to read as Sections 32, 33, 34, 35, 63 of the same decree is hereby amended to
36, 37, 38, 39 and 40, respectively. read as follows:
SEC. 8. A new section is hereby inserted “SEC. 63. Rate Review.
to be known as Section 41 which shall read xxx
as follows: The rates or charges established by such
“SEC. 41. Disposition of Income. The local district, after hearing shall have been
income of the district shall be disposed of conducted for the purpose, shall be subject to
according to the following priorities: review by the Administration to establish
“First, to pay its contractual and compliance with the above-stated provisions.
statutory obligations and to meet its essential Said review of rates or charges shall be
current operating expenses. executory and enforceable after the lapse of
“Second, to allocate at least fifty percent seven calendar days from posting thereof in a
(50%) of the balance exclusively as a reserve public place in the locality of the water district,
for debt service and operating and without prejudice to an appeal being taken
maintenance, to be used for such purposes therefrom by a water concessionaire to the
only during periods of calamities, force National Water Resources Council whose
majeure or unforeseen events. decision thereon shall be appealable to the
“Third, to allocate the residue as a reserve Office of the President. An appeal to the
exclusively for expansion and improvement of Council shall be perfected within thirty days
its physical facilities.” after the expiration of the seven-day period of
SEC. 9. Section 47 of the same decree is posting. The Council shall decide on appeal
hereby amended to read as follows: within thirty days from perfection.
“SEC. 47. Exclusive Franchise. No SEC. 12. Section 67 of the same decree
40
amended pd 198 and other related issuances
is hereby amended to read as follows: line. Releases of such funds shall be made
“SEC. 67. Capital Stock. The authorized directly to the Administration. In the
capital of the Local Water Utilities development of such water supply systems,
Administration is Two Billion, Five Hundred the Administration shall exert all efforts to
Million Pesos divided into Twelve Million Five bring the levels of service within the cost
Hundred Thousand share of stock with a par repayment capacity of the beneficiaries.”
value of Two Hundred Pesos per share which “SEC. 77. Special Projects. Whenever
shall be subscribed by the National required by the National Government to provide
Government and opened to subscription by funding requirements for the development of
private investors or government financial waterworks and sewerage systems in
institutions.” municipalities, cities or provinces, or portions
SEC. 13. Section 68 of the same decree thereof not yet covered by a duly formed water
is hereby amended to read as follows: district, an outlay shall be provided in the
“SEC. 68. Payment for National General Appropriations Act, upon the request
Government Shares. All amounts x x x at par of the Administration, separate from its
value. Whatever balance remaining of said capitalization, for the purposes of meeting
subscription shall be paid from a continuing the financial requirements of the project:
appropriation which is hereby made out of Provided, however, That in the event that funds
any funds in the National Treasury not for the project have already been appropriated
otherwise appropriated, such annual by the National Government, such funds shall
appropriation to be programmed and released be released directly to the Administration.
in accordance with the pertinent budget laws: Expenses incurred by the Administration for
Provided, That this continuing appropriation the service rendered may be drawn from such
shall remain in force until the balance of the account as provided in Section 70 of this Title.”
unpaid subscription of the government to the SEC. 15. Sections 76, 77, 78 and 79 of
capital stock of the administration have been the same decree are hereby amended to read
paid in full.” as Section 78, 79, 80 and 81, respectively.
SEC. 14. New sections are hereby inserted SEC. 16. This Decree shall take effect
to be known as Section 76 and 77, immediately.
respectively, which shall read as follows: Done in the City of Manila, this 11th day
“SEC. 76. Government Assistance to Non- of June in the year of Our Lord, nineteen
Viable Districts. There shall be included in the hundred and seventy-eight.
General Appropriations Act an outlay in the
form of National Government aid or subsidy By the President:
to meet the financial requirements in the
development of water supply systems of water
districts which are determined by the (SGD) JU AN C. TUVERA
JUAN
Administration to be financially non-viable in Presidential Assistant
such amount as the Administration may
recommend, but not exceeding the cost of
source development and main transmission
41
amended pd 198 and other related issuances
7
NO
NOW W, THEREFORE, I, FERDINAND EE..
section MARCOS, President of the Philippines, do
hereby order and instruct:
1. The Local Water Utilities
Office of the President of the Philippines Administration and Water Districts shall
Malacańang immediately review the facilities design,
implementation plan and rates and fees
Letter of Instructions No. 744 charged, with the objective of:
a. Reducing water rates to minimum
RELATIVE TTO
RELATIVE O RELIABL
RELIABLEE W
WAATER SUPPL
SUPPLYY levels;
AT RE ASONABLEE RA
ASONABL
REASONABL TES IN THE
RATES b. Eliminating unnecessary fees and
COUNTR YSIDE
COUNTRYSIDE regulatory measure;
c. Implementing expansion plans in
TO: The Minister of Public Works, phases so as to keep in step with growth in
Transportation and Communications demand without resulting in excess capacity;
d. Reducing cost of construction to a
The Chairman and Members, National minimum
Water Resources Council 2. The National Water Resources Council
shall eliminate all unnecessary regulatory
The General Manager, Local Water measures and fees particularly on privately
Utilities Administration owned and dug wells.
3. The Local Water Utilities
The Chairman and General Managers of Administration and each Water Districts shall
Water Districts prepare a public education program which
shall concentrate on the need and methods
All Others Concerned for water conservation, water rates, water
facilities requirements and need for financing,
WHERE
WHEREAS,AS, the provision of adequate and other related aspects of Water District
water supply at reasonable rates is a primary operations. They shall, in addition, prepare a
objective of the New Society; comprehensive program and system of public
WHERE
WHEREAS,AS, the implementation of a consultation, both formally in hearings and
national program for improved water supply informally through an education program,
is the responsibility of local organizations when considering increases in water rates,
particularly Water Districts and local particularly at the time when Water Districts
government units, assisted by the National initiate operation.
Water Resources Council and the Local Water 4. The Local Water Utilities
Utilities Administration; Administration shall review the composition
WHERE
WHEREAS,AS, there is need to improve of the Board of each Water District to make
planning, monitoring and implementing sure that consumers are properly and fully
activities at all levels, and to reduce water represented. It shall initiate the necessary
rates to minimum levels; changes.
42
amended pd 198 and other related issuances
43
amended pd 198 and other related issuances
8
from General Manager to Administrator and
section the officer(s) next in rank shall be designated
as Deputy Administrator(s).
DONE in the City of Manila, this 21st day
EXECUTIVE ORDER NO
NO.. 68 of November, in the year of Our Lord, Nine
Hundred and Eighty-Six.
MODIFYING PRESIDENTIAL DECREE
NO
NO.. 198, AS AMENDED
(SGD) CORAZON C. A QUINO
AQUINO
WHERE
WHEREAS,AS, the Local Water Utilities President of the Philippines
Administration (LWUA) was created by virtue
of Presidential Decree No. 198, as amended;
WHERE
WHEREAS,AS, Section 58 of Presidential
Decree No. 198, as amended, provides for a
General Manager of the Local Water Utilities
Administration (LWUA) while Section 23 of
the said Decree likewise provides for a general
manager for a local water district;
WHERE
WHEREAS,AS, there is a need to
distinguish the General Manager of the Local
Water Utilities Administration (LWUA) from
the general managers of the various local
water districts by changing the designation
of the General Manager of the Local Water
Utilities Administration (LWUA);
WHERE
WHEREAS,AS, as a consequence, the title
of the next in rank of the General Manager
of the Local Water Utilities Administration
(LWUA) should be similarly changed;
NO
NOW W, THEREFORE, I, CORAZON C.
AQUINO
QUINO,, President of the Philippines, do
hereby order:
SECTION 1. Section 58 of Chapter 58,
Title III of Presidential Decree No. 198, as
amended, is hereby modified to the extent
that the title of the head of the Local Water
Utilities Administration (LWUA) is changed
44
amended pd 198 and other related issuances
9
G. R. Nos. 95237-38
section Present:
FERNAN, C. J.,
NAR
NARVVAS
ASA,A,
SUPREME COUR T RULING ON W
COURT WAATER MELENCIO-HERRERA,
MELENCIO-HERRERA,
TS AS GO
DISTRICT
DISTRIC VERNMENT
GOVERNMENT -O
VERNMENT-OWNED
-OWNED GUTIERREZ, JR.,
AND CONTROLL ED CORPORA
CONTROLLED TIONS
CORPORATIONS CRUZ,
PARAS,
Republic of the Philippines FELICIANO,,
FELICIANO
Supreme Court PADILLA,
Manila BIDIN,
SARMIENT
ARMIENTO O,
EN BBANC
ANC GRIŃO-A QUINO
QUINO,,
GRIŃO-AQUINO
MEDIALDE
MEDIALDEA, A,
DAVAO CITY W WAATER DISTRIC
DISTRICT T, REGALADO &
CAGA
GAYYAN DE ORO CITY W WA ATER DISTRIC
DISTRICT T, DAVIDE, JR., JJ.
METRO CEBU W ATER DISTRIC
WA DISTRICT T,
ZAMBO ANGA CITY W
ZAMBOANGA WAATER DISTRIC
DISTRICT T, Promulgated: September 13, 199
19911
LEYTE METRO W WAATER DISTRIC
DISTRICT T, ————————————————————————
BUTU
BUTUANAN CITY W WAATER DISTRIC
DISTRICT T,
CAMARINES NOR NORTETE W
WAATER DISTRIC
DISTRICT T, DECISION
LA GUNA W
LAGUNA WAATER DISTRIC
DISTRICT T,
DUMA GUETE CITY W
DUMAGUETE ATER DISTRIC
WA DISTRICT T, MEDIALDE
MEDIALDEA, A, J.:
LA UNION W ATER DISTRIC
WA DISTRICT T, Whether or not the Local Water Districts
BAYB AY W
YBA WAATER DISTRIC
DISTRICTT, formed and created pursuant to the provisions
METRO LINGA YEN W
LINGAYEN ATER DISTRIC
WA DISTRICT T, of Presidential Decree No. 198, as amended,
URD ANET
URDANET
ANETA AW ATER DISTRIC
WA DISTRICT T, are government-owned or controlled
CO
COTTAB
ABAATO CITY W ATER DISTRIC
WA DISTRICT T, corporations with original charter falling
MARA
MARAWI WI CITY W WAATER DISTRIC
DISTRICT T, under the Civil Service Law and/or covered by
TAGUM W WA ATER DISTRIC
DISTRICT T, the visitorial power of the Commission on
DIGOS W WAATER DISTRIC
DISTRICT T, Audit is the issue which the petitioners entreat
BISLIG WWA ATER DISTRIC
DISTRICTT, this Court, en banc to shed light on.
and MEYC
MEYCA AUAYAN W WAATER DISTRIC
DISTRICT T Petitioners are among the more than five
Petitioners hundred (500) water districts existing
throughout the country formed pursuant to
versus the provisions of Presidential Decree No. 198,
as amended by Presidential Decrees Nos. 768
CIVIL SERVICE COMMISSION, and and 1479, otherwise known as the “Provincial
COMMISSION ON A UDIT
AUDIT Water Utilities Act of 1973.”
Respondents Presidential Decree No. 198 was issued
by the then President Ferdinand E. Marcos by
45
amended pd 198 and other related issuances
virtue of his legislative power under all the foregoing, the Commission
Proclamation No. 1981. It authorized the resolved, as it hereby resolves, to rule
different local legislative bodies to form and that Local Water Districts, being
create their respective water districts through quasi-public corporations created by
a resolution they will pass subject to the law to perform public services and
guidelines, rules and regulations therein laid supply public wants, the matter of
down. The decree further created and formed hiring and firing of its officers and
the “Local Water Utilities Administration” employees should be governed by the
(LWUA), a national agency attached to the Civil Service Law, rules and
National Economic and Development Authority regulations. Henceforth, all
(NEDA), and granted with regulatory power appointments of personnel of the
necessary to optimize public service from different local water districts in the
water utilities operations. country shall be submitted to the
The respondents, on the other hand, are Commission for appropriate action.”
the Civil Service Commission (CSC) and the (Rollo. p.22)
Commission on Audit (COA), both government However, on May 16, 1990, in G.R. No.
agencies and represented in this case by the 85760, entitled “Metro Iloilo Water District v.
Solicitor General. National Labor Relations Commission, et al.,”
On April 17, 1989, this Court ruled in the the Third Division of this Court ruled in a
case of Tanjay Water District v. Gabaton, et minute resolution:
al. (G.R. No. 63742, 172 SCRA 253): “x x x
Significantly, Article IX (B), “Considering that PD 198 is a
Section 2(1) of the 1987 Constitution general legislation empowering and/
provides that the Civil Service or authorizing government agencies
embraces all branches, subdivisions, and entities to create water districts,
instrumentalities, and agencies of the said PD 198 cannot be considered as
government, including government- the charter itself creating the Water
owned and controlled corporations Districts. Public respondent NLRC did
with original charters. Inasmuch as not commit any grave abuse of
PD No. 198, as amended, is the original discretion in holding that the
charter of the petitioner, Tanjay Water operative act, that created the Metro
District, and respondent Tarlac Water Iloilo Water District was the
District and all water districts in the resolution of the Sangguniang
country, they come under the coverage Panglungsod of Iloilo City. Hence, the
of the Civil Service Law, rules and employees of Water Districts are not
regulations. (Sec. 35, Art. VIII and Sec. covered by Civil Service Laws as the
37, Art. IX of PD No. 807).” latter do (sic) not have original
As an offshoot of the immediately cited charters.
ruling, the CSC issued Resolution No. 90-575, In adherence to the just cited ruling, the
the dispositive portion of which reads: CSC suspended the implementation of
“NOW THEREFORE, in view of Resolution No. 90-575 by issuing Resolution
46
amended pd 198 and other related issuances
Trajano, et al., (G. R. No. 65428, February 20, month shall not exceed fifty
1984, 127 SCRA 730), We already ruled that a percent (50%) of average net
water district is a corporation created monthly revenue. Said net
pursuant to a special law – P. D. No. 198, as revenue representing income
amended, and as such its officers and from water sales and sewerage
employees are covered by the Civil Service Law. service charges, les pro-rata
In another case (Hagonoy Water District share of debt service and
v. NLRC, G. R. No. 81490, August 31, 1988, expenses for fuel or energy for
165 SCRA 272), W ruled once again that local pumping during the preceding
water districts are quasi-public corporations fiscal year.
whose employees belong to the Civil Service. The Labor Arbiter failed to take
The Court’s pronouncement in this case, as into account the provisions of
extensively quoted in the Tanjay case, supra, Presidential Decree No. 1479, which
partly reads: went into effect on 11 June 1978. P.
“The only question here is D. No. 1479 wiped away Section 25
whether or not local water districts of PD 198 quoted above, and Section
are government-owned or controlled 26 of PD 198 was renumbered as
corporations whose employees are Section 25 in the following manner:
subject to the provisions of the Civil “Section 26 of the same decree
Service Law. The Labor Arbiter PD 198 is hereby amended to read as
asserted jurisdiction over the alleged Section 25 as follows:
illegal dismissal of private respondent Section 25. Authorization.
Villanueva by relying on Section 25 – The district may exercise all
of Presidential Decree No. 198, known the powers which are expressly
as the Provincial Water Utilities Act granted by this Title or which
of 1973” which went onto effect in are necessarily implied from or
25 May 1973, and which provides as incidental to the powers and
follows: purposes herein stated. For the
Exemption from Civil purpose of carrying out the
Service. - The district and its objectives of this Act, a district
employees, being engaged in a is hereby granted the power of
proprietary function, are hereby eminent domain, the exercise
exempt from the provision of the thereof shall, however, be
Civil Service Law. Collective subject to review by the
Bargaining shall be available Administration.
only to personnel below Thus, Section 25 of PD 198
supervisory levels: Provided, exempting the employees of water
however, That the total of all districts from the application of the
salaries, wages, emoluments, Civil Service Law was removed from
benefits or other compensation the statute books:
paid to all employees in any “ x x x.
48
amended pd 198 and other related issuances
(SGD). ADBUL
ADBULW WAHID A. BIDIN
Associate Justice
56
amended pd 198 and other related issuances
10
where feasible.
section NO
NOW W, THEREFORE, I, FIDEL VV.. RAMOS,
President of the Philippines, by virtue of the
powers vested in me by law, consistent with
EXECUTIVE ORDER NO
NO.. 286 the reorganization plan proposed by the Joint
Executive-Legislative Water Crisis Commission,
REORGANIZING THE METROPOLIT
METROPOLITANAN do hereby order:
WATER
TERWWORK
ORKSS AND SEWERA GE SSYSTEM
SEWERAGE YSTEM SECTION 1. Framework and Objectives.
(MW SS) AND THE LLOC
(MWSS) OC AL W
OCAL WAATER UTILITIES - The reorganization of the MWSS and LWUA
ADMINISTRA TION (L
ADMINISTRATION WU
(LWU A) PURSU
WUA) ANT TTO
PURSUANT O shall be undertaken in the context of the
REPUBLIC AACCT NO
NO.. 804 1, O
8041, THER
OTHER WISE
THERWISE Administration’s framework of governance.
KNOWN AS THE NA
KNOWN TIONAL W
NATIONAL ATER CRISIS
WA Accordingly, the role of the national
ACT OF 1995 government shall be to steer rather than row.
It shall, to the extent possible, encourage the
WHERE
WHEREAS, AS, as enunciated in Republic Act private sector to participate in the delivery of
No. 8041, it is the “declared policy of the State public goods through franchising, concession,
to adopt urgent and effective measures to management, privatization or other
address the nationwide water crisis which arrangements of the concerned agencies
adversely affects the health and well-being of operations or facilities.
the population, food production and Prudence and restraint in the use of
industrialization process;” government resources shall be exercised.
WHERE
WHEREAS, AS, consistent with this policy, Efforts at streamlining and correcting
Section 7 of Republic Act No. 8041 authorized dysfunctions in the operations and structures
the President to revamp and reorganize the of the agencies concerned shall be undertaken
MWSS and the LWUA; to achieve more with less. The delivery of more
WHERE
WHEREAS, AS, the Joint Executive-Legislative effective, efficient, and responsible public
Water Crisis Commission established under service shall be paramount.
the same law has, after consulting SECTION 2. Reorganization Plan for the
representatives of the MWSS and the LWUA, MWSS. - The MWSS shall be reorganized, as
proposed a reorganizational plan for the said follows:
agencies; and 2.1. Officers. - The MWSS shall be headed
WHERE
WHEREAS, AS, the proposed reorganization by an Administrator who shall be its chief
is consistent with the Administration’s executive officer. He shall be assisted by two
framework for governance, having been (2) Senior Deputy Administrators, one for
designed to streamline and correct Operations and Customers Service and another
dysfunctions in the structure and operations for Resource Development and Management.
of the MWSS and the LWUA to enable these There shall, moreover, be four (4) Deputy
agencies to become more effective, efficient Administrators, one (1) for Engineering and
and responsive to the country’s needs for Construction, one (1) for Finance and
potable water, as well as prepare the Administration, and two (2) for Customers
groundwork for their eventual privatization, Service. The Senior Deputy Administrators and
57
amended pd 198 and other related issuances
Deputy Administrators shall be appointed by meter installation and reading, billing and
the Board, upon the recommendation of the collection
Administrator. ii. Facilities Operation Maintenance
2.2 Organization and Management. - The and Improvement
Administrator, with the assistance of his iii. Meter Management
Senior Deputy Administrators, shall provide iv. Public Information
overall direction and control over the (d) The Office of the Senior Administrator
operations and administration of MWSS. for Resource Development and Management
(a) The Office of the Administrator shall shall have direct supervision over the Deputy
have the following services and/or departments Administrators for Engineering and
directly under its supervision: Construction, and for Administration and
i. Corporate Planning Service Finance.
ii. Internal Audit Service (e) The Office of the Deputy Administrator
iii. Management Information Service for Engineering and Construction shall
iv. System Development Department undertake planning and programming,
v. Computer Service Department monitoring, and evaluation of projects for the
vi. Legal Department development and expansion of waterworks
vii. Public Affairs Department and sewerage facilities. Specifically, it shall
(b) The Office of the Senior Deputy have direct supervision over the following
Administrator for Operations and Customers departments:
Service shall be in charge of the operations i. Project Planning
and maintenance of the MWSS plants and ii. Project Design
other facilities, and the actual delivery of iii. Applied Research and Quality
service to water users. It shall have direct Control
supervision of the following departments: The same Deputy Administrator shall
i. Water Production have direct supervision over the Project
ii. Water Transmission and Meter Management Office, which comprises a pool
Management of project managers, presently consisting of
iii. Sewerage five (5).
(c) To ensure more effective and (f) The Office of the Deputy Administrator
responsive delivery of water services and for Finance and Administration shall be
increase revenues, Customers Service shall be responsible for resource management and
divided into two Districts, each District to be provision of administrative support services.
headed by a Deputy Administrator. Each It shall consist of the following departments:
District shall have four service areas with each i. Accounting
Area (or department) performing the following ii. Managerial Finance and Budget
functions, as well as such other functions that iii. Human Resource Development and
may be assigned to it consistent with the Manpower Planning
purpose of decentralizing to ensure better iv. General Services
public service: v. Personnel Management and Health
i. Revenue Generation, including Services
58
amended pd 198 and other related issuances
60
amended pd 198 and other related issuances
ANNEX A
METROPOLITAN W
METROPOLITAN ATER
WA WORK
TERW S & SEWERA
ORKS GE SSYSTEM
SEWERAGE YSTEM ORGANIZATIONAL
ORGANIZATIONAL
STRUCTURE
STRUCTURE
61
amended pd 198 and other related issuances
ANNEX B
LOCAL W
OCAL ATER UTILITIES ADMINISTRA
WA TION ORGANIZA
ADMINISTRATION TIONAL STRUC
ORGANIZATIONAL TURE
STRUCTURE
62
amended pd 198 and other related issuances
11
WHERE
WHEREAS, AS, there is a need to tap
section financing resources available to the water
sector, including international grants, and
funding from government financing
MALACAŃANG institutions (GFIs), private financing
Manila institutions (PFls), and LGUs;
WHERE
WHEREAS,AS, there is a need to review and
BY THE PRESIDENT OF THE PHILIPPINES rationalize current financing policies for the
Philippine water supply and sewerage sector
EXECUTIVE ORDER NO
NO.. 279 to allow for the efficient flow of resources
thereto;
INSTITUTING REFORMS IN THE WHERE
WHEREAS,AS, cognizant of the urgency of
FINANCING POLICIES FOR THE W WAATER the aforecited need, the NEDA Board passed a
SUPPL
SUPPLYY AND SEWERA GE SEC
SEWERAGE SECT T OR AND resolution providing for the reforms in the
WATER SER VICE PRO
SERVICE VIDERS AND
PROVIDERS financing of the water supply and sewerage
PRO
PROVIDING TIONALIZA
RATIONALIZA
VIDING FOR THE RA TION OF
TIONALIZATION sector and the creation of an Oversight
LWU A’S ORGANIZA
WUA’S TIONAL STRUC
ORGANIZATIONAL TURE
STRUCTURE Committee for the purpose of coordinating
AND OPERA TIONS IN SUPPOR
OPERATIONS SUPPORTT THEREOF
THEREOF.. and overseeing the implementation of said
financing reforms in the Philippine water
WHERE
WHEREAS AS
AS, Presidential Decree No. 198 supply and sewerage sector;
(“PD 198”) established the Local Water Utilities WHERE
WHEREAS,AS, the implementation of the
Administration (LWUA), mandating it to serve recommended reforms requires that LWUA, as
as a “specialized lending institution” for the the focal government agency for financing and
promotion, development and financing of local institutional development of local WDs,
water utilities; refocus its objectives and rationalize its
WHERE
WHEREAS,AS, the Local Government Units operation;
(LGUs) are responsible for the provision of basic WHERE
WHEREAS,AS, by virtue of’ Executive Order
services and facilities as enumerated under 123, s. of 2002, the regulation of tariffs of
Section 17 of the Republic Act. No. 7160 (Local WDs will be undertaken by the National Water
Government Code), including among others, the Resources Board (NWRB) with a proviso that
provision of water supply and sewerage LWUA, consistent with its mandate under PD
services; 198, may continue reviewing the tariff of WDs
WHERE AS, shifts in government financing
WHEREAS, in which it has financial exposure with the
policies and constraints in the availability of end view of ensuring their financial viability.
financing from the National Government, and WHERE
WHEREAS, AS, the LWUA is currently
lack of investor confidence in the water supply attached to the Department of Public Works
and sewerage sector and limited capital stock and Highways (DPWH) by virtue of Executive
and domestic and foreign borrowing authority Order No. 124, s. of 1987;
have constrained LWUA from providing WHERE
WHEREAS,AS, rationalization of LWUA’s
financing assistance to qualified Water operations require closer policy and program
Districts (WDs); coordination with the Office of the President
63
amended pd 198 and other related issuances
the Oversight Committee. The Oversight In addition, the LWUA Board of Trustees (BOT)
Committee may subject the classification of shall include representatives from the agency
the WSPs to audit; to which it is attached.
(e) Prepare an action plan for the reforms SEC. 9. Rationalization of LLWU WU A’s
WUA’s
in the financing policies in the water supply organizational structure and operations -
and sewerage sector for the near term and the LWUA, subject to applicable laws and
medium term including incentive schemes that regulations, is hereby directed to review its
appropriate agencies may consider to offer to organizational structure and internal policies
GFIs and PFIs to encourage such institutions and programs, rationalize its operation and
to lend to WSPs; refocus its objectives to include other WSPs,
(f) Prepare and submit quarterly reports whenever feasible or applicable to facilitate
to the agency to which LWUA is attached; and implementation of and conform with the
(g) Review the charter of LWUA and when policies enunciated in this Order. To this extent,
necessary, propose amendments thereto. LWUA shall constitute and designate from its
The Oversight Committee shall current organizational set-up, a Water
immediately organize itself and set its policies Development Group (WDG), a Water
and procedures to facilitate the Development Financier (WDF) and a Technical
implementation of the said reforms in the Assistance Group (TAG), or similar structures,
water supply and sewerage sector. with functions and responsibilities as follows:
SEC. 6. TTechnical
echnical Secr etariat - The
Secretariat A. Water Development Group (WDG)
Oversight Committee shall establish a The WDG shall have the following
Technical Secretariat under DOF to be staffed responsibilities;
by personnel assigned by government agencies (a) The WDG which shall be primarily
comprising it. It shall serve as the official charged with the continuation of LWUA’s
repository of all data concerning the current institutional development services
classification and evaluation of all WSPS, aimed at graduating WSPs, as well as the
SEC. 7. Expenses - Members of the classification of WSPs.
Oversight Committee and its Technical (b) The WDG shall classify the WSPs into
Secretariat shall be entitled to receive either creditworthy, semi-creditworthy, pre-
honoraria and/or reimbursement of expenses creditworthy or non-creditworthy for the
as may be allowed subject to availability of purpose of determining the appropriate
funds and prevailing rules and regulations. sources of financing. WSPs initially classified
by WDG as creditworthy and/or non-
PAR
ARTT III creditworthy shall be subject to further review
LOCAL W
OCAL WAATER UTILITIES by the Oversight Committee pursuant to
ADMINISTRA
ADMINISTRATIONTION Section 5 of this Order.
WSPs classified as semi-creditworthy
SEC. 8. TTrransfer to OP - The LWUA, and pre-creditworthy and non-credit worthy
presently attached to the DPWH, is hereby shall be subject to periodic review by the WDG
attached to OP until such time it is transferred at least once every three (3) years for purposes
to DOF as provided for under Section 10 hereof. of reclassification. At their own instance,
66
amended pd 198 and other related issuances
WSPs may request the WDG for an annual 90 days from its effectivity and submit the
reclassification review. same to the Oversight Committee. LWUA shall
(c) Graduation - The WDG shall develop a conduct its operations in a transparent,
graduation plan for non-creditworthy, pre- efficient and effective manner.
creditworthy and semi-creditworthy WSPs (c) Strengthening of Collection Function
based on the following graduation initiatives: - In the exercise of its lending functions, LWUA
LWUA-WDG shall monitor the shall also strengthen its collection function
implementation of the graduation plan and from WDs as well as enhance its payment of
evaluate the effectiveness of the graduation loans to LWUA creditors. To this effect, all
initiatives undertaken by the semi- collections arising from LWUA’s receivables
creditworthy, pre-creditworthy and non-credit shall constitute a special fund to be
worthy WSPs. apportioned between debt servicing of LWUA
LWUA-WDG shall initially cover the loans and the additioned funding necessary
classification and graduation plan and to support the LWUA’s graduation and
initiatives of WDs. It may also cover other technical assistance functions under the WDG
WSPs as deemed applicable or feasible. and the TAG.
(d) Reporting - LWUA-WDG shall prepare (i) Cost Recovery Tariff Initiatives - These
and submit quarterly reports on its activities are initiatives aimed at achieving widespread
to the Oversight Committee and DOF. full cost recovery tariffs in the long term. The
B. Water Development Financier (WDF) initiatives shall include the inventory of non-
The WDF shall have the following credit worthy, semi-creditworthy and pre-
responsibilities: creditworthy WSPs to determine the degree
(a) The WDF which shall be primarily to which tariffs are sufficient to accumulate
tasked to enhance and/or strengthen LWUA’s at least a minimal reserve for collateral or
lending functions and evaluate the applications counterpart equity. In. addition, should the
for financial assistance. LGUs invest in WSPs, they should be allowed
(b) Re-orientation Towards Banking recovery of and’ some minimal return on its
Principles - LWUA, through the WDF, shall investment.
enhance and/or strengthen its lending policies (ii) Amalgamation and Private Sector
and functions to carry out and implement its Participation Initiatives - These are initiatives
mandate to provide financing particularly to aimed at achieving economies of scale and
non-credit worthy, pre-creditworthy and semi- efficiency of service through the use of
creditworthy WDs, grounded on sound identified amalgamation and private sector
development banking principles. To this effect, participation techniques based on technical,
LWUA shall adopt development banking geographical, economic and other indicators.
principles which cater to the financing needs LWUA shall develop the necessary
of WSPs and shall develop its own procedures guidelines during the transition period for the
for the monitoring of its loan portfolio. LWUA amalgamated WDs and LGUs.
shall develop lending policies and guidelines (iii) Management Structure and
in pursuit of the policies and principles Governance - These initiatives pertain to
espoused under this Executive Order within institutional improvements within the WSPs
67
amended pd 198 and other related issuances
structure leading to greater accountability and (c) Above a certain value threshold,
improved service. which threshold shall be determined by LWUA,
(iv) LGU/WSP Resource Coordination for TAG shall extend project-related technical
Credit Enhancement. - This refers to the assistance to semi-creditworthy WSPs on a
pooling of resources between semi- competitive basis, consistent with applicable
creditworthy and/or pre-creditworthy or semi- laws, rules and regulations on government
creditworthy and/or non-creditworthy WSPs procurement.
and the relevant LGUs in their service areas to (d) LWUA-TAG shall extend project-related
finance water supply and sewerage projects assistance to non-creditworthy and pre-
or create the collateral needed to borrow from creditworthy WDs which may be with or
GFls and PFIs. without charge within a certain value
(v) Education - This refers to threshold to be determined by LWUA to
communication and information initiatives on support projects funded by LWUA-WDF.
the benefits of graduation initiatives including SEC. 10. Within thirty (30) days from the
cost recovery tariffs, amalgamation, private effectivity of this Order, LWUA shall review its
sector participation and LGU/WSP resource current structure and submit its rationalized
coordination. plan to the Oversight Committee, consistent
(vi) Technical Assistance to non-credit with the policy reforms enunciated under this
worthy and pre-creditworthy WSPs - This Order. The Oversight Committee shall evaluate
refers to technical assistance to support the rationalization plan within thirty (30) days
graduation initiatives which may be given with from receipt. LWUA, with the endorsement of
or without charge within a value threshold the Oversight Committee, shall submit the
that may be determined by LWUA-WDG. rationalization plan to the President for final
(d) Segregation of LWUA Loan Portfolios approval.
- For purposes of identification and Upon approval by the President of the
administrative efficiency, LWUA shall maintain reforms in the water supply and sewerage
separate accounting, payment and collection sector, including the rationalized organization
systems for existing loans and loans to be and manpower structure of LWUA, LWUA shall
granted henceforth pursuant to the reforms then be transferred to DOF. Pursuant to Section
instituted in this Executive Order. 51 of PD 198, at least three (3) of the trustees
C. Technical Assistance Group (TAG) must be employees of the National Government.
TAG shall have the following DOF shall always be represented in the LWUA-
responsibilities: BOT.
(a) TAG shall continue LWUA’s program
of providing technical assistance to WSPs, in PART IV
ART
accordance with the proceeding sections. FINANCING POLICIES
(b) TAG shall extend project-related
technical assistance to GFIs and credit-worthy SEC. 11. Responsibility of LLGUs
GUs - In line
WSPs on a competitive basis, consistent with with the principle of devolution of the provision
applicable laws, rules and regulations on of basic services under the Local Government
government procurement. Code, LGUs shall be encouraged to provide
68
amended pd 198 and other related issuances
delivery of water supply and sewerage services LWUA-WDG shall provide guidelines to
through, but not limited to, investments in, or encourage graduation, which shall be
loans to WSPs. LGUs shall as a general policy, approved by LWUA-BOT for submission to the
be financially and operationally responsible Oversight Committee.
for the WSPs within their respective SEC. 13. Role of Financial Institution –
jurisdictions. The classification of WSPs shall merely be a
SEC. 12. Sources of Financing - The determinant of eligibility for the various
sources of financing for the water supply and sources of financing, but shall not in any way
sewerage sector shall be as follows: be construed as an outright guarantee of
(a) Creditworthy WSPs shall be eligible actual financing from the designated source.
to source financing at commercial lending
rates from GFIs and PFIs. Pursuant thereto, PARTV
ART
LWUA, with respect to creditworthy WDs shall FINAL PROVISIONS
enhance and streamline its waiver procedures
to effect the reform objectives/policies SEC. 14. The Oversight Committee shall
enunciated herein. GFIs shall strengthen their formulate the IRR of this Order within 90 days
skills base and develop lending programs from its effectivity, which shall be published
specially tailored to the needs of the water in accordance with the requirements of the
supply and sewerage sector. Administrative Code of 1987 and other
(b) Semi-creditworthy WDs snail be pertinent laws.
eligible to source concessional debt financing SEC. 15. The Oversight Committee shall
from the LWUA-WDF, as well as GFIs and PFIs cease to exist three (3) years after the approval
when possible. by the President of the rationalized
(c) Pre-creditworthy WDs shall be eligible organization and manpower structure of
to source grants from donors and deep LWUA, with any remaining function of the
concessional financing from the LWUA-WDF. Committee to be assumed by the DOF.
(d) Non-creditworthy WDs shall continue SEC. 16.. Any violation of this Order and
to be eligible for financing under the LWUA- of its IRR shall be subject to disciplinary action
WDF. However, LGUs are hereby encouraged and other penalties as provided for in said
to provide financial and operational support IRR and other relevant laws and issuances.
for such WDs and other WSPs within their SEC. 17. If any provision of this Order is
respective jurisdictions. DILG and MDFO shall declared unconstitutional or invalid, the other
provide the necessary technical and financial provisions not affected thereby shall remain
support within their respective mandates. in full force and effect.
(e) WSPs, including eligible WDs, can SEC. 18. All orders, executive issuances,
access financing from GFIs, PFIs, MDFO, and rules and regulations, administrative
LGUs, whenever possible. resolutions, or parts thereof, inconsistent with
LWUA-WDG shall provide the necessary the provisions of this Order are hereby repealed
incentives for graduation such as extension or modified accordingly.
of greater flexibility in WD’s operation as a SEC. 19. This Order shall take effect upon
WD graduate from one stage to the next. its publication in the Official Gazette or in a
69
amended pd 198 and other related issuances
By the President:
(SGD) ALBER
ALBERT TO G. ROMUL O
ROMULO
Executive Secretary
70
amended pd 198 and other related issuances
following terms are defined: and operational indicators set by the Oversight
(a) Amalgamation – consolidation, joint Committee.
operation or annexation of two or more WSPs (k) Pre-Creditworthy WSPs – WSPs
resulting into a WD. which are not likely to become creditworthy
(b) Classification – categorization of in the medium-term due to performance issues
WSPs into non-creditworthy, pre-creditworthy, but can demonstrate the potential for
semi-creditworthy or creditworthy to creditworthiness in the long-term, as may be
determine proper allocation of financing. determined based on relevant financial and
(c) Cost Recovery Tariff – tariff that is operational indicators set by the Oversight
required to cover investment in capital Committee.
expenditures, operating expenditures and debt (l) Private Financial Institutions (PFIs) –
servicing, including minimal reserve for private entities which are primarily organized
collateral or counterpart equity, and reserve for the purpose of extending credit facilities
for recovery of and some minimal return on to consumers and to industrial or agricultural
LGU’s investment/infusion in the WDs or WSPs. enterprises. Financing institutions other than
(d) Creditworthy WSPs – financially self- government financial institutions. These
sustaining WSPs capable of accessing include universal and commercial banks.
financing from GFIs and/or PFIs. (m) Semi-Creditworthy WSPs – WSPs
(e) Government Financial Institutions with the demonstrated ability to achieve
(GFIs) – Development Bank of the Philippines creditworthiness in the short-term, based on
(DBP), Land Bank of the Philippines (LBP) and relevant financial and operational indicators
other financing institutions owned and set by the Oversight Committee, but either lack
controlled by the Government. the full criteria for creditworthiness or do not
(f) Graduation – the progression of a WSP meet the criteria consistently.
from non-creditworthy to pre-creditworthy (n) Short Term – period covering one year
status or from a pre-creditworthy to semi- (1) to less than three (3) years.
creditworthy status and/or from a semi- (o) Technical Assistance – includes
creditworthy to creditworthy status based on feasibility study, detailed engineering design,
improvements in financial and operational review of feasibility study and engineering
indicators. design, preparation of work program,
(g) Local Government Units (LGUs) – construction supervision, start-up operations,
territorial and political subdivisions of the operations and maintenance assistance,
Philippines, consisting of provinces, cities, rehabilitation of dilapidated systems, well
municipalities and barangays. drilling and construction of new wells,
(h) Long Term – period covering more than rehabilitation and repair of old wells and
five (5) years, emergency repair of water supply system.
(i) Medium Term – period covering Financing for technical assistance involving
between three (3) and five (5) years. pre-feasibility or feasibility studies, project
(j) Non-Creditworthy WSPs – WSPs with identification, sector survey, institution
potential to reach pre-creditworthy status in building activities including training, shall be
the medium-term, based on relevant financial charged against beneficiaries unless grants
72
amended pd 198 and other related issuances
are available for the purpose. On the other EO 279. Further, LWUA shall conduct its
hand, consultancy/advisory services related operations in a transparent, efficient and
to construction activities, including detailed effective manner.
engineering shall be considered as part of the LWUA shall constitute and designate from
project capital cost and may be financed by its current organization set-up, a Water
the project loan. Development Group (WDG), a Water
(p) Value Threshold – the level at which Development
LWUA may grant project related technical Financier (WDF) and a Technical
assistance for free to the PCW and NCW WSPs Assistance Group (TAG), or similar structures,
without affecting LWUA’s viability. This will with functions and responsibilities as follows:
be determined by LWUA on a yearly basis 5.1 A Water Development Group (WDG)
depending on LWUA’s capability to absorb WDG shall have the following
such additional cost. responsibilities:
(q) Water Service Providers (WSPs) – local (a) It shall be primarily charged with the
water utilities such as WDs, LGU-run water continuation of LWUA’s current institutional
utilities, rural waterworks and sanitation development services aimed at graduating
associations (RWSAs), and barangay WSPs, as well as the classification of WSPs.
waterworks and sanitation associations (b) It shall classify the WSPs into either
(BWSAs), regardless of location. creditworthy, semi-creditworthy, pre-
Section 5. Responsibilities creditworthy or non-creditworthy for the
The implementation of the recommended purpose of determining the appropriate
reforms requires that LWUA as the local sources of financing WSPs initially classified
government agency for financing and by WDG as creditworthy and/or non-
institutional development of local WDs, creditworthy shall be subject to further review
focuses its objectives and rationalizes its by the Oversight Committee pursuant to
operations. Accordingly, the rationalization Section 5.2(b) of these IRR.
of LWUA’s organizational structure, operation LWUA shall initially cover the
and refocusing of its objectives, and the classification and graduation plan and
implementation of the reforms in the financing initiatives of WDs. It may also cover other
policies for the water supply and sewerage WSPs as deemed applicable or feasible.
sector, as defined in Section 2 of these IRR, To facilitate the classification of the WDs,
require close policy coordination among the LWUA shall prepare the criteria for
concerned government agencies. classification and submit the same to the
5.1 Local Water Utilities Administration Oversight Committee for review within 30 days
LWUA, subject to applicable laws and upon effectivity of EO 279.
regulations, shall review its organizational The criteria shall consider:
structure and internal policies and programs, i. financial indicators such as current
rationalize its operations and refocus its ratio, debt service ratio, debt/equity ratio,
objectives to include WSPs, whenever feasible profit margin ratio and cash flow ratio; and
or applicable, to facilitate implementation of ii. operational indicators such as
and conform with the policies enunciated in collection efficiency; non-revenue water and
73
amended pd 198 and other related issuances
reforms in the water supply and sewerage enunciated under EO 279. However, LWUA shall
sector, including the rationalized organization work out an arrangement to GFIs/PFIs to
structure and the staffing pattern of LWUA, ensure repayment of LWUA loan to WSP. GFIs
LWUA shall then be attached to the DOF. shall strengthen their skills base and develop
Pursuant to Section 51 of PD 198, at least lending programs specially tailored to the
three (3) of the trustees must be employees of needs of the water supply and sewerage
the National Government (NG). NG sector;
representatives must be at least Director level, b. Creditworthy WDs may be eligible for
DOF shall always be represented in the LWUA financing from LWUA in case no funds are
Board of Trustees. available from other sources, subject to
Section 7. Expenses prioritization criteria giving preference to NCW
Members of the Oversight Committee and up to SCW WDs/WSPs, availability of funds
its Technical Secretariat shall be entitled to and provided that these WDs undertake
receive honoraria and/or reimbursement of graduation initiatives such as pooling of
expenses as may be allowed subject to resources, amalgamation, among others with
availability of funds and prevailing rules and the end objective of accessing financing from
regulations. GFIs/PFIs and sources other than LWUA;
c. Semi-creditworthy (SCW) WDs shall
FINANCING POLICIES be eligible to source concessional project
financing as grants from donor agencies,
Section 8. Responsibility of LLGUs
GUs financial assistance made available through
In line with the principle of devolution of representative of the District, LGU financial
the provision of basic services under the Local assistance packages or financing from other
Government Code, LGUs shall be encouraged donors made available and are coursed
to provide delivery of water supply and through the LWUA-WDF. Said WSPs shall be
sewerage through, but not limited to, re-oriented towards meeting the lending
investments in, or loans to WSPs. LGUs shall criteria of GFIs and PFIs to qualify them for
as general policy, be financially and eventual financing in the medium term
operationally responsible for the WSPs, whenever possible;
excluding WDs and RWSAs, within their d. Pre-creditworthy (PCW) WDs shall be
respective jurisdictions. eligible from donors and deep concessional
Section 9. Source of Financing financing from the LWUA-WDF.
The source of financing for the water e. Non-creditworthy (NCW) WDs shall
supply and sewerage sector shall be as continue to be eligible for financing under the
follows: LWUA-WDF. However, LGUs are hereby
a. Creditworthy WSPs shall be eligible encouraged to provide financial and
to source financing at commercial lending operational support for such WDs and other
rates from GFIs and PFIs. Pursuant thereto, WSPs within their respective jurisdictions. DILG
LWUA with respect to creditworthy WDs shall and MFC shall provide the necessary technical
enhance and streamline its waiver procedures and financial support within their respective
to effect the reform objectives/policies mandates;
77
amended pd 198 and other related issuances
78
amended pd 198 and other related issuances
12
and benefits as the Board may prescribe
section subject to the approval of the Administration.”
Sec. 2. Section 23 of Presidential Decree
No. 198, as amended, is hereby amended to
Republic of the Philippines read as follows:
Congress of the Philippines “Sec. 23. The General Manager. - At the
Metro Manila first meeting of the Board, or as soon
thereafter as practicable, the Board shall
Twelfth Congress
Congress appoint, by a majority vote, a general manager
and shall define his duties and fix his
Third Regular Session compensation. Said officer shall not be
removed from office, except for cause and after
Begun and held in Metro Manila, on due process.”
Monday, the twenty-eighth day of July, two Sec. 3. Separability Clause. - If any
thousand and three. section or provision of this Act is declared
unconstitutional or invalid, the other sections
Republic Act No. 9286
Act or provisions not affected thereby shall
continue to be in force and effect.
AN A CT FUR
AC THER AMENDING
FURTHER Sec. 4. Repealing Clause. - All acts,
PRESIDENTIAL DECREE NO NO.. 198, decrees, executive orders, rules and
OTHER WISE
THERWISE KNO WN
KNOWN AS “THE regulations, part or parts thereof inconsistent
PRO VINCIAL W
PROVINCIAL ATER UTILITIES A
WA CT OF
AC with the provisions of this Act are hereby
1973”, AS AMENDED repealed or modified accordingly.
Sec. 5. Effectivity Clause. - This Act shall
Be it enacted by the Senate and House of take effect upon its approval.
Representatives of the Philippines in Congress Approved.
assembled:
Section 1. Section 13 of Presidential (Signed) JOSE DE VENECIA JR.
Decree No. 198, as amended, is hereby amended Speaker of the House of Representatives
to read as follows:
“Sec. 13. Compensation. - Each director (Signed) FRANKLIN M. DRIL ON
DRILON
shall receive per diem to be determined by the President of the Senate
Board, for each meeting of the Board actually
attended by him, but no director shall receive This Act which is a consolidation of
per diems in any given month in excess of the Senate Bill No. 2727 and House Bill No. 4861
equivalent of the total per diem of four was finally passed by the Senate and the
meetings in any given month. House of Representatives on February 6, 2004
“Any per diem in excess of One hundred and February 7, 2004, respectively.
fifty pesos (P150.00) shall be subject to the
approval of the Administration. In addition
thereto, each director shall receive allowances
79
amended pd 198 and other related issuances
(Signed) ROBER
ROBERTTO PP.. NAZARENO
Secretary General
House of Representatives
(Signed) GL GLORIA
ORIA MA MACC AP
APAA GAL
GAL--
ARROYYO
ARRO
President of the Philippines
80
amended pd 198 and other related issuances
13
and efficiency and with the overall national
section development objectives;
WHERE
WHEREAS AS
AS, under Section 31, Chapter
10, Book III of Executive Order No. 292, series
EXECUTIVE ORDER NO
NO.. 387 of 1987, otherwise known as the
“Administrative Code of 1987”, the President,
TRANSFERRING THE LLOC OC AL W
OCAL WA
ATER in order to achieve simplicity, economy and
UTILITIES ADMINISTRA TION
ADMINISTRATION FROM THE efficiency, has the continuing authority to
OFFICE OF THE PRESIDENT TTO O THE reorganize the administrative structure of the
DEPAR TMENT OF PUBLIC W
ARTMENT
DEPAR ORK
WORK
ORKS S AND Office of the President.
HIGHW
HIGHWA AYS (DPWH) AND
STRENG THENING THE SUPER
STRENGTHENING VISION BBYY
SUPERVISION NO
NOW W THEREFORE, I, GL GLORIA
ORIA
THE DPWH SECRET AR
ARYY O
SECRETAR VER THE
OVER MA
MAC CAP
APAA GAL -ARROYYO , President of the
-ARRO
GAL-ARRO
METROPOLIT
METROPOLITAN AN WWAATER
TERW W ORK
ORKS S AND Republic of the Philippines, by virtue of the
SEWERA
SEWERAGEGE SSYSTEM.
YSTEM. powers vested in me by law, do hereby order:
SECTION 1. Tr ansfer of LLWU WU
WUA A to
WHERE
WHEREASAS
AS, the Local Water Utilities DPWH . – The Local Water Utilities
Administration (LWUA), which was created by Administration (LWUA) is hereby transferred
virtue of Presidential Decree No. 198, as from the Office of the President to the
amended, is currently attached to the Office Department of Public Works and Highways
of the President by virtue of Executive Order (DPWH).
No. 279, series of 2004; SECTION 2. A uthority to Exer cise
Exercise
WHERE
WHEREAS AS
AS, the Metropolitan Administrative Supervision. – The Secretary
Waterworks and Sewerage System (MWSS) of Public Works Highways is hereby authorized
was created by virtue of Republic Act No. 6234, to exercise administrative supervision over the
as amended, and is currently attached to the LWUA and the MWSS, with the objective of
DPWH by virtue of Executive Order No. 124, providing a concerted and well-coordinated
series of 1987; effort in formulating policies, as well as
WHERE
WHEREASAS
AS, there is a need for a concerted planning and implementing programs and
and well-coordinated effort in formulating projects for the water sector.
policies as well as planning and implementing For the purpose, the DPWH Secretary
programs and projects for the water sector; shall among others:
WHERE
WHEREASAS
AS, there is a need to speed-up a. Coordinate and oversee the policy-
the provision of potable water in every making processes of the respective governing
barangay; boards of the LWUA and the MWSS;
WHERE
WHEREASAS
AS, the DPWH is mandated to b. Require the submission of reports as
ensure that the planning, design, construction the DPWH Secretary may deem necessary,
and maintenance of infrastructure facilities including periodic reports of their respective
such as national highways, flood control and policies and the implementation of their major
water resource development systems are in programs and projects, and their respective
accordance with the highest level and safety audited financial statements within sixty (60)
81
amended pd 198 and other related issuances
82
amended pd 198 and other related issuances
14
operation and improved performance and
section productivity.
NO
NOW W, THEREFORE, I, GL ORIA
GLORIA
MA
MAC CAP
APA AGAL ARROARROYYO, President of the
MALACAŃANG Philippines, by virtue of the powers vested in
MANILA me by law, do hereby order the following:
SECTION 1. Cor Coree functions
functions.. LWUA shall
EXECUTIVE ORDER NO
NO.. 42
4211 proved institutional development services, and
strengthen its, ending practices and policies
IMPLEMENTING THE REFOCUSING OF
IMPLEMENTING on granting financial assistance grounded on
TIONS AND ORGANIZA
FUNCTIONS
FUNC TIONAL
ORGANIZATIONAL sound development banking principles aimed
STRUC TURE OF THE LLOC
STRUCTURE OC AL W
OCAL ATER
WA at graduating water districts (WDs) and other
UTILITIES ADMINISTRATION UNDER EO
ADMINISTRATION water service providers (WSPs), allowing
279 AND PROVIDING OPTIONS AND efficient use of financial resources, extend
BENEFIT
BENEFITSS FOR EMPL
EMPLOOYEES WHO MAMAYY technical assistance to WDs/WSPs and
AFFEC TED THEREON
AFFECTED addressing the need for a greater number of
WDs/WSPs.
WHERE AS, it is the policy of government
WHEREAS, SECTION 2. Specific Shifts in PPolic olic
olicyy
of adopt institutional reforms and effect Directions, Functions, Programs, Activities
functional, operational and organizational and Str ategies
ategies.. To fully implement the reform
Strategies
adjustments in the bureaucracy to objectives/policies in the water supply and
continuously improve the quality and sewerage sector, LWUA shall:
efficiency of public service delivery and a. Improve investor’s confidence in the
transform it into an efficient and results- water supply and sewerage sector;
oriented structure; b.Rationalize the allocation of financial
WHERE AS, Executive Order (EO) No. 279
WHEREAS, resources in the water supply and
provides for the rationalization of LWUA’s sewerage sector through classification
organizational structure and refocusing its and graduation initiatives;
objectives to fully implement the reforms in c. Expand the freedom of choice of water
the financing policies in the water supply and service providers in sourcing their
sewerage sector and water service providers; funding requirements;
WHERE AS, section 79 of the General
WHEREAS, d.Increase the participantion of Local
Provisions of RA 9336 (General Appropriations Government Units (LGUs), Government
Act of 2005) mandates, among others, the Financial Institutions (GFIs), and
adoption of institutional strengthening Private Financial Institutions (PFIs) in
measures to improve service delivery and financing the water supply and
enhance productivity; identification of areas sewerage sector;
where improvement are necessary; and e. Stimulate improved service and create
implementation of corresponding structure, financial self-sustainability for water
functional and operational adjustments that service providers;
will result in streamlined organization and f. Encourage initiatives aimed at self-
83
amended pd 198 and other related issuances
May Be Affected by the Rationalization of would opt to retire or be separated from the
Functions
Functions.. Personnel who may be affected by service pursuant to Section 5 hereof and those
the rationalization of functions shall have the hired on a casual or contractual basis, if
following options: qualified, shall be given the option to avail
5.1 Remain in government service, themselves of any of the following, whichever
provided that their appointments, whether is beneficial to them:
permanent or temporary, shall be attested by 7.1 Retirement gratuity provided under
the Civil Service Commission (CSC); Provided RA 1616, as amended, payable by the last
further, that those with temporary employer of the affected personnel, plus the
appointments shall be guaranteed tenure up refund of retirement premiums payable by the
to the expiration of their appointment only, or Government Service Insurance Service (GSIS),
5.2 Avail of the retirement/separation without the incentive herein provided.
benefits herein provided. 7.2 Retirement benefit under RA 660 or
SECTION 6. Per sonnel Who W
ersonnel ould Opt
Would applicable retirement, separation or
to Remain in Government Service. Affected unemployment benefit under RA 8291, if
personnel who would opt to remain in qualified, plus the following applicable
government service shall be either be: incentives:
a. placed by the CSC in other agencies 7.2.1 1/2 month of the present basic
where additional personnel are salary for every year of government
required; service, for those who have rendered
or 20 years of service and below;
b. transferred to CSC, if not placed 7.2.2 3/4 month of the present basic
within two (2) months, to remain salary for every year of government
therein until a match could be found. service, computed starting from 1st
Their compensation shall be transferred year, for those who have rendered
to the recipient agency or to CSC as the may 21-30 years of service; and
be. 7.2.3 one (1) month of the present basic
Affected LWUA personnel who choose to salary for every year of government
remain in government service but would later service, computed starting from the
object to his/her new job assignment, without 1st year, for those who have
justifiable meritorious reasons approved by rendered more than 30 years of
the CSC, shall be deemed separated/retired service.
and shall be paid the appropriate retirement, For purpose of Section 7.2.1 to
separation or unemployment under existing 7.2.3, employment for a fraction of a
retirement/separation laws, without the year shall be considered as employment
incentives provided herein. for the whole year.
SECTION 7. Benefits of PPer ersonnel Who
ersonnel PROVIDED: That for the purpose
Would Opt to Retir
Retiree or Be Separ ated fr
Separated froo m of computing the total amount of
the Service. Affected personnel, with incentive that an affected personnel
appointments attested by the CSC, whether would receive, only his/her government
hired on a permanent or temporary basis, who service up to age 59 and a fraction thereof
86
amended pd 198 and other related issuances
would be counted: government service The GSIS shall return to the National
starting at the age 60 would no longer Government the corresponding share of the
be subject to the incentive herein provided; government to the retirement premiums, with
PRO VIDED FUR
PROVIDED THER: That for the
FURTHER: interest, of employees who are not yet entitled
purpose of complying with the required to avail either RA 660 or RA 8291.
number of years of service under RA SECTION 9. Other Benefits of Retir ed/
Retired/
8291, the portability scheme under RA Separ
Separated er
ated PPer sonnel. - LWUA affected
ersonnel.
7699 (An Act Instituting Limited personnel who opted to retire or be separated
Portability Scheme in the Social Security shall, in addition to the applicable benefits
Insurance Systems by Totalizing the above, be entitled to the following:
Workers’ Creditable Services or 9.1 Refund of Pag-IBIG Contributions. All
Contributions in Each of the Systems) affected personnel who are members of the
may be applied, subject to existing Pag-IBIG shall be entitled to the refund of their
policies and guidelines; contributions (both personal and government),
PRO VIDED FUR
PROVIDED THERMORE: That
FURTHERMORE: pursuant to existing rules and regulations of
on the day of separation, the GSIS shall the Home Development Mutual Fund;
pay the amount of retirement/separation/ 9.2 Commutation of Unused Vacation
unemployment benefits payable by the and Sick Leave Credits. All LWUA affected
GSIS, to which an affected employee may personnel shall be entitled to the commutation
be entitled to under the provisions of this of unused vacation and sick leave credits in a
Order, subject to the submission of the accordance with existing rules and regulations.
required documents to the GSIS one (1) They are also allowed to monetize their
month before the set date of retirement/ accumulated compensatory time-off credits,
separation. if any.
7.3 Those with less than three (3) SECTION 10. Resulting Staffing PPattern
attern
years of government service may opt to and PPer
er sonnel. - To ensure that the new
ersonnel.
avail of the separation gratuity under rationalized organization is staffed with
RA No. 6656; plus the appropriate competent and dedicated civil servants, the
incentive provided under Section 7.2. LWUA Management shall draw up the
No affected employee who deployment of personnel to the new OSSP
opted for retirement/separation with utmost care, subject to all pertinent Civil
shall receive less than an aggregate Service rules and regulations. Further, LWUA
amount of Fifty Thousand Pesos Management shall ensure the implementation
(P50,000.00) as his retirement/ of appropriate personnel action on affected
separation gratuity benefit from employees in accordance with the
both the National Government and corresponding guidelines as may be issued by
the GSIS. the DBM.
SECTION 8. Return bbyy the GSIS of the SECTION 11. Transition Plan. - Towards
National Government’s Share in the the smooth and expeditious implementation
Retirement Premiums of Personnel Who of its plan, the LWUA Management shall
Cannot Avail of RA No. 660 or RA 8291. - prepare and implement a step-by-step action
87
amended pd 198 and other related issuances
plan for the transition from the old structure or hired in any agency of of the Executive
to the new rationalized organization. In this Branch, except in educational institutions and
regard, it shall closely supervise and properly hospitals, within a period of five (5) years.
document turnover of responsibilities and Reemployment in any other Branch of
accountabilities. Government shall be considered as new entry
SECTION 12. Funding. - Funds needed to to the civil service.
implement this rationalization, as well as the SECTION 15. Repealing Clause Clause.. - All
payment of the separation/retirement benefits, issuances, order, rules and regulations or parts
not covered by the GSIS, shall be taken from thereof that are inconsistent with this
available LWUA corporate funds, subject to Executive Order are hereby revoked, amended
the usual accounting and auditing rules and or modified accordingly.
regulations. In case of funding deficiency, the SECTION 16.. Effectivity
Effectivity.. - This Executive
National Government may provide assistance Order shall take effect immediately.
in the payment of incentives to affected
personnel, in accordance with applicable laws, DONE in the City of Manila, this 13th
and subject to the usual accounting and day of April, in the year of our Lord two
auditing rules and regulations. thousand and five.
SECTION 13. Effectivity of the
Retirement/Separation package. The option By Authority of the President:
to avail of the retirement /separation package
shall be available up to two (2) months after
the DBM approval of the L WUA staffing (SGD) EDU ARDO R. ERMIT
EDUARDO A
ERMITA
pattern, provided that such period may be Executive Secretary
extended only in exceptional circumstances
upon the recommendation of the LWUA
Administrator and approval by the DBM. L
WUA shall ensure that there is a smooth
transition from the old to the new rationalized
organization. Affected employee who opted
to avail of the retirement/separation package
shall not be included in the selection and
placement process of employees in the new
staffing pattern. However, they shall not be
considered retired/separated from the service
until their actual receipt of the benefits
provided herein.
SECTION 14. Pr ohibition on Rehiring of
Prohibition
Personnel Retired/separated from the
Service. - A personnel who would opt to retire
or be separated as a result of the
rationalization efforts shall not be appointed
88
amended pd 198 and other related issuances
15
prays that this Office issue an Order against
section respondent to defer from collecting the alleged
tax deficiency amounting to Php
Republika ng Pilipinas 9,736,486.17, plus increments as contained
KAGAWARAN NG KATARUNGAN in its decision dated April 19, 2005, and that,
Department of Justice after proceeding, we render a ruling (a) to
Manila declare that it is not subject to income tax
pursuant to Section 32 (B) (7) (b) of the
OFFICE OF THE SECRETAR
ARYY
SECRETAR National Internal Revenue Code (NIRC) of 1997,
(b) to declare that it is not subject to franchise
– Case No. OSJ-2005-03
tax, or, in the alternative, should it be liable
CAMARINES NOR TE W
NORTE ATER
WA for franchise tax, it should no longer be liable
DISTRICT
DISTRIC T (CNWD), for value added tax and (c) to declare that the
Petitioner, petitioner is not liable for payment of
increments for deficiency income and value
-versus- added taxes for taxable year 2000.
BURE
BUREAAU OF INTERNAL Petitioner alleges, among others, that it
REVENUE (BIR), seeks from this Office “proper interpretation
Respondent, and application of laws relative to the
exemption, or liability, of the petitioner from
x————————————————-------------------x
payment of income tax, franchise tax, and
DECISION other internal revenue taxes;” that it is a public
water utility performing an essential
Subject herein is the petition for government function; that its income is
Arbitration filed by Camarines Norte Water exempt from taxes pursuant to Section 32 (B)
District (CNWD), through its statutory 97) (b) of the Tax Code, as amended; that BIR
counsel, the Office of the Government Ruling No. 074-98 has already been
Corporate Counsel (OGCC) against the Bureau superseded or abandoned by BIR Ruling Nos.
of Internal Revenue (BIR), represented by its 018-2000 and DA-088-2001; that the
Commissioner, pursuant to Chapter 14, Book assessments issued against it is contrary to
V of Executive order (E.O.) No. 292, which the uniformity and equal protection clauses
adopted the provisions of P. D. 242 prescribing of the Constitution; that P. D. No. 198 is a
the procedure for the administrative special law that should prevail over the Tax
settlement or adjudication of disputes, claims Code which is a general law and that the
and controversies between and among assessments are contrary to the general
government offices, agencies and welfare clause of the constitution and inimical
instrumentalities, including government- to public interest.
owned or controlled corporations.
As alleged in the pleadings, the following
In its Amended Petition, herein petitioner are the background facts relevant to
89
amended pd 198 and other related issuances
Respondent further argues that in order from assailing the jurisdiction of this Office
for the petitioner to be exempt under section and that it complies with the requirements
32 (B) (7) (b) of the Tax Code two conditions for exemption under section 32 (B) (7) (b) of
should be met: (1) the income derived must be the Tax Code.
from a public utility or from the exercise of
any essential government function, and (2) We find for the petitioner.
the income must accrue to the Government of
It bears stress, at the outset, that while
the Philippines or to any political subdivision
on its face, it appears that the instant petition
thereof; and that failure to satisfy both two
was brought up to question the validity of
conditions makes the petitioner liable.
the disputed assessment made by the
Finally, respondent argues, among respondent against CNWD, the petitioner
others, that petitioner cannot contend that it herein, there is also here, in fact and on closer
is performing government functions when the scrutiny, a question of law involved, i.e., the
law creating it states that it is engaged in a proper interpretation of Section (B) (7) (b) of
proprietary functions; that its exemption the NIRC of 1997, and both parties have
privilege cannot hinge on previous BIR conflicting interpretations thereof requiring,
Rulings; and that local water districts have therefore, this Office to interpret the same
different charters and are governed by pursuant to its authority under Section 66
different laws. and 68, Chapter 14, Book IV of E. O. No. 292,
to wit:
By way of reply to the respondent’s
Answer, petitioner maintains that this Office “Chapter 14 – Controversies among
has jurisdiction over the instant case; that Government Offices and Corporations
respondent is estopped from assailing the
jurisdiction of this Office; and that petitioner Sec. 66. How Settled. – All disputes,
satisfies the requirements of Section 32 (B) claims and controversies, solely between
(7) (b) of the Tax Code. or among the departments, bureaus,
office, agencies and instrumentalities of
No amicable settlement having been the National Government, including
reached during the preliminary conference, the government-owned or controlled
instant petition, on motion of petitioner, duly corporations, such as those arising from
concurred in by the respondent, was the interpretation and application of
considered submitted for resolution based on statutes, contracts or agreements, shall
the pleadings and memoranda to be filed with be administratively settled or
this Office. However, while petitioner adjudicated in the manner provided in
submitted its Memorandum, the respondent this Chapter. xxx
failed to submit any.
xxx xxx
Petitioner reiterated in its position paper
that this Office has jurisdiction over the Sec. 68. Disputes Involving
instant case; that respondent is estopped Questions of Fact and Law. – C ases
91
amended pd 198 and other related issuances
involving mixes questions of law and of court actually had jurisdiction or not. If it
fact or only factual issues shall be had no jurisdiction but the case was tried
submitted to and settled or adjudicated and decided upon the theory that it had
by: jurisdiction, the parties are not barred, on
appeal, from assailing such jurisdiction, for
The Solicitor General, if the dispute, the same ‘must exist as a matter of law, and
claim or controversy involves only may not be conferred by consent of the parties
departments, bureaus, offices and other or by estoppel’ (5C.J.S. 861-863). However, if
agencies of the National Government as the lower court had jurisdiction, and the case
well as government-owned or controlled was heard and decided upon a given theory,
corporations or entities of whom he is such, for instance, as the court had no
the principal law officer or general jurisdiction, the party who induced it to adopt
counsel; and such theory will not be permitted, on appeal,
to assume an inconsistent position-that the
The Secretary of Justice in all other
lower court had jurisdiction. Here, the principle
cases not falling under paragraph (1).”
of estoppel applies. The rule that jurisdiction
(underscoring supplied)
is conferred by law, and does not depend upon
The jurisdiction of this Department over the will of the parties, have no bearing
the case cannot, thus, be disputed. thereon. (underscoring supplied)
Cconsequently, if the GOCC, as the Upon the other hand, the other exemption
petitioner herein, derives income from its is justified by the fact that the income results
operation as a public utility, the income is from the exercise of an essential government
excluded from gross income, irrespective of function and accrues to the government or its
93
amended pd 198 and other related issuances
94
amended pd 198 and other related issuances
95
amended pd 198 and other related issuances
districts all over the country must be declared Million pesos (P10,000,000.00),
as exempt from tax as they are no difference subject Section 236 of this code, a
from MWSS that is engaged in the supply of tax of three percent (3%) and on
potable drinking water to the public in Metro electric, gas and water utilities, a tax
Manila. of two percent (2%) on the gross
receipts derived from the business
To rule otherwise violates the equal covered by the law granting the
protection of the laws. The phrase equal franchise: xxx”
protection of the laws signifies that “all
persons subject to legislation shall be treated It is clear from the above provision that
alike under like circumstances and conditions the CNWD is liable for Franchise Tax of two
both in the privileges conferred and liabilities percent (2%) of its gross receipts, however
imposed.” since it is now subject to franchise tax, they
are exempt from VAT on their services that
We do not see rational basis in exempting are already subject to franchise.
PAGCOR and PCSO vis-a-vis MWSS and Water
Districts from income tax where one proceeds WHEREFORE, premises considered,
from gambling while the other proceeds from CNWD is declared exempt from payment of
basic necessity. This could be the reason why income tax as an exclusion from gross income,
the respondent find it wise to exempt MWSS liable for payment of franchise tax but exempt
and NAPOCOR in its ruling by breeching the from VAT and all other increments thereto.
non-exclusivity of Section 27(c) of the NIRC.
If respondent can exempt MWSS there is no With respect to the prayer of the
reason why it cannot exempt the water petitioner that this Office issue a Cease and
districts all over the country. There is no Desist Order against respondent to defer from
reason why a huge company can be exempt collecting the amount of Php 9,736,486.17
while a small entity cannot be exempt. the same is hereby GRANTED.
96
amended pd 198 and other related issuances
Produced by
PUBLIC AFFAIRS DEPARTMENT
LOCAL WATER UTILITIES ADMINISTRATION
FEBRUARY 2007
97