amended pd 198 and other related issuances table of...

amended pd 198 and other related issuances

2

table of contentstable of contentstable of contentstable of contentstable of contentsSECSECSECSECSECTION 1TION 1TION 1TION 1TION 1

Presidential Decree 198Presidential Decree 198Presidential Decree 198Presidential Decree 198Presidential Decree 198 33333SECSECSECSECSECTION 2TION 2TION 2TION 2TION 2

LLLLLocal Wocal Wocal Wocal Wocal Water Utilitiesater Utilitiesater Utilitiesater Utilitiesater Utilities A A A A Administrdministrdministrdministrdministration Lation Lation Lation Lation Laaaaawwwww 1616161616

SECSECSECSECSECTION 3TION 3TION 3TION 3TION 3Presidential Decree 768Presidential Decree 768Presidential Decree 768Presidential Decree 768Presidential Decree 768 2424242424

SECSECSECSECSECTION 4TION 4TION 4TION 4TION 4LLLLLetter of Instructions No. 683etter of Instructions No. 683etter of Instructions No. 683etter of Instructions No. 683etter of Instructions No. 683 3535353535


SECSECSECSECSECTION 6TION 6TION 6TION 6TION 6Presidential Decree 1479Presidential Decree 1479Presidential Decree 1479Presidential Decree 1479Presidential Decree 1479 3939393939


SECSECSECSECSECTION 8TION 8TION 8TION 8TION 8Executive Order No. 68Executive Order No. 68Executive Order No. 68Executive Order No. 68Executive Order No. 68 4444444444

SECSECSECSECSECTION 9TION 9TION 9TION 9TION 9SuprSuprSuprSuprSupreme Court Ruling on Weme Court Ruling on Weme Court Ruling on Weme Court Ruling on Weme Court Ruling on WaterateraterateraterDistricts as Government OwnedDistricts as Government OwnedDistricts as Government OwnedDistricts as Government OwnedDistricts as Government Ownedand Controlled Corporationsand Controlled Corporationsand Controlled Corporationsand Controlled Corporationsand Controlled Corporations 4545454545

SECSECSECSECSECTION 1TION 1TION 1TION 1TION 100000Executive Order No. 286Executive Order No. 286Executive Order No. 286Executive Order No. 286Executive Order No. 286 5757575757

SECSECSECSECSECTION 1TION 1TION 1TION 1TION 111111Executive Order No. 279Executive Order No. 279Executive Order No. 279Executive Order No. 279Executive Order No. 279 6363636363Implementing Rules & RegulationsImplementing Rules & RegulationsImplementing Rules & RegulationsImplementing Rules & RegulationsImplementing Rules & Regulations

of Executive Order No. 279 of Executive Order No. 279 of Executive Order No. 279 of Executive Order No. 279 of Executive Order No. 279 7777711111SECSECSECSECSECTION 12TION 12TION 12TION 12TION 12

Republic ARepublic ARepublic ARepublic ARepublic Act No. 9286ct No. 9286ct No. 9286ct No. 9286ct No. 9286 7979797979SECSECSECSECSECTION 13TION 13TION 13TION 13TION 13

Executive Order No. 387Executive Order No. 387Executive Order No. 387Executive Order No. 387Executive Order No. 387 8888811111SECSECSECSECSECTION 14TION 14TION 14TION 14TION 14

ExecutivExecutivExecutivExecutivExecutive Ore Ore Ore Ore Order No. 42der No. 42der No. 42der No. 42der No. 4211111 8383838383SECSECSECSECSECTION 15TION 15TION 15TION 15TION 15

Department of Justice Ruling onDepartment of Justice Ruling onDepartment of Justice Ruling onDepartment of Justice Ruling onDepartment of Justice Ruling onWWWWWater District Tater District Tater District Tater District Tater District Tax Exemptionax Exemptionax Exemptionax Exemptionax Exemption 8989898989


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MALACAŃANGMANILA

PRESIDENTIAL DECREE 198PRESIDENTIAL DECREE 198PRESIDENTIAL DECREE 198PRESIDENTIAL DECREE 198PRESIDENTIAL DECREE 198(As amended Presidential Decree Nos., 768 and 1479, R.A. 9286)

DECLARING A NADECLARING A NADECLARING A NADECLARING A NADECLARING A NATIONAL POLICTIONAL POLICTIONAL POLICTIONAL POLICTIONAL POLICY FY FY FY FY FAAAAAVVVVVORING LORING LORING LORING LORING LOCOCOCOCOCAL OPERAAL OPERAAL OPERAAL OPERAAL OPERATION ANDTION ANDTION ANDTION ANDTION AND

CONTROL OF WCONTROL OF WCONTROL OF WCONTROL OF WCONTROL OF WAAAAATER STER STER STER STER SYSTEMS; AYSTEMS; AYSTEMS; AYSTEMS; AYSTEMS; AUTHORIZING THE FORMAUTHORIZING THE FORMAUTHORIZING THE FORMAUTHORIZING THE FORMAUTHORIZING THE FORMATION OF LTION OF LTION OF LTION OF LTION OF LOCOCOCOCOCALALALALAL

WWWWWAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTTS AND PROS AND PROS AND PROS AND PROS AND PROVIDING FOR THE GOVIDING FOR THE GOVIDING FOR THE GOVIDING FOR THE GOVIDING FOR THE GOVERNMENT ANDVERNMENT ANDVERNMENT ANDVERNMENT ANDVERNMENT AND

ADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATION OF SUCH DISTRICTION OF SUCH DISTRICTION OF SUCH DISTRICTION OF SUCH DISTRICTION OF SUCH DISTRICTTTTTS; CHARS; CHARS; CHARS; CHARS; CHARTERING A NATERING A NATERING A NATERING A NATERING A NATIONALTIONALTIONALTIONALTIONAL

ADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATION TTION TTION TTION TTION TO FO FO FO FO FAAAAACILITCILITCILITCILITCILITAAAAATE IMPROTE IMPROTE IMPROTE IMPROTE IMPROVEMENT OF LVEMENT OF LVEMENT OF LVEMENT OF LVEMENT OF LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATERTERTERTERTER

UTILITIES; GRANTING SUTILITIES; GRANTING SUTILITIES; GRANTING SUTILITIES; GRANTING SUTILITIES; GRANTING SAID ADMINISTRAAID ADMINISTRAAID ADMINISTRAAID ADMINISTRAAID ADMINISTRATION SUCH POTION SUCH POTION SUCH POTION SUCH POTION SUCH POWERS AS AREWERS AS AREWERS AS AREWERS AS AREWERS AS ARE

NECESSNECESSNECESSNECESSNECESSARARARARARY TY TY TY TY TO OPTIMIZE PUBLIC SERO OPTIMIZE PUBLIC SERO OPTIMIZE PUBLIC SERO OPTIMIZE PUBLIC SERO OPTIMIZE PUBLIC SERVICE FROM WVICE FROM WVICE FROM WVICE FROM WVICE FROM WAAAAATER UTILITYTER UTILITYTER UTILITYTER UTILITYTER UTILITY

OPERAOPERAOPERAOPERAOPERATIONS, AND FOR OTIONS, AND FOR OTIONS, AND FOR OTIONS, AND FOR OTIONS, AND FOR OTHER PURPOSES:THER PURPOSES:THER PURPOSES:THER PURPOSES:THER PURPOSES:

sectionsectionsectionsectionsection 1


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One of the prerequisites to the orderly andwell-balanced growth of urban areas isan effective system of local utilities, theabsence of which is recognized as adeterrent to economic growth, a hazardto public health and an irritant to thespirit and well being of the citizenry;

Domestic water systems and sanitarysewers are two of the most basic andessential elements of local utility systems,which, with a few exceptions, do notexists in provincial areas in thePhilippines;

Existing domestic water utilities are notmeeting the needs of the communities theyserve; water quality is unsatisfactory;pressure is inadequate and reliability ofservice is poor, in fact many persons receiveno piped water service whatsoever;

Conditions of service continue to worsenfor two apparent reasons, namely: (1) thatkey elements of existing system aredeteriorating faster than they are beingmaintained or a placed, and (2) that theyare not being expanded at a rate sufficientto match population growth; and

Local water utilities should be locally-controlled and managed, as well as havesupport on the national level in the areaof technical advisory service andfinancing.

RARARARARATIONALETIONALETIONALETIONALETIONALE

SEC. 1. Title.Title.Title.Title.Title. This Decree shall be knownand referred to as the “Provincial WaterUtilities Act of 1973.”

SEC. 2. DeclarDeclarDeclarDeclarDeclaration of Pation of Pation of Pation of Pation of Policolicolicolicolicyyyyy..... TheCreation, operation, maintenance andexpansion of reliable and economically viableand sound water supply and wastewaterdisposal systems for population centers ofthe Philippines in hereby declared to be anobjective of national policy of high priority.For purposes of achieving said objectives, theformulation and operation of independent,locally controlled public water district is foundand declared to be the most feasible andfavored institutional structure. To this end, itis hereby declared to be in the national interestthat said district be formed and that watersupply wastewater disposal system beoperated by and through such district to thegreatest extent practicable. To encourage theformulation of such local water districts andthe transfer thereto of existing water supplyand wastewater disposal facilities, this Decreeprovides by general act the authority for theformation thereof, on a local option basis. Itis likewise declared appropriate, necessaryand advisable that all funding requirementsfor such local revenues, should be channeledthrough and administered by an institutionon the national level, which institution shallbe responsible for and have authority topromulgate and enforce certain rules and

TITLE ITITLE ITITLE ITITLE ITITLE I

PRELIMINARPRELIMINARPRELIMINARPRELIMINARPRELIMINARY PROY PROY PROY PROY PROVISIONSVISIONSVISIONSVISIONSVISIONS

By Proclamation No. 1081 datedSeptember 21, 1972, and General Order No. 1dated September 22, 1972, as amended, the

following measures have been decreed,ordered and made as part of the law of theland.


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regulations to achieve national goals and theobjective of providing public waterworksservices integration or joint investments andoperations whenever economically warrantedand to assure the maintenance of uniformstandards, training of personnel and theadoption of sound operating and accountingprocedures.

SEC.3. Definitions.Definitions.Definitions.Definitions.Definitions. As used in thisDecree, the following words and terms shallhave the meanings herein set forth, unless adifferent meaning clearly appears from thecontext. The definition of a word or termapplies to any its variants.

(a) Act. This Provincial Water Utilities Actof 1973.

(b) Appointing Authority. The personempowered to appoint the members of theBoard of Directors of a local water districtdepending upon the geographic coverage andpopulation makeup of the particular district.In the event more than seventy-five percent ofthe total active water service connections of alocal water district are within the boundaryof any city or municipality, the appointingauthority shall be the mayor of the city ormunicipality, as the case may be; otherwise,the appointing authority shall be the governorof the province within which the district islocated: Provided, That if the existingwaterworks system in the city or municipalityestablished as a water district under thisDecree is operated and managed by theprovince, initial appointment shall be extendedby the governor of the province. Subsequentappointments shall be as specified herein.

If portions of more than one province areincluded within the boundary of the district,and the appointing authority is to be thegovernor, then the power to appoint shallrotate between the governors involved with

the initial appointments made by the governorin whose province the greatest number ofservice connections exists. (As amended bySec. 1, PD 768).

(c) Administration. The Local WaterUtilities Administration chartered in Title IIIof this Decree.

(d) NEDA. The National Economic andDevelopment Authority. (Note: This paragraphshould properly have been deleted).

(e) Board or Board of Directors. TheBoard of Directors of a district.

(f) Contracts. All agreements, includingleases, conveyances and obligations

(f) District. A local water district formedpursuant to Title II of this Act.

(h) Local Water Utilities. Any district, city,municipality, province, investor-owned publicutility or cooperative corporation which ownsor operates a water system serving an urbancenter in the Philippines, except that said termshall not include the Metropolitan Waterworksand Sewerage System (MWSS) or any systemoperated by the Bureau of Public Works assuccessor to the Walls and SpringsDepartment of the National Waterworks andSewerage Authority.

(I) Person. A natural person, corporation,cooperative, partnership, association, city,municipality or other juridical entity.

(j) Property. All real and personalproperty, including but not limited to: water,water rights, works, easements, rights of way.

(k) Street. Includes road, alley, avenue,and highway of other public way.

(I) Trustees or Board of Trustees. TheBoard of Trustees of the Administration.


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TITLE IITITLE IITITLE IITITLE IITITLE II

LLLLLOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICT LAT LAT LAT LAT LAWWWWW

Chapter 1Chapter 1Chapter 1Chapter 1Chapter 1 - Title - Title - Title - Title - TitleSEC. 4. Title.Title.Title.Title.Title. The provisions of this Title

shall be known and referred to as the “LocalWater District Law.”

Chapter IIChapter IIChapter IIChapter IIChapter II - Purpose and F - Purpose and F - Purpose and F - Purpose and F - Purpose and FormationormationormationormationormationSEC. 5. PurposePurposePurposePurposePurpose..... Local water district may

be formed pursuant to this Title for thepurpose of (a) acquiring, installing, improving,maintaining and operating water supply anddistribution systems for domestic, industrial,municipal and agricultural uses for residentsand lands within the boundaries of suchdistricts, (b) providing, maintaining andoperating wastewater collection, treatmentand disposal facilities, and (c) conducting suchother functions and operations incidental towater resources development, utilization anddisposal within such districts, as are necessaryor incidental to said purpose.

SEC. 6. Formation of District.Formation of District.Formation of District.Formation of District.Formation of District. This Actis the source of authorization and power toform and maintain a district. Once formed, adistrict is subject to the provisions of this Actand not under the jurisdiction of any politicalsubdivision. For purposes of this Act, a districtshall be considered as a quasi-publiccorporation (The Supreme Court, in an en bancdecision dated Sept. 13, 1991 in the case ofDavao City Water District et. al. vs. CSC et. al.{G.R. No. 95237-38} has declared WaterDistricts as government-owned and controlledcorporations) performing public service andsupplying public wants. As such, a districtshall exercise the powers, rights and privilegesgiven to private corporation under existinglaws, in addition to the powers granted in,

and subject to such restriction imposed under,this Act. To form a district, the legislative bodyof any city, municipality or province shallenact a resolution containing the following:(As amended by Sec.1, PD 1479)

(a) The name of the local water district,which shall include the name of the city,municipality, or province, or region thereof,served by system, followed by the words“Water District.”

(b) A description of the boundary of thedistrict. In the case of a city or municipality,such boundary may include all lands withinthe city or municipalities, cities or provinces,or portions thereof: Provided, That suchmunicipalities, cities or provinces, or portionsthereof, cover a contagious area. (As amendedby Sec. 2, PD 768)

(c) A statement completely transferringany and all waterworks and/or seweragefacilities managed, operated by or under thecontrol of such city, municipality or provinceto such district upon the filing of resolutionforming the district. (As amended by Sec. 2PD 768: Sec. 1, PD 1479)

(d) A statement identifying the purposefor which the district is formed, which shallinclude those purposes outlined in Section 5above.

(e) The names of the initial directors ofthe district with the date of expiration of theterm of office for each which shall be on the31st of December of first, second, or third even-numbered year after assuming office, as setforth in Section 11 hereof. (As amended bySec. 2, PD 768)

(f) A statement that the district may onlybe dissolved on the grounds and under theconditions set forth in Section 45 of this Title.

(i) A statement acknowledging thepowers, rights and obligations as set forth in


7

Section 25 of this Title.Nothing in the resolution of formation

shall state or infer that the local legislativebody has the power to dissolve, alter or affectthe district beyond that specifically providedfor in this Act.

If two or more cities, municipalities orprovinces, or any combination thereof, desireto form a single district, a similar resolutionshall be adopted in each city, municipalityand province; or the city, municipality orprovince in which 75% of the total activeservice connections are situated shall pass aninitial resolution to be concurred in by theother cities, municipalities or provinces. (Asamended by Sec. 2, PD 768)

SEC. 7. Filing of Resolution.Filing of Resolution.Filing of Resolution.Filing of Resolution.Filing of Resolution. A certifiedcopy of the resolution or resolutions forminga district shall be forwarded to the office ofthe Secretary of the Administration. If foundby the Administration to conform to therequirement of Section 6 and the policyobjectives in Section 2 the resolution shall beduly filed. The district shall be deemed dulyformed and existing upon the date of suchfiling. A certified copy of said resolutionshowing the stamp of the administration shallbe maintained in the office of the district. Uponsuch filing, the local government orgovernments concerned shall lose ownership,supervision and control or any rightwhatsoever over the district except. Asprovided herein ( As amended by Sec. 3, PD768)

CHAPTER IIICHAPTER IIICHAPTER IIICHAPTER IIICHAPTER III - Directors - Directors - Directors - Directors - DirectorsSEC. 8. Number and Qualification.Number and Qualification.Number and Qualification.Number and Qualification.Number and Qualification. The

Board of Directors of a district shall becomposed of five citizens of the Philippineswho are of voting age and residents withinthe district. One member shall be representative

of civic-oriented service clubs, one member arepresentative of professional associations,one member a representative of business,commercial, or financial organizations, onemember a representative of educationalinstitutions, one member a representative ofwomen’s organizations. No public officialshall serve as directors: Provided, however,that if the district has availed of the financialassistance of the Administration, theadministration may appoint any of itspersonnel to sit in the board of directors withall the rights and privileges as pertaining to aregular member, for such period as theindebtedness remains unpaid, in which casethe board shall be composed of six members.(As amended by Sec. 4, PD 768; Sec. 4, PD1479)

SEC. 9. Appointment.Appointment.Appointment.Appointment.Appointment. The appointingauthority shall appoint board members. Saidappointments shall be made from a list ofnominees, if any, submitted pursuant toSection 10. If no nominations are submitted,the appointing authority shall appoint anyqualified person of the category to the vacantposition.

SEC. 10. NominationsNominationsNominationsNominationsNominations..... On or beforeOctober 1 of each even-numbered year, thesecretary of the district shall contact eachknown organization, association, orinstitution being represented by the directorwhose term will expire on December 31 andsolicit nominations from these organizationsto fill the position for the ensuing term. Onenomination may be submitted in writing byeach organizations to the secretary of thedistrict on or before November 1 of such year.The list of nominees shall be transmitted bythe secretary of the district to the office of theappointing authority on or before November15, or such year and he shall make his


8

secretary of the district for nominations andwithin 30 days thereafter a list of nomineesshall be submitted to the appointing authorityfor his appointment of a replacement directorsfrom the list of nominees. In the absence ofsuch nominations, the appointing authorityshall make such appointment. If within 30days after submission to him of a list ofnominees the appointing authority fails tomake an appointment, the vacancy shall befilled from such list by a majority vote of theremaining members of the Board of Directorsconstituting a quorum. Vacancies occurringwithin the last six months of an unexpiredterm shall also be filled by the Board in theabove manner. The director thus appointedshall serve the unexpired term only. (Asamended by Sec. 12. PD 768)

SEC. 13. CompensationCompensationCompensationCompensationCompensation. Each directorshall receive per diem, to be determined by theBoard, for each meeting of the Board actuallyattended by him, but no director shall receiveper diems in any given month in excess of theequivalent of the total per diem of fourmeetings in any given month. No director shallreceive other compensation for service to thedistrict.

Any per diem in excess of One HundredFifty pesos (P150.00) shall be subject toapproval of the Administration. In additionthereto, each director shall receive allowancesand benefits as the Board may prescribesubject to the approval of the Administration.”(As amended by Sec. 7. PD 768; R.A. 9286)

SEC. 14. PPPPPererererersonal Liabilitysonal Liabilitysonal Liabilitysonal Liabilitysonal Liability..... No directormay be held to be personally liable for anyaction of the district.

Chapter 1VChapter 1VChapter 1VChapter 1VChapter 1V - The Board - The Board - The Board - The Board - The BoardSEC. 15. Organizational Meeting.Organizational Meeting.Organizational Meeting.Organizational Meeting.Organizational Meeting. The

Board shall hold its first meeting as soon as

appointment from the list submitted on orbefore December 15. In the event theappointing authority fails to make hisappointments on or before December 15,selection shall be made from said list ofnominees by majority vote of the seateddirectors of the district constituting a quorum.Initial nominations for all five seats of theboard shall be solicited by the legislative bodyor bodies at the time of adoption of theresolution forming the district. Thirty daysthereafter. A list of nominees shall besubmitted to the provincial governor in theevent the resolution forming the district is bya provincial board, or the mayor of the city ormunicipality in the event the resolutionforming the adoption of the district is by thecity or municipal board of councilors, whoshall select the initial directors there fromwithin 15 days after receipt of suchnominations.

SEC. 11. TTTTTerm of Officeerm of Officeerm of Officeerm of Officeerm of Office..... Of the five initialdirectors of each newly formed district, twoshall be appointed for a maximum term oftwo years, two for a maximum term of fouryears, and one for a maximum term of sixyears. Term of office of all directors in a givendistrict shall be such that the term of at leastone director, but not more than two, shallexpire on December 31 of each even-numberedyear. Regular terms of office after the initialterms shall be for six years commencing onJanuary 1 of odd-numbered years. Directorsmay be removed for a cause only, subject toreview and approval of the Administration.(As amended by Sec. 5, PD 768)

SEC. 12. VVVVVacanciesacanciesacanciesacanciesacancies..... In the event of avacancy in the Board of Directors occurringmore than six months before expiration of anydirector’s term, the remaining directors shallwithin 30 days, serve notice to or request the


9

practicable after appointment of the firstdirectors, and not later than 45 days afterformation of the district. At said first meetingof the district Board, and thereafter at thefirst meeting of each odd-numbered years, theBoard shall elect a chairman, a vice-chairman,a secretary and a treasurer. Such secretaryand treasurer may, but need not be membersof the Board, and the offices of the secretaryand treasurer may be held by the same person.

SEC. 16. Quorum.Quorum.Quorum.Quorum.Quorum. A majority of theBoard present in person shall constitute aquorum for the transaction of business;Provided, however, That no resolution ormotion shall be adopted or become effectivewithout the affirmative vote of a majority ofthe authorized number of members of theBoard.

Chapter VChapter VChapter VChapter VChapter V - P - P - P - P - Pooooowwwwwererererers and Duties of the Boars and Duties of the Boars and Duties of the Boars and Duties of the Boars and Duties of the BoardddddSEC. 17. Performance of DistrictPerformance of DistrictPerformance of DistrictPerformance of DistrictPerformance of District

PPPPPooooowwwwwererererersssss..... All powers, privileges, and duties ofthe district shall be exercised and performedby and through the Board: Provided, however,That any executive, administrative orministerial power shall be delegated andredelegated by the Board to officers or agentsdesignated for such purpose by the Board.

SEC. 18. Functions Limited to PFunctions Limited to PFunctions Limited to PFunctions Limited to PFunctions Limited to Policolicolicolicolicy-y-y-y-y-Making.Making.Making.Making.Making. The function of the Board shall be toestablish policy. The Board shall not engagein the detailed management of the district.

SEC. 19. By LawsBy LawsBy LawsBy LawsBy Laws. At its first meeting,the Board shall adopt, and may thereafterfrom time to time amend by-laws for theoperation of business and affairs of the Boardand the district. By-Laws may not be amendedwithout 30 days public notice to that effect,and a public hearing held.

SEC. 20. System of BusinessSystem of BusinessSystem of BusinessSystem of BusinessSystem of BusinessAdministration.Administration.Administration.Administration.Administration. The Board shall, as soon as

practicable, prescribe and define by resolutiona system of business administration andaccounting for the district, which shall bepatterned upon and conform to the standardsestablished by the Administration. Auditingshall be performed by a certified publicaccountant not in the government service. TheAdministration may, however, conduct annualaudits of the fiscal operations of the districtto be performed by an auditor retained by theAdministration. Expenses incurred inconnection therewith shall be borne equallyby the district and the Administration. (Asamended by Sec. 8, PD 768)

SEC. 21. DepositoryDepositoryDepositoryDepositoryDepository..... The district’sdepository shall be the Philippine NationalBank, unless use of such bank is impractical:Provided, however, That any and all reservesaccumulated for capital improvement may bedeposited with the Administration.

SEC. 22. Contracts.Contracts.Contracts.Contracts.Contracts. All contracts of thedistrict shall be entered into by or pursuant toauthority of the Board: Provided, however,That the Board may by resolution delegateand redelegate to officers or agents of thedistrict under conditions and restrictions asshall be fixed by the Board, the power to bindthe district by contract.

Chapter VIChapter VIChapter VIChapter VIChapter VI - Officers and Employees - Officers and Employees - Officers and Employees - Officers and Employees - Officers and EmployeesSEC. 23. The GenerThe GenerThe GenerThe GenerThe General Manageral Manageral Manageral Manageral Manager..... At the

first meeting of the Board, or as soonthereafter as practicable, the Board shallappoint, by a majority vote, a general managerand shall define his duties and fix hiscompensation. Said officer shall not beremoved from office, except for cause and afterdue process. (As amended by Sec. 9, PD 768.Also see amendment under R.A. 9286.)

SEC. 24. Duties.Duties.Duties.Duties.Duties. The duties of the GeneralManager and other officers shall be determined


10

and specified from time to time by the Board.The General Manager, who shall not be adirector; shall have full supervision and controlof the maintenance and operation of waterdistrict facilities, with power and authorityto appoint all personnel of the district:Provided, That the appointment of personnelin the supervisory level shall be subject toapproval by the Board. (As amended by Sec.10, PD 768)

Chapter VIIChapter VIIChapter VIIChapter VIIChapter VII - P - P - P - P - Pooooowwwwwererererers of Districtss of Districtss of Districtss of Districtss of DistrictsSEC. 25. Authorization.Authorization.Authorization.Authorization.Authorization. The district may

exercise all the powers which are expresslygranted by this Title or which are necessary,implied from, or incidental to the powers andpurposes herein stated. For the purpose ofcarrying out the objectives of this Act, a districtis hereby granted the power of eminentdomain, the exercise thereof shall, however,be subject to review by the Administration.(As amended by Sec. 4, PD 1479)

SEC. 26. AAAAAcquisition of Wcquisition of Wcquisition of Wcquisition of Wcquisition of Waterwaterwaterwaterwaterworkorkorkorkorksssss. Adistrict may purchase, construct, or otherwiseacquire works, water, water rights, land rightsand privileges useful or necessary to convey,supply, store, collect, threat, dispose of ormake other use of water for any purposeauthorized by this Title. In the acquisition ofwater or water rights the district shallcooperate with existing agencies of thegovernment of the Philippines. (As amendedby Sec. 5, PD 1479)

SEC. 27. Sale of WSale of WSale of WSale of WSale of Wateraterateraterater..... The district shallhave the power to sell water pursuant togenerally applicable rules and regulations, toany person for use within the district. As acondition of such sale, the district may requirethe filing of a written application for service,payment of established charges or depositsand execution of a water service contract.

A district may provide service to publicfaucets or hydrants provided that it shall firsthave executed an application and servicecontract with the Government entity toestablish or maintain such faucets or hydrantswithin the district. The district will be paidfor such service in the same manner as regulardomestic service and pursuant to the adoptedrules and regulations of the district.

Any district holding a valid Certificateof Conformance or a Conditional Certificateof Conformance from the Administration shallbe exempt from regulation by the PublicService Commission or its successors. (Asamended by Sec. 5, PD 1479)

SEC. 28. Sewerage.Sewerage.Sewerage.Sewerage.Sewerage. A district mayrequire, construct, operate and furnishfacilities and services, within or without thedistrict, for the collection, treatment anddisposal of sewerage, waste, and storm water.The district may only furnish such serviceoutside the district by means of facilitiesdesigned primarily to serve inside the district.Upon providing a sewer system in any area ofthe district, the district may acquire allbuildings used by human beings to beconnected to the sewer system within suchreasonable times as may be prescribed by thedistrict, provided that the property uponwhich such building to be connected stands islocated within 35 meters of an existing mainof the district’s sewer system. The districtmay declare the further maintenance or useof cesspools, septic tanks, or other local meansof sewerage disposal in such area to be apublic nuisance and, after notice in writing ofat least 10 days, deprive said property ownerof any and all services provided by the district,which sanction may be co-extensive with theperiod during which the property ownerpersists in refusing to connect with the


11

district’s sewer system. (As amended by Sec.5, PD 1479)

SEC. 29. Rights of WRights of WRights of WRights of WRights of Waaaaayyyyy..... The right ofway is hereby granted to locate, constructand maintain works of the district on anyland which is now, or hereafter may be, ownedby the Government of the Philippines or byany of its political subdivisions, and/orinstrumentalities. A district may constructany works along, under or across any street,watercourse, railway, or conduit in anymanner, which will afford security for life andproperty. Provided, That in planning any suchworks, the environmental aspects shall alsobe considered. (As amended by Sec. 5, PD 1479)

Sec. 30. ContrContrContrContrContractsactsactsactsacts..... A district shall havethe power to enter into contracts with anyperson for the purpose of performing anyfunction of the district: Provided, That theBoard of Directors may not by contractdelegate any of the discretionary powersvested in the Board by this Title. Specifically,but without limiting said general power, adistrict may enter into the following contracts:

(a) Cooperation. Agreement with theGovernment of the Philippines or any of itsagencies or political subdivisions for thecooperative or joint performance of anyfunction of the district.

(b) In-Lieu Share. As an incident to theacquisition of the existing water system of acity, municipality, or province, a district mayenter into a contract to pay in-lieu share forsuch utility plant, an annual amount notexceeding three percent (3%) of the district’sgross receipts from water sales in any year:Provided, however, That no contract of thisnature shall be executed during the first fiveyears of the existence of the district; andProvided, further, that the Board of Directorsshall determine that such contract will not

adversely affect or impair the fiscal positionand operations of the district as verified bythe Administration. (As amended by Sec.11,PD 768: Sec. 5, PD 1479)

(c) MWSS Agreement. In the event thecity, municipality or province has not reachedagreement with the Metropolitan Waterworksand Sewerage System pursuant to Section15 and 17 of R.A. 6234, a district, may, withthe consent of the local government, act forand in behalf of the local interests innegotiating and executing such contract forfinal settlement of the consequences ofMWSS involvement in the operation of thewater system.

SEC. 31. PrPrPrPrProtection of Wotection of Wotection of Wotection of Wotection of Waterateraterateraters ands ands ands ands andFacilities of District.Facilities of District.Facilities of District.Facilities of District.Facilities of District. A district shall have theright to:

(a) Commence, maintain, intervene in,defend and compromise actions or proceedingsto prevent interference with or deteriorationof water quality or the natural flow of anysurface, stream or ground water supply whichmay be used or useful for any purpose of thedistrict or be a common benefit to the landsor its inhabitants. The ground water within adistrict is necessary to the performance of thedistrict’s powers and such district is herebyauthorized to adopt rules and regulationssubject to the approval of the National WaterResources Council governing the drilling,maintenance and operation of wells withinits boundaries for purposes other than singlefamily domestic use on overlaying land. Anywell operated in violation of such regulationsshall be deemed an interference with the waterof the district.

(b) Require a develop or builder of anystructure within the service areas of the districtto extend or connect its pipeline facilities tothe district facilities whenever such


12

development or structure is within one hundredmeters of existing district facilities orwhenever the district is willing to extend itsfacilities within one hundred meters of saiddevelopment or structure. For the purpose ofthis section, development shall include thesubdivision of land for any purpose other thanagricultural purpose, and structure shall meanany building of facility to be used forresidential, commercial or industrial purpose.

(c) Prohibit any person, firm orcorporation from vending, selling, or otherwisedisposing of water for public purposes withinthe service area of the district where districtfacilities are available to provide such service,or fix terms and conditions by permit for suchsale or disposition of water.

(d) Safeguard and protect the use of itswaters. For this purpose, any person whoinstalls any water connection without theprevious authority from the water districtestablished under this Decree; tampers watermeters or uses jumpers or other deviceswhereby water is stolen; steals or pilfers wateror water meters; knowingly possesses stolenor pilfered water or water meters shall uponconviction, be punished by prision correccionalin its minimum period or a fine ranging fromtwo thousand pesos to six thousand pesos, orboth. If the violation is committed with theconnivance or permission of an employee orofficer of the water district, an employee orofficer shall, upon conviction, be punished bya penalty one degree lower than prisioncorreccional in its minimum period andforthwith be dismissed and perpetuallydisqualified from employment in any utilityor service company owned or controlled bythe government. (As amended by Sec. 12, PD768)

(e) Take over the management,

administration, operation, and maintenanceof all watersheds within its territorialboundaries. (As amended by Sec. 6, PD 1479)

SEC. 32. FirFirFirFirFire Pre Pre Pre Pre Protection Capacityotection Capacityotection Capacityotection Capacityotection Capacity..... Thedistrict may install and maintain pipelinecapacity and additional hydrants for fireprotection purposes: Provided, That prioragreement has been executed with the publicentity having principal fire protectionresponsibility within the district whereby thedistrict will be reimbursed over the reasonablelife of said facilities for the cost of installationand operation of such fire protection capacityand facilities. (As amended by Sec. 7, PD 1479)

Chapter VIII Chapter VIII Chapter VIII Chapter VIII Chapter VIII - Financial Provisions- Financial Provisions- Financial Provisions- Financial Provisions- Financial ProvisionsSEC. 33. Receipt, Deposit and PaymentReceipt, Deposit and PaymentReceipt, Deposit and PaymentReceipt, Deposit and PaymentReceipt, Deposit and Payment

of District Fundof District Fundof District Fundof District Fundof District Fundsssss..... The treasurer shall receive,to the credit of the district and in trust for itsuse and benefit, all monies belonging to thedistrict. All monies belonging to the Districtshall, where practicable, be deposited by thetreasurer in the Philippine National Bank. (Asamended by Sec. 13, PD 768; Sec. 7, PD 1479)

SEC. 34. Bonds or Other Evidence ofBonds or Other Evidence ofBonds or Other Evidence ofBonds or Other Evidence ofBonds or Other Evidence ofIndebtedness.Indebtedness.Indebtedness.Indebtedness.Indebtedness. A district may borrow moneyto raise funds to pay all cost of any publicimprovement authorized by this Title and mayissue negotiable or non-negotiable bonds,promissory notes or other evidence ofindebtedness to support such borrowings.These obligations may be secured by amortgage, pledge, deed or trust or any otherencumbrance upon any of its then owned orafteracquired real or personal property, assetsor revenues and the same shall constitute alien as to the principal and interest thereon,on all such property, assets or revenues. Theinterests on such bonds or notes are exemptfrom all taxes, duties, fees, imposts or othercharges of the national or local governments.


13

(As amended by Sec. 14, and 15, PD 768, Sec.7, PD 1479).

SEC. 35. Authority for SubsequentAuthority for SubsequentAuthority for SubsequentAuthority for SubsequentAuthority for SubsequentBorrowings.Borrowings.Borrowings.Borrowings.Borrowings. Where a water district hasborrowed money from the Administration, thedistrict shall not borrow money or incurfurther obligations from other sources withoutthe prior written consent of theAdministration. (Sec. 16, PD 768; Sec 7 PD1479)

Sec. 36. Default Default Default Default Default - In the event of thedefault by the district in the payment ofprincipal or interest on its outstanding bondsor other obligations, any bondholder orcreditor shall have the right to bring an actionbefore the appropriate court to compel thepayment of such obligations. If the bondholderor creditor concerned is the Administration, itmay, without the necessity of judicial process,take over and operate the entire facilities,systems or properties of the district. For thispurpose, the Administration may designateits employees or any person or organizationto assume all powers or policy-decision andthe powers of management andadministration, including but not limited tothe establishment of water rates and charges,the dismissal and hiring of personnel, thepurchase of supplies, equipments, andmaterials and such other actions as maynecessary to operate the utility efficiently. (Sec.16, PD 768; As amended by Sec. 7, PD 1479)

Chapter IXChapter IXChapter IXChapter IXChapter IX - Revenues - Revenues - Revenues - Revenues - RevenuesSec. 37 - Rates and CharRates and CharRates and CharRates and CharRates and Charges- Wges- Wges- Wges- Wges- Wateraterateraterater- A

district may sell water under its control, underschedules of rates and charges as may bedetermined by the Board, to any and all waterusers within the district. Said schedule mayprovide for differential rates for differentcategories of use and different quantity blocks.

The district, as far as practicable, shall fixsuch rates and charges for water as will resultin revenue which will;

(a) Provide for reimbursement from allnew water customers for the cost ofinstallation of new services and meters;

(b) Provide for revenue from all waterdeliveries and services performed by thedistrict;

(c) Pay the operating expenses of thedistrict;

(d) Provide for the maintenance andrepairs of the works;

(e) Provide a reasonable surplus forreplacement, extension and improvements; and

(f) Pay the interest and principal andprovide a sinking fund for the payment ofdebts of the district as they become due andestablish a fund for reasonable reserves. ( Asamended by Sec. 17, PD 768; Sec. 7, PD 1479)

Sec. 38. Service and Stand-bService and Stand-bService and Stand-bService and Stand-bService and Stand-by Chary Chary Chary Chary Chargesgesgesgesges.-.-.-.-.-SewerSewerSewerSewerSewer- A district may prescribe and collectrates and other charges for sewer servicesfurnished. A district may also fix, levy andcollect a sewerage and wastewater servicestand-by or availability charge in the eventthe sewer service is available and noconnections is made. Such rates and chargesmay be collected with the water charges ofthe district. In the event of failure to pay thewhole or any part thereof, district maydiscontinue any and all services for whichsuch bill is rendered, including water, shallnot be construed to prohibit the district fromcollecting rates and other charges in any otherlawful manner. (As amended by Sec. 18, PD768; Sec. 7, PD 1479)

SEC. 39. Production AssessmentProduction AssessmentProduction AssessmentProduction AssessmentProduction Assessment. In theevent the Board of the district finds, afternotice and hearing, that production ofgroundwater by other entities within the


14

district for commercial or industrial uses isinjuring or reducing the district’s financialcondition, the Board may adopt and levy agroundwater production assessment tocompensate for such loss. In connection inthere-with, the district mat require necessaryreports by the operator of any commercial orindustrial well. Failure to pay said assessmentshall constitute an invasion of the waters ofthe district and shall entitle this district to aninjunction and damages pursuant to Section31 of this Title. (As amended by Sec. 18, PD768; Sec. 7, PD 1479)

SEC. 40. Assessment and Stand-byAssessment and Stand-byAssessment and Stand-byAssessment and Stand-byAssessment and Stand-byChargesChargesChargesChargesCharges. - In order to obtain capital to financeinstallation of sanitary sewerage, a districtshall have the power to establish by resolutionof the Board of Directors the area to bebenefited from such facilities. After a hearingand upon notice to all parties affected, thedistrict may levy and collect assessment, orstand-by charges based upon availablecapacities or upon selected characteristics ofproperty benefited by said improvements, asdetermined by the Board. Said characteristicsmay include, but not limited to, the effectivelength of property counting upon the proposedimprovement or, in terms of the area containedwithin the boundary of said property. Saidassessment, if unpaid, shall be and constitutea lien on the land assessed. (As amended bySec. 18, PD 768; Sec. 7, PD 1479)

SEC. 41. Disposition of IncomeDisposition of IncomeDisposition of IncomeDisposition of IncomeDisposition of Income..... - Theincome of the district shall be disposed ofaccording to the following priorities:

First, to pay its contractual andstatutory obligations and to meet its essentialcurrent operating expenses.

Second, to allocate at least fifty percent(50%) of the balance exclusively as a reservefor debt service and operating and

maintenance, to be used for such purposesonly during periods of calamities, forcemajeure or unforeseen events.

Third, to allocate the residue as a reserveexclusively for expansion and improvement ofits physical facilities. (Sec. 8, PD 1479)

Chapter XChapter XChapter XChapter XChapter X - Changes in Organization - Changes in Organization - Changes in Organization - Changes in Organization - Changes in OrganizationSEC. 42. Exclusion of a TExclusion of a TExclusion of a TExclusion of a TExclusion of a Territoryerritoryerritoryerritoryerritory..... Any

territory within the boundary of district maybe excluded by resolution of the Board ofDirectors after notice to landowners withinthe territory proposed to be excluded, andupon a finding that said lands do not and willnot benefit by reason of their inclusion withinthe district. A certified copy of said resolutionof exclusion shall be filed in the same mannerand become effective in accordance with theprovision applicable to the resolution formingthe district. (As amended by Sec.18, PD 768)

SEC. 43. Annexation and Deannexation.Annexation and Deannexation.Annexation and Deannexation.Annexation and Deannexation.Annexation and Deannexation.The Administration may, after notice toproperty owners within the territory proposedfor annexation or deannexation, and followinga hearing, make finding of benefit or potentialbenefit, and thereafter, require filing of anappropriate resolution in the same manner asthe filing of the resolution forming a districtor of exclusion, as the case may be. (Asamended by Sec. 18, PD 768)

SEC. 44. Consolidation and JointConsolidation and JointConsolidation and JointConsolidation and JointConsolidation and JointOperation.Operation.Operation.Operation.Operation. The Administration may requirethe merger or consolidation of the facilities oroperation of two or more district formedpursuant to the levy, in the event that theAdministration shall have determined,following a hearing, that such merger orconsolidation is in the best interest of theresidents in the districts involved. (Asamended by Sec.18, PD 768)

SEC. 45. Dissolution.Dissolution.Dissolution.Dissolution.Dissolution. A district may be


15

dissolved by resolution of its Board ofDirectors filed in the manner of filing theresolution forming the district: Provided,however, That prior to the adoption of anysuch resolution: (1) another public entity hasacquired the assets of the district and hasassumed all obligations and liabilitiesattached thereto; (2) all bondholders and othercreditors have been notified and they consentto said transfer and dissolution; and (3) a courtof competent jurisdiction has found that saidtransfer and dissolution are in the best interestof the public. (As amended by the Sec. 19, PD768)

Chapter XIChapter XIChapter XIChapter XIChapter XI - Protection to Districts - Protection to Districts - Protection to Districts - Protection to Districts - Protection to DistrictsSEC.46. Exemption from Taxes. - A

district shall (1) be exempt from paying incometaxes, and (2) shall be exempt from paymentof (a) all National Government, localgovernment and municipal taxes and fees,including any franchise, filing, recordation,license or permit fees or taxes and any fees,charges or costs involved in any court oradministrative proceeding in which it may bea party and (b) all duties or imposts onimported machinery, equipment and materialsrequired for its operations. (As amended bySec. 20, PD 768)

SEC. 47. Exclusive Franchise. - Nofranchise shall be granted to any other personor agency for domestic, industrial orcommercial water service within the districtor any portion thereof unless and except tothe extent that the Board of Directors of saiddistrict consents thereto by resolution dulyadopted, such resolution, however, shall besubject to review by the Administration. (Asamended by Sec. 20, PD 768; Sec. 9, PD 1479)

Subject to Philippine Supreme Court enbanc decision of September 13, 1991 declaringwater districts as “government owned orcontrolled corporations with original charter.”(Davao City Water District et.al. vs. Civil ServiceCommission et.al.)


16

TITLE IIITITLE IIITITLE IIITITLE IIITITLE III

LLLLLOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER UTILITIESTER UTILITIESTER UTILITIESTER UTILITIESTER UTILITIESADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATION LATION LATION LATION LATION LAWWWWW

Chapter I Chapter I Chapter I Chapter I Chapter I - Title- Title- Title- Title- TitleSEC. 48. TitleTitleTitleTitleTitle. - This Title of the

Provincial Water Utilities Act of 1973 shallbe known and referred to as the “Local WaterUtilities Administration Law”. (As amendedby Sec. 20, PD 768)

Chapter IIChapter IIChapter IIChapter IIChapter II - Purpose and F - Purpose and F - Purpose and F - Purpose and F - Purpose and FormationormationormationormationormationSEC. 49. CharterCharterCharterCharterCharter..... - There is hereby

chartered, created and formed a governmentcorporation to be known as the “Local WaterUtilities Administration” which is herebyattached to the Office of the President. Theprovisions of this Title shall be and constitutethe charter of the Administration. (Asamended by Sec. 21, PD 768)

SEC. 50. Purposes.Purposes.Purposes.Purposes.Purposes. - TheAdministration shall primarily be aspecialized lending institution for thepromotion, development and financing oflocal water utilities. In the implementationof its functions, the Administration shall,among others: (1) prescribe minimumstandards and regulations in order to assureacceptable standards of constructionmaterials and supplies, maintenance,operation, personnel training, accounting andfiscal practices for local water utilities ; (2)furnish technical assistance and personneltraining programs for local water utilities;(3) monitor and evaluate local water

standards; and (4) effect systems integration,joint investment and operations, districtannexation and deannexation whenevereconomically warranted. (As amended by Sec.22, PD 768)

Chapter IIIChapter IIIChapter IIIChapter IIIChapter III - Boar - Boar - Boar - Boar - Board of Td of Td of Td of Td of TrusteesrusteesrusteesrusteesrusteesSEC. 51. Composition.Composition.Composition.Composition.Composition. - The Board of

Trustees of the Administration shall becomposed of a chairman and four othermembers, all of whom shall be citizens of thePhilippines.

One trustee at any time shall have atleast ten years experience in banking, financeor business. One trustee at any time shallpossess sufficient background in the field ofeconomics; one trustee at any time shall haveexperience in management or systemsoperations. Two trustees at any time shall becivil or sanitary engineers with experiencerelated to water supply or wastewateroperations. Not more than one trustee mayrepresent a private investor-owned utility. Noelected official shall be entitled to act as atrustee. At least three of the trustees must beemployees of the National Government.

The General Manager shall be ex-officiomember of the Board. (As amended by Sec.23, PD 768)

SEC. 52. Appointment and TAppointment and TAppointment and TAppointment and TAppointment and Term oferm oferm oferm oferm ofOffice.Office.Office.Office.Office. - The trustees, with the exception ofthe ex-officio member, shall be appointed bythe President of the Philippines. They shallserve a term of five years each: Provided, Thatof the first four initially appointed, one shallserve a term of five years, another for fouryears, the third for three years, and the fourthfor two years. Trustees may be removed forcause only.

The incumbent trustees holding office assuch upon the effectivity of this amendment

sectionsectionsectionsectionsection2


17

shall continue to hold such office until theexpiration of their original terms as defined intheir appointments. (As amended by the Sec.24, PD 768)

SEC. 53. VVVVVacanciesacanciesacanciesacanciesacancies..... - Vacancies in theBoard of Trustees for any reason whatsoevershall be filled by the President of thePhilippines in like manner as in the case ofnew appointments but the trustees soappointed shall serve only the unexpiredportion of the term of the trustees substitutedfor. (As amended by Sec. 25, PD 768)

SEC. 54. PPPPPooooowwwwwererererersssss. . . . . - All of the businessand affairs of the Administration shall becarried on and its powers shall be exercisedby and through the Board of Trustees. Thefunction of the trustees, however, shall be toestablish policy, not to engage in the detailedmanagement of the Administration. (Asamended by the Sec. 25, PD 768)

SEC. 55. Compensation.Compensation.Compensation.Compensation.Compensation. - The Trusteesshall each receive a per diem as may be fixedby the Board for each meeting actuallyattended by them: Provided, That the total ofsuch per diem in any one month for eachTrustee, shall not exceed the equivalent of theper diems for four meetings: Provided, further,That per diems in excess of three hundred pesosper meeting shall be subject to the approvalof the Office of the President; and Provided,Finally, That, in addition, each Trustee shallbe reimbursed his expenses incurred inconnection with the performance of hisfunctions in such amounts as may determinedby the Board of Trustees. (As amended by Sec.26, PD 768)

Chapter IVChapter IVChapter IVChapter IVChapter IV - By Laws - By Laws - By Laws - By Laws - By LawsSEC. 56. By-Laws.By-Laws.By-Laws.By-Laws.By-Laws. - The Board of

Trustees shall adopt a code of by-laws for theconduct of the affairs of the Administration

which may be amended from time to time bythe affirmative vote of four Trustees.

Except as otherwise provided herein, theorganizational structure and staffing patternof the Administration, the qualification of theappointive officers and employees, the powersand responsibilities of the officers, the internalprocedure of the Administration, and suchother matters relative to the organization,management and conduct of the affairs ofthe Administration shall be as provided in bythe by-laws; Provided, That the appointmentof and disciplinary action against officers andemployees of the Administration shall be doneand effected pursuant to guidelinesestablished by the Board of Trustees. (Asamended by Sec. 27, PD 768)

Chapter VChapter VChapter VChapter VChapter V - Officers and Employees - Officers and Employees - Officers and Employees - Officers and Employees - Officers and EmployeesSEC. 57. Officers.Officers.Officers.Officers.Officers. - The Board shall elect

a Chairman from among its members. Inaddition, the Board shall select a secretaryand a corporate legal counsel, each of whomshall not be a trustee (As amended by Sec. 28,PD 768).

SEC. 58. The General Manager andThe General Manager andThe General Manager andThe General Manager andThe General Manager andOther EmploOther EmploOther EmploOther EmploOther Employyyyyeeseeseeseesees. - The Trustees shall selecta general manager who shall not come fromthe appointed trustees. The general managershall receive compensation in an amount asmay be fixed by the Board, subject to theapproval of the President of the Philippines,but in no case less than fifty-four thousandpesos per annum. The general manager shallemploy and appoint all additional personnel;Provided, That the appointment of personnelin the supervisory level shall be subject toconfirmation by the Board.

The incumbent manager holding officeas such upon the effectivity of this amendmentshall continue to hold such office unless sooner


18

terminated by competent authority. (Asamended by Sec. 29, PD 768)

The regular professional and technicalpersonnel of the Administration shall beexempt from WAPCO and Civil Service rulesand regulations; Provided, that the personnelshall be entitled to the benefits and privilegesnormally accorded to government employees,such as retirement, GSIS insurance, leave andsimilar matters.

Chapter VIChapter VIChapter VIChapter VIChapter VI - P - P - P - P - PooooowwwwwererererersssssSEC. 59. GenerGenerGenerGenerGeneral Corporal Corporal Corporal Corporal Corporate Pate Pate Pate Pate Pooooowwwwwererererersssss..... -

The Administration shall have all the powerswhich are expressly granted to it under thisTitle, or which are necessary, implied from, orincidental to the power and purposes hereinstated.

SEC. 60. Borrowing and SecurityBorrowing and SecurityBorrowing and SecurityBorrowing and SecurityBorrowing and SecurityTherTherTherTherThereforeforeforeforefor..... - The Administration may borrowfunds as authorized in Section 72 of this Title,and issue as security therefor debentures orother evidence of indebtedness constitutinglien on any and all securities, covenants andobligations of local water utilities held by theAdministration as security for loans made tosuch local water utilities. (As amended by Sec.30, PD 768)

SEC.61. LLLLLoansoansoansoansoans..... - Administration maymake loans from its Revolving Loan Funds toqualified local water utilities, upon thefollowing condition and pursuant to thefollowing procedures:

(a) Qualification of Borrower. - Beforeany loan may be granted, the local waterutility shall (1) hold a valid certificate ofconformance or a conditional certificate ofconformance from the Administration, and (2)meet such other and further loan qualificationrequirements as the trustees may establish;

(b) Feasibility Study. - A feasibility study

which may be required by the Administrationfor any proposed project for which loan fundsare sought may be undertaken by the waterdistrict, the Administration or by a consultantpre-qualified by the Administration; (Asamended by Sec. 31, PD 768)

(c) Security. - The Administration maytake as security for such loans the authorizedbonds or other evidence of debt by the waterdistrict and a mortgage on its properties; (Asamended by Sec. 31, PD 768)

(d) Loan Documents and Procedures. - TheBoard of Trustees shall adopt rules, loandocuments and procedures to be used in thegranting of loans. Such rules shall includeprovisions for security, payment and default.(As amended by Sec. 31, PD 768)

(e) Default. - In the event of default bythe local water district in the payment ofprinciple or interest on its outstanding bondsor other obligations to the Administration,the latter may, without the necessity of judicialprocess, take over and operate the facilitiesor properties of the district. For this purpose,the Administration may designate itsemployees or any person or organization toassume both the policy-making authority andthe powers of management, including but notlimited to, the establishment of water ratesand service charges, the dismissal and hiringof personnel, the purchase of equipment,supplies or materials and such other actionsas may be necessary to operate the waterdistrict efficiently. Such policy-making andmanagement prerogatives may be returned tothe Board of Directors and the GeneralManager of the water district, respectively,when all of its overdue accounts have beenpaid, all its reserve requirements have beensatisfied and all the causes of default havebeen met. (As amended by Sec. 31, PD 768)


19

(f) Funding of Loan. - When a loan is madeto local water utility, the necessary amountof such loan shall be programmed to assurecompletion of the project for which such loanwas granted. (As amended by Sec.10, PD 1479)

SEC. 62. Regulations.Regulations.Regulations.Regulations.Regulations. - Administrationshall have the power and duty to establishstandards for local water utilities and adoptrules and regulations for the enforcementthereof. The Administration shall vigorouslyconsult and coordinate its actions with allgovernment agencies active in the areas ofpublic works and all other concerned agenciesin the promulgation of these standards. Saidstandards and regulations shall include thefollowing:

(a) Water Quality. - Minimum drinkingwater standards including a uniform testingand reporting system. Said standards shallinclude bacteriological, chemical and physicalparameters;

(b) Design and Construction. - Minimumcriteria for the design and construction of newor additional facilities for water supply,treatment, transmission and distribution, andfor wastewater collection, treatment anddisposal;

(c) Equipment, Materials and Supplies. -Standards for the optimum selection andeffective utilization of equipment, materialsand supplies by local water and sewer utilities;

(d) Operations and Maintenance. -Standardized procedures for operating andmaintaining equipment and facilities;

(e) Personnel. - The training of personnelwho operate or manage local water utilities.For this purpose, at least a majority of thepersonnel of a local water district must havesatisfactorily completed appropriate trainingcourses, programs or seminars conducted bythe Administration, and must be holders of a

certificate of completion or competence, asthe case may be, before a certificate ofconformance is issued to the water district.

For certain positions which theAdministration may specify, only thosepersons possessing, or in the case ofsubsequent appointments, only persons whowill undergo training and shall have obtainedwithin six months, a certificate of completionor competence, as the case may be, shall beappointed; (As amended by Sec. 31, PD 768)

(f) Organization. - Organizational andinstitutional criteria to assure independentoperation and funding of local water utilities;

(g) Accounting. - A uniform accountingsystem with uniform chart of accounts. Saidstandards and regulations shall also includestipulated levels of internal reporting to localwater utility management.

SEC. 63. Rate ReRate ReRate ReRate ReRate Revievievievieviewwwww..... - Any publicly-owned local utility holding a Certificate ofConformance or Conditional Certificate ofConformance from the Administration ishereby declared exempt from the jurisdictionof the Public Service Commission or itssuccessor. Any rates or charges establishedby such local water utility shall be adequateto provide for:

(a) Reimbursement from all new watercustomers for the cost of installing newservices and meters;

(b) Revenue from all water deliveries andservices performed by the district;

(c) Annual operating expense of thedistrict;

(d) The maintenance and the repair ofthe works;

(e) A reasonable surplus for replacement,extension and improvement; and

(f) Payment of the interest and principaland provide a sinking fund for payment of


20

debts of the district as they become due andestablish fund for reasonable resources.

The rates or charges established by suchlocal district, after hearing shall have beenconducted for the purpose, shall be subject toreview by the Administration to establishcompliance with the above-stated provisions.Said review of rates or charges shall beexecutory and enforceable after the lapse ofseven calendar days from posting thereof in apublic place in the locality of the water district,without prejudice to an appeal being takentherefrom by a water concessionaire to theNational Water Resources Council whosedecision thereon shall be appealable to theOffice of the President. An appeal to theCouncil shall be perfected within thirty daysafter the expiration of the seven-day period ofposting. The council shall decide an appealwithin thirty days from perfection. (Asamended by Sec.11, PD 1479)

SEC. 64. TTTTTechnical Aechnical Aechnical Aechnical Aechnical Assistancessistancessistancessistancessistance. -Administration shall provide technicalassistance to local water utilities their boards,management, and operating personnel, to aidin meeting the standards and criteriaestablished by the Administration, and toencourage the upgrading of the operationsand management of such local water utilities.Said technical assistance should consist ofthose matters which are practical to financeor develop on a national basis but are beyondthe capability of the individual local waterutility, as such.

SEC. 65. TTTTTrrrrraining Praining Praining Praining Praining Progrogrogrogrogramsamsamsamsams. -Administration shall establish trainingprograms and seminars for personnel of localwater utility. Programs shall include the areasof utility management, operation,maintenance and customer service.Administration shall have the power to issue

Certificate of Completion for the satisfactorycompletion of a specified course of instruction.In the case of operational personnel,Administration may conduct appropriateexaminations and issue correspondingCertificate of Competence to assist local waterutilities to meet the personnel standards setpursuant to Section 62 (e) of this Title.

SEC. 66. Certificate of Conformance.Certificate of Conformance.Certificate of Conformance.Certificate of Conformance.Certificate of Conformance. -Administration may require report from allwater utilities, conduct field investigations andreview all available information to determinewhether there has been conformance to itsstandards and procedures establishedpursuant to Section 62 of the Title. Uponfinding that said standards are met, theAdministration shall issue a Certificate ofConformance to any such water utility. SaidCertificate may be revoked after due noticeand hearing as to any local water utility whichthereafter fails to continue conformance withsuch standards. A Conditional Certificate ofConformance may be issued where proceduresand practices have been adopted to assureconformances and reasonable time schedulehas been adopted. Failure, to reachconformance as contemplated shall be causefor revocation of such conditional certificate,without hearing or other cause.

Chapter VIIChapter VIIChapter VIIChapter VIIChapter VII - Financial Provision - Financial Provision - Financial Provision - Financial Provision - Financial ProvisionSEC. 67. Capital Stock.Capital Stock.Capital Stock.Capital Stock.Capital Stock. - The authorized

capital of the Local Water UtilitiesAdministration is Two Billion Five HundredMillion Pesos divided into Twelve Million FiveHundred Thousand shares of stock with a parvalue of Two Hundred Pesos per share whichshall be subscribed by the NationalGovernment and opened to subscription byprivate investors or government financialinstitutions. (Sec. 34, PD 768; as amended by


21

Sec. 12, PD 1479)SEC. 68. Payment for NationalPayment for NationalPayment for NationalPayment for NationalPayment for National

Government Shares.Government Shares.Government Shares.Government Shares.Government Shares. - All amounts previouslyreleased by the National Government to theRevolving Fund of the Administration shall becredited as payment for subscriptions toshares of stock at par value. Whatever balanceremaining of said subscription shall be paidfrom a continuing appropriation which ishereby made out of any funds in the NationalTreasury not otherwise appropriated, suchannual appropriation to be programmed andreleased in accordance with pertinent budgetlaws Provided, That this continuingappropriation shall remain in force until thebalance of the unpaid subscription of thegovernment to the capital stock of theAdministration have been paid in full. (Sec.34, PD 768; as amended by Sec. 13, PD 1479)

SEC. 69. Operational Expenses.Operational Expenses.Operational Expenses.Operational Expenses.Operational Expenses. - TheBoard of Trustees is hereby authorized toappropriate out of any funds of theAdministration, such amounts as it may deemnecessary for the operational and otherexpenses of the Administration includingpurchase of necessary equipment. (Sec. 34,PD 768)

SEC. 70. CharCharCharCharChargesgesgesgesges. . . . . - To the extent thatthe Administration performs services for thebenefit and at the request of a local waterdistrict or utility or a number of water districts,utilities or organizations, it may levy fees orcharges for such service rendered.

Charges may include an assessmentagainst water districts or utilities to financethose functions of the Administration whichare of general benefit to water district orutilities including, but not limited to, generaladministration and supervision. (Sec.34, PD768)

SEC. 71. Receipt and InvReceipt and InvReceipt and InvReceipt and InvReceipt and Investment ofestment ofestment ofestment ofestment of

Funds.Funds.Funds.Funds.Funds. - Whenever the Administration receivesmoney whether as payment for subscriptionsto shares of stock, principal repayments,interest income, payment for services renderedor for any purpose whatsoever, it shall issueits own receipts and provide for theirsafekeeping and investments under policyguidelines as may be established by the Boardof Trustees in accordance with Department ofFinance regulations. (Sec. 34, PD 768)

SEC. 72. Domestic BorrowingDomestic BorrowingDomestic BorrowingDomestic BorrowingDomestic BorrowingAAAAAuthorityuthorityuthorityuthorityuthority..... - The Administration shall have theauthority to borrow money from all domesticloan sources whether government or privateProvided, That its loans outstanding fromdomestic sources at any one time shall notexceed One Billion Pesos. (As amended by Sec.36, PD 768)

SEC. 73. Authority to Contract ForeignAuthority to Contract ForeignAuthority to Contract ForeignAuthority to Contract ForeignAuthority to Contract ForeignLLLLLoan.oan.oan.oan.oan. - The Administration is herebyauthorized to contract loans, credits, in anyconvertible foreign currency or capital goods,and to incur indebtedness from time to timewith foreign governments, or any internationalfinancial institutions or fund sources,including supplier’s credits or deferredpayment arrangements, the total outstandingamount of which, excluding interests, shallnot exceed five hundred million US$ or theequivalent thereof in other currencies, on termsand conditions promulgated by the Secretaryof Finance and the Monetary Board for theaccomplishment of its objectives; and to enterinto and execute contracts and otherdocuments specifying such terms andconditions.

The President of the Philippines, byhimself or through his duly authorizedrepresentative, is hereby authorized tonegotiate and contract with foreigngovernments or any international financial


22

institution or fund sources in the name andon behalf to the administration, one or severalloans, for the purpose of implementing theAdministration’s program for the promotionand development of local water utilitiesthrough the Administration’s financing orlending operations.

The President of the Philippines, byhimself or through his duly authorizedrepresentative, is hereby further authorized toguarantee, absolutely and unconditionally, asprimary obligor and not as mere surety, in thename and on behalf of the Republic of thePhilippines, the payments of the loans, creditsand indebtedness up to the amount hereinauthorized, over and above the amounts whichthe President of the Philippines pursuant toloan agreements entered into with foreigngovernments or any international financinginstitution or fund sources.

The loan credits and indebtednesscontracted under this section shall be in accordwith the provisions of the Foreign BorrowingAct as amended. (As amended by Sec. 36, PD768)

SEC. 74. Depository for Reserves.Depository for Reserves.Depository for Reserves.Depository for Reserves.Depository for Reserves. - Anylocal water utility which is accumulatingreserves for capital improvement may makespecified time deposits of the same to theAdministration in the manner authorized forbanks in handling trust funds. Such fundsshall not be used for operating purposes bythe Administration. (As amended by Sec. 37,PD 768)

SEC. 75. Control and Supervision overControl and Supervision overControl and Supervision overControl and Supervision overControl and Supervision overall Releases of Appropriations forall Releases of Appropriations forall Releases of Appropriations forall Releases of Appropriations forall Releases of Appropriations forWWWWWaterwaterwaterwaterwaterworkorkorkorkorks and Ses and Ses and Ses and Ses and Sewwwwwerererererage Syage Syage Syage Syage Systemsstemsstemsstemsstems..... -Since the Administration is charged with thedevelopment of local water utilities, fundsfrom prior and future appropriations of theNational Government for waterworks and

sewerage systems in cities, municipalities,and provinces that are covered by duly formedwater districts shall be released directly tothe Administration for the account of thewater district concerned. The Administrationmay, however, draw from such account feesand charges for services rendered to the waterdistrict concerned as specified in Section 70of this Title. (Sec. 38, PD 768)

SEC. 76. Government Assistance toGovernment Assistance toGovernment Assistance toGovernment Assistance toGovernment Assistance toNon-Viable WNon-Viable WNon-Viable WNon-Viable WNon-Viable Water Districtsater Districtsater Districtsater Districtsater Districts..... - There shall beincluded in the General Appropriations Act anoutlay in the form of National Governmentaid or subsidy to meet the financialrequirements in the development of watersupply systems of water districts which aredetermined by the Administration to befinancially nonviable in such amount as theAdministration may recommend, but notexceeding the cost of source development andmain transmission line. Releases of such fundsshall be made directly to the Administration.In the development of such water supplysystems, the Administration shall exert allefforts to bring the levels of service within thecost repayment capacity of the beneficiaries.(Sec. 14, PD 1479)

SEC. 77. Special Projects.Special Projects.Special Projects.Special Projects.Special Projects. - Wheneverrequired by the National Government to providefunding requirements for the development ofwaterworks and sewerage systems inmunicipalities, cities or provinces or portionsthereof not yet covered by a duly formed waterdistrict, an outlay shall be provided in theGeneral Appropriations Act, upon the requestof the Administration, separate from itscapitalization, for the purpose of meeting thefinancial requirements of the project;Provided, however, That in the event thatfunds for the project have already beenappropriated by the National Government,


23

such funds shall be released directly to theAdministration. Expenses incurred by theAdministration for the service rendered maydrawn from such account as provided inSection 70 of this Title.

SEC. 78. Exemption frExemption frExemption frExemption frExemption from All Tom All Tom All Tom All Tom All Taxesaxesaxesaxesaxes,,,,,Duties, Fees, Imposts and Other ChargesDuties, Fees, Imposts and Other ChargesDuties, Fees, Imposts and Other ChargesDuties, Fees, Imposts and Other ChargesDuties, Fees, Imposts and Other Chargesbbbbby the Goy the Goy the Goy the Goy the Govvvvvernment.ernment.ernment.ernment.ernment. - To enable theAdministration to pay its indebtedness andobligations, and in furtherance and effectiveimplementation of the policies and objectivesof this Decree, the Administration is herebydeclared exempt:

(a) From the payment of all taxes, fees,imposts, charges, costs and restriction by theGovernment of the Republic of the Philippines,its provinces, cities, municipalities, and othergovernment agencies and instrumentalities,and filing and service fees and other chargesor costs in any court or administrativeproceedings in which it may be a party;

(b) From all income taxes, franchise taxesand realty taxes to be paid to the NationalGovernment, its provinces, cities,municipalities and other government agenciesand instrumentalities; and

(c) From all import duties, compensatingtaxes, wharfage fees on import of foreigngoods and equipment required for itsoperations and projects. (Sec. 38, PD 768; asamended by Sec. 15, PD 1479)

GENERAL PROVISIONSGENERAL PROVISIONSGENERAL PROVISIONSGENERAL PROVISIONSGENERAL PROVISIONS

SEC. 79. Separability of Provisions.Separability of Provisions.Separability of Provisions.Separability of Provisions.Separability of Provisions. - Ifany provision of this Decree, or the applicationof such provision to any person orcircumstances, is declared invalid, theremainder of the Decree or the application ofsuch provision to other persons orcircumstances shall not be affected by suchdeclaration. (As amended by Sec. 39, PD; Sec.15, PD 1479)

SEC. 80. Effect on Other Acts.Effect on Other Acts.Effect on Other Acts.Effect on Other Acts.Effect on Other Acts. - All actsor parts of acts, decrees, general orders,executive orders, proclamations, or rules andregulations inconsistent herewith are repealedor modified accordingly. (As amended by Sec.39, PD 768; Sec. 15, PD 1479)

SEC. 81. EffectivityEffectivityEffectivityEffectivityEffectivity..... - This Decree shalltake effect immediately. (As amended by Sec.15, PD 1479)

Done in the City of Manila, this 25th dayof May in the year of our Lord, nineteenhundred and seventy three.

(SGD) FERDINAND E(SGD) FERDINAND E(SGD) FERDINAND E(SGD) FERDINAND E(SGD) FERDINAND E. MARCOS. MARCOS. MARCOS. MARCOS. MARCOSPresident of the Philippines

By the President:

(SGD) AL(SGD) AL(SGD) AL(SGD) AL(SGD) ALEJEJEJEJEJANDRO MELANDRO MELANDRO MELANDRO MELANDRO MELCHORCHORCHORCHORCHORExecutive Secretary

Presidential Decree No. 768 waspromulgated on August 15, 1975.

Presidential Decree No. 1479 waspromulgated on June 11, 1978.


24

MALACAŃANGMANILA

Presidential Decree No. 768Presidential Decree No. 768Presidential Decree No. 768Presidential Decree No. 768Presidential Decree No. 768

AMENDING PRESIDENTIAL DECREEAMENDING PRESIDENTIAL DECREEAMENDING PRESIDENTIAL DECREEAMENDING PRESIDENTIAL DECREEAMENDING PRESIDENTIAL DECREENONONONONO.198 ENTITL.198 ENTITL.198 ENTITL.198 ENTITL.198 ENTITLED “DECLARING AED “DECLARING AED “DECLARING AED “DECLARING AED “DECLARING ANANANANANATIONAL POLICTIONAL POLICTIONAL POLICTIONAL POLICTIONAL POLICY FY FY FY FY FAAAAAVVVVVORING LORING LORING LORING LORING LOCOCOCOCOCALALALALALOPERAOPERAOPERAOPERAOPERATION AND CONTROL OF WTION AND CONTROL OF WTION AND CONTROL OF WTION AND CONTROL OF WTION AND CONTROL OF WAAAAATERTERTERTERTERSSSSSYSTEMS; AYSTEMS; AYSTEMS; AYSTEMS; AYSTEMS; AUTHORIZING THEUTHORIZING THEUTHORIZING THEUTHORIZING THEUTHORIZING THEFORMAFORMAFORMAFORMAFORMATION OF LTION OF LTION OF LTION OF LTION OF LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTTSSSSSAND PROVIDING FOR THE GOVERNMENTAND PROVIDING FOR THE GOVERNMENTAND PROVIDING FOR THE GOVERNMENTAND PROVIDING FOR THE GOVERNMENTAND PROVIDING FOR THE GOVERNMENTAND ADMINISTRAAND ADMINISTRAAND ADMINISTRAAND ADMINISTRAAND ADMINISTRATION OF SUCHTION OF SUCHTION OF SUCHTION OF SUCHTION OF SUCHDISTRICDISTRICDISTRICDISTRICDISTRICTTTTT; CHAR; CHAR; CHAR; CHAR; CHARTERING A NATERING A NATERING A NATERING A NATERING A NATIONALTIONALTIONALTIONALTIONALADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATION TTION TTION TTION TTION TO FO FO FO FO FAAAAACILITCILITCILITCILITCILITAAAAATETETETETEIMPROIMPROIMPROIMPROIMPROVEMENT OF LVEMENT OF LVEMENT OF LVEMENT OF LVEMENT OF LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATERTERTERTERTERFFFFFAAAAACILITIES; GRANTING SCILITIES; GRANTING SCILITIES; GRANTING SCILITIES; GRANTING SCILITIES; GRANTING SAIDAIDAIDAIDAIDADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATION SUCH POTION SUCH POTION SUCH POTION SUCH POTION SUCH POWERS ASWERS ASWERS ASWERS ASWERS ASARE NECESSARE NECESSARE NECESSARE NECESSARE NECESSARARARARARY TY TY TY TY TO OPTIMIZE PUBLICO OPTIMIZE PUBLICO OPTIMIZE PUBLICO OPTIMIZE PUBLICO OPTIMIZE PUBLICSERSERSERSERSERVICE FROM WVICE FROM WVICE FROM WVICE FROM WVICE FROM WAAAAATER UTILITYTER UTILITYTER UTILITYTER UTILITYTER UTILITYOPERAOPERAOPERAOPERAOPERATIONS, AND FOR OTIONS, AND FOR OTIONS, AND FOR OTIONS, AND FOR OTIONS, AND FOR OTHERTHERTHERTHERTHERPURPOSES.”PURPOSES.”PURPOSES.”PURPOSES.”PURPOSES.”

WHEREWHEREWHEREWHEREWHEREASASASASAS, it is the primary concern ofthe government to develop an orderly andeffective system of local water utilities,particularly in the area of water supply andsewerage services;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, under Presidential DecreeNo. 198, the Government declared as anational policy the local operation andcontrol of water systems; authorized theformation of local water districts providedfor the administration of such districts, andchartered a national administration tofacilitate improvement of local water utilities;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is need to amendcertain provisions of Presidential Decree No.

198 in order to hasten and make more effectivethe implementation and administration of theprogram of total development and expansionof domestic water systems;

NONONONONOWWWWW, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E.....MARCOS,MARCOS,MARCOS,MARCOS,MARCOS, President of the Philippines, byvirtue of the powers vested in me by theConstitution, do hereby order and decree theamendment of Presidential Decree No. 198, asfollows:

SECTION 1. Section 3, paragraph (b) ofPresidential Decree No. 198, is hereby amendedto read as follows:

“(b) Appointing Authority. The personempowered to appoint the members of theBoard of Directors of a local water districtdepending upon the geographic coverage andpopulation make-up of the particular district.In the event that more than seventy-five percentof the total active water service connectionsof a local water district are within theboundary of any city or municipality, theappointing authority shall be the mayor ofthe city or municipality, as the case may be;otherwise, the appointing authority shall bethe governor of the province within which thedistrict is located: Provided, That if the existingwaterworks system in the city or municipalityestablished as a water district under thisDecree is operated and managed by theprovince, initial appointment shall be extendedby the governor of the province. Subsequentappointments shall be as specified herein.

“If portions of more than one provinceare included within the boundary of thedistrict, and the appointing authority is to bethe governor, then the power to appoint shallrotate between the governors involved withthe initial appointments made by the governorin whose province the greatest number ofservice connections exists.”



25

SEC. 2. Paragraph (b), (c), (e) and lastparagraph of Section 6 of the same decree,are hereby amended to read as follows:

“x x x”“(b) A description of the boundary of the

district. In the case of a city or municipality,such boundary may include all lands withinthe city or municipality. A district may includeone or more municipalities, cities or provinces,or portions thereof: Provided, That suchmunicipalities, cities or provinces, or portionsthereof, cover a contiguous area.

“(c) A statement transferring any and allwaterworks and/or sewerage facilitiesmanaged, operated by or under the control ofsuch city, municipality or province to suchdistrict pursuant to a contract authorized bythis Title.

“x x x”“(e) The names of the initial directors of

the district with the date of expiration of theterm of office for each which shall be on the31st of December of first, second, or third even-numbered year after assuming office, as setforth in Section 11 hereof.

“x x x”“If two or more cities, municipalities or

provinces, or any combination thereof, desireto form a single district, a similar resolutionshall be adopted in each city, municipalityand province; or the city, municipality orprovince in which 75% of the total activeservice connections are situated shall pass aninitial resolution to be concurred in by theother cities, municipalities or provinces.”

SEC. 3. Section 7 of the same decree ishereby amended to read as follows:

“SEC. 7. Filing of Resolution. - A certifiedcopy of the resolution or resolutions forminga district shall be forwarded to the office ofthe Secretary of the Administration. If found

by the Administration to conform to therequirements of Section 6 and the policyobjectives in Section 22, the resolution shallbe duly filed. The district shall be deemed dulyformed and existing upon the date of suchfiling. A certified copy of said resolutionshowing the filing stamp of the Administrationshall be maintained in the office of the district.Upon such filing, the local government orgovernmentsconcerned shall lose ownership,supervision and control or any rightwhatsoever over the district except as providedherein.”


“SEC. 8. Number and Qualifications. -The Board or Directors of a district shall becomposed of five citizens of the Philippineswho are of voting age and residents withinthe district. One member shall be arepresentative of civic-oriented service clubs,one member a representative of professionalassociations, one member a representative ofbusiness, commercial, or financialorganizations, one member a representativeof educational institutions and one member arepresentative of women’s organizations. Nopublic officials shall serve as director.”

“SEC. 5. Section 11 of the same decree ishereby amended to read as follows:

“SEC. 11. Term of Office. - Of the five initialdirectors of each newly-formed district, twoshall be appointed for a maximum term oftwo years, two for a maximum term of fouryears, and one for a maximum term of sixyears. Terms of office of all directors in a givendistrict shall be such that the term of at leastone director, but not more than two, shallexpire on December 31 of each even-numberedyear. Regular terms of office after the initialterms shall be for six years commencing on


26

January 1 of odd-numbered years. Directorsmay be removed for cause only, subject toreview and approval of the Administration.”


“SEC. 12. Vacancies. - In the event of avacancy in the board of directors occurringmore than six months before expiration of anydirector’s term, the remaining directors shallwithin 30 days, serve notice to or request thesecretary of the district for nominations andwithin 30 days there-after a list of nomineesshall be submitted to the appointing authorityfor his appointment of a replacement directorfrom the list of nominees. In the absence ofsuch nominations, the appointing authorityshall make such appointment. If within 30days after submission to him of a list ofnominees the appointing authority fails tomake an appointment, the vacancy shall befilled from such list by a majority vote of theremaining members of the Board of Directorsconstituting a quorum. Vacancies occuringwithin the last six months of an unexpiredterm shall also be filled by the Board in theabove manner. The director thus appointedshall serve the unexpired term only.” “If aspracticable, the board shall appoint, by amajority vote, a general manager and shalldefine his duties and fix his compensation.Said officer shall serve at the pleasure of theboard.”


“SEC. 13. Compensation. - Each directorshall receive a per diem, to be determined bythe board, for each meeting of the boardactually attended by him, but no director shallreceive per diems in any given month in excessof the equivalent of the total per diem of fourmeetings in any given month. No director shall

receive other compensation for services to thedistrict.

“Any per diem in excess of P50 shall besubject to approval of the Administration.”


“SEC. 20. System of BusinessAdministration. - The Board shall, as soon aspracticable, prescribe and define by resolutiona system of business administration andaccounting for the district, which shall bepatterned upon and conform to the standardsestablished by the Administration. Auditingshall be performed by a certified publicaccountant not in the government service. TheAdministration may, however, conduct annualaudits of the fiscal operations of the districtto be performed by an auditor retained by theAdministration. Expenses incurred inconnection therewith shall be borne equallyby the water district concerned and theAdministration.”


“SEC. 23. The General Manager. - At thefirst meeting of the board, or as soonthereafter as practicable, the board shallappoint, by a majority vote, a general managerand shall define his duties and fix hiscompensation. Said officer shall serve at thepleasure of the board.”

“SEC. 10. Section 24 of the same decreeis hereby amended to read as follows:

“SEC. 24. Duties. - The duties of theGeneral Manager and other officers shall bedetermined and specified from time to timeby the board. The general manager, who shallnot be a director, shall have full supervisionand control of the maintenance and operationof water district facilities, with power andauthority to appoint all personnel of the


27

district: Provided, That the appointment ofpersonnel in the supervisory level shall besubject to approval by the board.”

SEC. 11. Paragraph (b) of Section 31 ofthe same decree is hereby amended to read asfollows:

“(b) In-Lieu Share. - As an incident to theacquisition of the existing water system of acity, municipality, or province, a district mayenter into a contract to pay in-lieu share forsuch utility plant, an annual amount notexceeding three percent (3%) of the district’sgross receipts from water sales in any year:Provided, however, That no contract of thisnature shall be executed during the first fiveyears of the existence of the district; andProvided, further, That the Board of Directorsshall determine that such contract will notadversely affect or impair the fiscal positionand operations of the district as verified bythe Administration.”

SEC. 12. Section 32 of the same decreeis hereby amended by adding four newsubsections therein, which shall read asfollows:

“SEC. 32. Protection of Waters and,Facilities of District. - A district shall have theright to:

“(a) Commence, maintain, intervene in,defend and compromise actions or proceedingsto prevent interference with or deteriorationof water quality or the natural flow of anysurface, stream or ground water supply whichmay be used or useful for any purpose of thedistrict or be a common benefit to the landsor its inhabitants. The ground water within adistrict is necessary to the performance of thedistrict’s powers and such district is herebyauthorized to adopt rules and regulationssubject to the approval of the National WaterResources Council governing the drilling,

maintenance and operation of wells withinits boundaries for purposes other than a singlefamily domestic use on overlying land. Anywell operated in violation of such regulationsshall be deemed in interference with the watersof the district.

“(b) Require a developer or builder of anystructure within the service areas of the districtto extend or connect its pipeline facilities tothe district facilities whenever suchdevelopment or structure is within one hundredmeters of existing district facilities orwhenever the district is willing to extend itsfacilities within one hundred meters of saiddevelopment or structure. For the purpose ofthis section, development shall include thesubdivision of land for any purpose other thanagricultural purpose, and structure shall meanany building or facility to be used forresidential, commercial or industrial purposes.

“(c) Prohibit any person, firm orcorporation from vending, selling, or otherwisedisposing of water for public purposes withinthe service area of the district where districtfacilities are available to provide such service,or fix terms and conditions by permit for suchsale or disposition of water.

“(d) Safeguard and protect the use of itswaters. For this purpose, any person whoinstalls any water connection without theprevious authority from the water districtestablished under this Decree; tampers watermeters or uses jumpers or other deviceswhereby water is stolen; steals or pilfers wateror water meters; knowingly possesses stolenor pilfered water or water meters shall, uponconviction, be punished by prision correccionalin its minimum period or a fine ranging fromtwo thousand pesos to six thousand pesos, orboth. If the violation is committed with theconnivance or permission of an employee or


28

officer of the water district, an employee orofficer shall, upon conviction, be punished bya penalty one degree lower than prisioncorreccional in its minimum period andforthwith be dismissed and perpetuallydisqualified from employment in any utilityor service company owned or controlled bythe government.”

Sec. 13. Section 34 of the same decree ishereby amended to read as follows:

“SEC. 34. Receipt, Deposit and Paymentof District Funds. - The treasurer shall receive,to the credit of the district and in trust for itsuse and benefit, all monies belonging to thedistrict. All monies belonging to the Districtshall, where practicable, be deposited by thetreasurer in the Philippine National Bank.”

SEC. 14. Section 35 of the same decreeis hereby repealed.

SEC. 15. Section 36 of the same decreeis hereby amended to be known as Section 35to read as follows:

“SEC. 35. Bonds or Other Evidence ofIndebtedness. - A district may borrow moneyto raise funds to pay all cost of any publicimprovements authorized by this Title andmay issue negotiable or non-negotiablebonds, promissory notes or other evidence ofindebtedness to support such borrowings.These obligations may be secured by amortgage, pledge, deed of trust of or any otherencumbrance upon any of its then owned orafter-acquired real or personal property, assetsor revenues and the same shall constitute alien as to the principal and interest thereon,on all such properly, assets or revenues. Theinterests on such bonds or notes are exemptfrom all taxes, duties, fees, imposts, or othercharges of the national or local governments.”

SEC. 16. Two new sections are herebyinserted to be known as Section 36 and

Section 37, respectively, which shall read asfollows:

“SEC. 36. Authority for SubsequentBorrowings. - Where a water district hasborrowed money from the Administration, thedistrict shall not borrow money or incurfurther obligations from other sources withoutthe prior written consent of theAdministration.

“SEC. 37. Default. - In the event of thedefault by the district in the payment ofprincipal or interest on its outstanding bondsor other obligations, any bondholder orcreditor shall have the right to bring an actionbefore the appropriate court to compel thepayment of such obligation. If the bondholderor creditor concerned is the Administration, itmay, without the necessity of judicial process,take over and operate the entire facilities,systems or properties of the district. For thepurpose, the Administration may designateits employees or any person or organizationto assume all powers of policy-decision andthe powers of management andadministration, including but not limited tothe establishment of water rates and charges,the dismissal and hiring of personnel, thepurchase of supplies, equipment and materialsand such other actions as may be necessaryto operate the utility efficiently.”

SEC. 17. Section 37 of the same decreeis hereby amended to read as Section 38 asfollows:

“SEC. 38. Rates and Charges - Water. - Adistrict may sell water under its control, underschedules of rates and charges as may bedetermined by the Board, to any and all waterusers within the district. Said schedule mayprovide for differential rates for differentcategories of use and different quantity blocks.The district, as far as practicable, shall fix


29

such rates and charges for water as will resultin revenues which will:

“(a) Provide for reimbursement from allnew water customers for the cost ofinstallation of new services and meters;

“(b) Provide for revenue from all waterdeliveries and services performed by thedistrict;

“(c) Pay the operating expenses of thedistrict;

“(d) Provide for the maintenance andrepairs and of the works;

“(e) Provide a reasonable surplus forreplacement, extension and improvement; and

“(f) Pay the interest and principal andprovide a sinking fund for the payment ofdebts of the district as they become due andestablish a fund for reasonable reserves.”

SEC. 18. Sections 38, 39, 40, 41, 42 and43 of the same decree are hereby amended toread as Sections 39, 40, 41, 42, 43 and 44,respectively.


“SEC. 45. Dissolution. - A district maybe dissolved by resolution of its board ofdirectors filed in the manner of filing theresolution forming the district: Provided,however, That prior to the adoption of anysuch resolution: (1) another public entity hasacquired the assets of the district and hasassumed all obligations and liabilitiesattached thereto; (2) all bondholders and othercreditors have been notified and they consentto said transfer and dissolution, and (3) a courtof competent jurisdiction has found that saidtransfer and dissolution are in the best interestof the public.”

SEC. 20. Sections 45, 46 and 47 of thesame decree are hereby amended to read as

Sections 46, 47 and 48, respectively.SEC. 21. Section 48 of the same decree is

hereby amended to read as Section 49 asfollows:

“SEC. 49. Charter. - There is herebychartered, created and formed a governmentcorporation to be known as the ‘Local WaterUtilities Administration’ which is herebyattached to the Office of the President. Theprovisions of this Title shall be and constitutethe charter of the Administration.”


“SEC. 50. Purposes. - The Administrationshall primarily be a specialized lendinginstitution for the promotion, development andfinancing of local water utilities. In theimplementation of its functions, theAdministration shall, among others: (1)prescribe minimum standards and regulationsin order to assure acceptable standards ofconstruction materials and supplies,maintenance, operation, personnel training,accounting and fiscal practices for local waterutilities; (2) furnish technical assistance andpersonnel training programs for local waterutilities; (3) monitor and evaluate local waterstandards; and (4) effect system integration,joint investment and operation, districtannexation and deannexation whenevereconomically warranted.”


“SEC. 51. Composition. - The Board ofTrustees of the Administration shall becomposed of a chairman and four othermembers, all of whom shall be citizens of thePhilippines.

“One trustee at any time shall have at


30

least ten years experience in banking, financeor business. One trustee at any time shallpossess sufficient background in the field oreconomics; one trustee at any time shall haveexperience in management or systemsoperations. Two trustees at any time shall becivil or sanitary engineers with experiencerelated to water supply or wastewateroperations. Not more than one trustee mayrepresent a private investor-owned utility. Noelected official shall be entitled to act as atrustee. At least three of the trustees must beemployees of the National Government.

“The General Manager shall be ex-officiomember of the Board.”

SEC.24. Section 51 of the same decree ishereby amended to read as Section 52 asfollows:

“SEC. 52. Appointment and Term ofOffice. - The trustees, with exception of the ex-officio member, shall be appointed by thePresident of the Philippines. They shall servea term of five years each: Provided, That ofthe first four initially appointed, one shallserve a term of five years, another for fouryears, the third for three years, and the fourthfor two years. Trustees may be removed forcause only.

“The incumbent trustees holding officeas such upon the effectivity of this amendmentshall continue to hold such office until theexpiration of their original terms as defined intheir appointments.”

SEC. 25. Sections 52 and 53 of the samedecree are hereby amended to read as Sections53 and 54, respectively.


“SEC. 55. Compensation. - The Trusteesshall each receive a per diem as may be fixed

by the Board for each meeting actuallyattended by them: Provided, That the total ofsuch per diem in any one month for eachTrustees, shall not exceed the equivalent ofthe of the per diems for four meetings; Provide,further, That per diems in excess of threehundred pesos per meeting shall be subject toapproval of the Office of the President; andProvided, finally, That, in addition, eachTrustee shall be reimbursed his expensesincurred in connection with the performanceof his functions in such amount as may bedetermined by the Board of Trustees.”

SEC. 27. Sections 55 and 56 of the samedecree are hereby amended to read a Section56 as follows:

“SEC. 56. By-Laws. - The Board ofTrustees shall adopt a code of by-laws for theconduct of the affairs of the Administrationwhich may be amended from time to time bythe affirmative vote of four Trustees.

“Except as otherwise provided herein, theorganizational structure and staffing patternof the Administration, the qualification of theappointive officers and employees, the powerand responsibilities of the officers, the internalprocedure of the Administration, and suchother matters relative to the organization,management and conduct of the affairs ofthe Administration shall be as provided in theby-laws; Provided, That, the appointment ofand disciplinary action against officers andemployees of the Administration shall be doneand effected pursuant to guidelinesestablished by the Board of Trustees.”

SEC. 28. Section 57 of the same decreeis hereby amended to read as follows:

“SEC. 57. Officers. - The Board shall electa chairman from among its members. Inaddition, the Board shall select a secretaryand a corporate legal counsel, each of whom


31

shall not be a trustee.”SEC. 29. The first paragraph of Section

58 of the same decree is hereby amended toread as follows:

“SEC. 58. The General Manager andOther Employees. - The Trustees shall select ageneral manager who shall not come fromthe appointed trustees. The general managershall receive compensation in an amount asmay be fixed by the Board, subject to theapproval of the President of the Philippines,but in no case less than fifty-four thousandpesos per annum. The general manager shallemploy and appoint all additional personnel;Provided, That the appointment of personnelin the supervisory level shall be subject toconfirmation by the Board.

“The incumbent manager holding officeas such upon the effectively of thisamendment shall continue to hold such officeunless sooner terminated by competentauthority.


“SEC. 60. Borrowing and SecurityTherefor. - The Administration may borrowfunds as authorized in Section 72 of this Title,and issue as security therefore debentures orother evidence of indebtedness constituting alien on any and all securities, covenants andobligations of local water utilities held by theAdministration as security for loans made tosuch local water utilities.

SEC. 31. Paragraph (b), (c), and (d) ofSection 61 of the same decree are herebyamended to read, and a new paragraph ishereby inserted which shall read, as follows:

“SEC. 61. Loans - x x x x“(a) x x x x“(b) Feasibility Study. - A feasibility study

which may be required by the Administration

for any proposed project for which loan fundsare sought may be undertaken by the waterdistrict, the Administration or by a consultantprequalified by the Administration.

“(c) Security. - The Administration maytake as security for such loans the authorizedbonds or other evidence of debt by the waterdistrict and a mortgage on its properties;

“(d) Loan Documents and Procedure, - TheBoard of Trustees shall adopt rules, loandocuments and procedures to be used in thegranting of loans. Such rules shall includeprovisions for security, payment and default.

“(e) Default. - In the event of default bythe local water district in the payment ofprincipal or interest on its outstanding bondsor other obligation to the Administration, thelatter any, without the necessity of judicialprocess, take over and operate the facilitiesor properties of the district. For this purpose,the Administration may designate itsemployees or any person or organization toassume both the policy-making authority andthe powers of management, including but notlimited to, the establishment of water ratesand service charges, the dismissal and hiringof personnel, the purchase of equipment,supplies or materials and such other actionsmay be necessary to operate the water districtefficiently. Such policy-making andmanagement prerogatives may be returned tothe Board of Directors and the generalmanager of the water district, respectively,when all of its overdue accounts have beenpaid, all its reserve requirements have beensatisfied and all the causes of default havebeen met.”

SEC. 32. Paragraph (e) Section 62 of thesame decree is hereby amended to read asfollows:

“SEC. 62. Regulations. - x x x x


32

“(e) Personnel. - The training of personnelor operate or manage local water utilities.For this purpose, at least a majority of thepersonnel of a local water district must havesatisfactorily completed appropriate trainingcourses, programs or seminars conducted bythe Administration, and must be holders of acertificate of completion or competence, asthe case may be, before a certificate ofconformance is issued to the water district.

“For certain positions which theAdministration may specify, only thosepersons possessing, or in the case ofsubsequent appointment, only persons whowill undergo training and shall have obtainedwithin six months, a certificate of completionor competence, as the case may be, shall beappointed.”

SEC. 33. Paragraph (f) of Section 83 ofthe same decree is hereby to read as follows:

“SEC. 63. Rate Review. - x x x x“(f) Payment of the interest and principal

and provide a signing fund for payment ifdebts of the district as they become due andestablish a fund reasonable reserves.

“The rates or charges established by suchlocal water district shall be subject to reviewby the Administration to establish compliancewith the above-stated provisions. Said reviewof rates or any charges therein shall be by theBoard of Trustees, and in writing.”

SEC. 34. Sections 67, 68 and 69 of thesame decree are hereby repealed, and five newsections are hereby substitute therefore to beknown as Sections 67, 68, 69, 70 and 71,which shall be read as follows:

“SEC. 67. Capital Stock. - The authorizedcapital of the Local Water UtilitiesAdministration is Five Million shares of stockwith a par value of One Hundred Pesos pershare, which shall be subscribed by the

National Government and opened tosubscription by private investors orgovernment financial institutions.

“SEC. 68. Payment for NationalGovernment Shares. - All amounts previouslyreleased the National Government to theRevolving Fund of the Administration shall becredited as payment for subscriptions toshares of stock at par value. Thereafter, theNational Government shall for each yearbeginning with fiscal year 1975-76subscription and pay for the necessarycapitalization as programmed during the year;Provided, That the amount programmed foreach year shall not be less than Fifty MillionPesos.

“SEC. 69. Operational Expenses. - TheBoard of Trustees is hereby authorized toappropriate out of any funds of theAdministration, such amounts as it may deemnecessary for the operational and otherexpenses of the Administration including thepurchase of necessary equipment.

“SEC. 70. Charges. - To the extent thatthe Administration perform services for thebenefit and at the request of a local waterdistrict or utility or a number of water districts,utilities or organizations, it may levy fees orcharges for such services rendered.

“Charges may include as assessmentagainst water districts or utilities to financethose functions of the Administration whichare of general benefit to water districts orutilities including, but not limited to, generaladministrations and supervision.

“SEC. 71. Receipt and Investment ofFunds. - Whenever the Administration receivesmoney whether as payment for subscriptions,interest to shares of stock, principalrepayments, interest income, payment forservices rendered or for any purpose


33

whatsoever, it shall issue its own receipts andprovide for their safekeeping and investmentunder policy guidelines as may be establishedby the Board of Trustees in accordance withDepartment of Finance regulations.”

SEC. 35. Section 70 of the same decreeis hereby repealed.

SEC. 36. Section 71 of the same decree ishereby amended to read as Sections 71 and73 as follows:

“SEC. 72. Domestic Borrowing Authority.- The Administration shall have the authorityto borrow money from all domestic loansources whether government or private;Provided, That its loans outstanding fromdomestic sources at any one time shall notexceed One Billion Pesos.”

“SEC. 73. Authority to Contract ForeignLoan. - The Administration is herebyauthorized to contract loans, credits, in anyconvertible foreign currency or capital goods,and to incur indebtedness from time to timewith foreign governments, or any internationalfinancial institutions or fund sources,including suppliers credits or deferred paymentarrangements, the total outstanding amountof which, excluding interests, shall not exceedfive hundred million United States dollars orthe equivalent therefore in other currencies,on terms and conditions promulgated by theSecretary of Finance and the Monetary Boardfor the accomplishment of its objectives; andto enter into and execute contract and otherconditions.

“The President of the Philippines, byhimself, or through his duly authorizedrepresentative, is hereby authorized tonegotiate and contract with foreigngovernments or any international financialinstitution of fund sources in the name andon behalf of the Administration, one or several

loans, for the purpose of implementing theAdministration’s program for the promotionand development of local water utilitiesthrough the Administration’s financing orlending operations.

“The President of the Philippines, byhimself or through his duly authorizedrepresentative, is hereby further authorized toguarantee, absolutely and unconditionally, aprimary obligor and not as mere surety, in thename and on behalf of the Republic of thePhilippines, the payments of the amountherein authorized, over and above the amountswhich the President of the Philippinespursuant to loan agreements entered into withforeign governments or any internationalfinancial institution or fund sources.

“The loans, credits and indebtednesscontracted under this section shall be in accordwith the provisions of the Foreign BorrowingAct as amended.”


“SEC. 74. Depository for Reserves. - Anylocal water utilities which is accumulatingreserves for capital improvement may makespecified time deposits of the same to theAdministration in the manner authorized forbanks in handling trust fund. Such funds shallnot be used for operating purposes by theAdministration.”

SEC. 38. Two new sections are herebyinserted to be known as Section 75 andSection 76, which shall read as follows:

“SEC. 75. Control and Supervision overAll Release of Appropriations for Waterworksand Sewerage System. - Since theAdministration is charge with the developmentof local water utilities, funds from prior andfuture appropriations of the National


34

Governments for waterworks and seweragesystem in cities, municipalities, and provincesthat are covered by duly formed water districtsshall be released directly to the Administrationfor the account of the water districtsconcerned. The Administration may, however,draw from such account fees and charges forservices rendered to the water districtconcerned as specified in Section 70 of thisTitle.

“SEC. 76. Exemption from All Taxes,Duties, Fees, Imposts and Other Charges bythe Government. - To enable the Administrationto pay its indebtedness and obligations, andin furtherance and effective implementationof 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 bythe Government of the Republic of thePhilippines, its provinces, cities,municipalities, and other government agenciesand instrumentalities, and filing and servicefees and other charges of courts in any courtor administrative proceedings in which it maybe a party;

“(b) From all income taxes, franchisetaxes and really taxes to be paid to theNational Government, its provinces, cities,municipalities and other government agenciesand instrumentalities; and

“(c) From all import duties, compensatingtaxes, wharfage fees on import of foreigngoods and equipment require for its operationsand projects.”

SEC. 39. Sections 73 and 74 of the samedecree are hereby amended to read as Section77 and 78, respectively.

SEC. 40. This Decree shall take effectimmediately.

Done in the City of Manila, this 15th day

of August in the year of Our Lord, nineteenhundred and seventy-five.

By the President:

(SGD) AL(SGD) AL(SGD) AL(SGD) AL(SGD) ALEJEJEJEJEJANDRO MELANDRO MELANDRO MELANDRO MELANDRO MELCHORCHORCHORCHORCHORExecutive Secretary


35

Office of the President of the PhilippinesMalacańang

LLLLLetter of Instructions No. 683etter of Instructions No. 683etter of Instructions No. 683etter of Instructions No. 683etter of Instructions No. 683

ESTESTESTESTESTABLISHING BABLISHING BABLISHING BABLISHING BABLISHING BASIC POLICIES FORASIC POLICIES FORASIC POLICIES FORASIC POLICIES FORASIC POLICIES FORTHE WTHE WTHE WTHE WTHE WAAAAATER SUPPLTER SUPPLTER SUPPLTER SUPPLTER SUPPLY SECY SECY SECY SECY SECTTTTTOROROROROR

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, drinking water is a basicrequirement to sustain life;

WHEREAS, only about 40 percent of thepopulation of the Philippines is presentlyserved with public water supply systems;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, it is primary concern of theGovernment in promoting the welfare of thepeople to hasten the availability of watersupply in the whole country, with specialattention to the rural areas;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the approved PhilippineDevelopment Plan for 1978-1987, thereforeaims to increase the public water supplycoverage to about 85 percent of the totalPhilippine population within ten years;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is a need to restructurethe water supply sector so that gaps andoverlaps in responsibility will be eliminated;and

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, it is necessary to establishcertain basic policies to attain these objectivesin the most efficient manner;

NONONONONOWWWWW, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E.....MARCOS,MARCOS,MARCOS,MARCOS,MARCOS, President of the Philippines, byvirtue of the powers vested in me by theConstitution, do hereby order theimplementation of the following basic policiesfor the water supply sector;

(1) The attainment of complete coverage

of water supply services for the whole countryis a declared policy of the State and shall beeffected primarily through;

(a) The rationalization of theorganizational structure for the water supplysector; (b) The formation of water districts,associations, cooperatives or corporations forthe construction, operation and maintenanceof water supply systems in preference tosystems directly operated and managed bylocal governments; and (c) The encouragementof self-help and self-reliant water supplyprojects.

(2) Agencies involved in water supply shallstrive to attain financial independence,thereby minimizing Government subsidy, byincreasing their own internal revenuegeneration capabilities and by providingservices within the cost repayment capabilitiesof the beneficiaries.

(3) The levels of water supply service tobe developed shall vary according to technicaleconomic, organizational and financialconsideration. These levels of service are asfollows:

Level I - Point sources (such as raincollector, wells and springs); generally for ruralareas where houses are scattered too thinlyto justify a distribution system.

Level II - Communal faucet systems;generally for rural areas where houses areclustered densely enough to justify a pipeddistribution system with a faucet providedfor a number of households.

Level III - Individual house connections;generally for urban areas.

(4) The rationalization of the watersupply sector structure shall be pursued inaccordance with the following strategies:

(a) The Metropolitan Waterworks andSewerage System shall concentrate its



36

operations in Metropolitan Manila and othercontiguous areas that may later be includedin its service coverage.

(b) The Local Water UtilitiesAdministration shall promote water districtsin cities and municipalities with populationof at least 20,000 each. It will support thesewater districts through institutional, technicaland financial assistance.

(c) The Bureau of Public Works shall bemainly responsible for the construction ofwells and development of springs in ruralareas.

(d) The Department of Local Governmentsand Community Development shall beresponsible for the formations of waterassociations and cooperatives that willoperate and maintain water supply systemsfor communities in the provinces covered bythe Provincial Development AssistanceProgram (PDAP). It shall provide institutional,technical and financial support to theseassociations and cooperatives.

(e) A Task Force on Rural Water Supplyunder the National Water Resources Councilshall, until such time that a permanentinstitution of the Government to handle therural water supply sector is evolved, beresponsible for the formation of waterassociations and cooperatives that willconstruct, operate, and maintain water supplysystems in the rural areas of non-PDAPprovinces. This Task Force shall providetechnical, institutional, and financialassistance to these associations andcooperatives. It shall also make studies andrecommendations on the appropriateinstitution that will eventually be responsiblefor the rural water supply sector on apermanent basis. The Task Force is herebyauthorized to call upon any agency of the

Government for assistance in accomplishingits tasks.

(5) The National Water Resources Councilshall be responsible for coordinating theimplementation of the above policies. It shallsubmit to the President of the Philippines,periodic reports on the status on the entirewater supply sector and the performance ofeach of the above agencies in relation to theoverall policy framework for water supply.

Done in the City of Manila, this 30th dayof March in the year of Our Lord, nineteenhundred and seventy eight.



37

sectionsectionsectionsectionsection 5Office of the President of the Philippines

Malacańang


PROPROPROPROPROVIDING MEVIDING MEVIDING MEVIDING MEVIDING MEASURES TASURES TASURES TASURES TASURES TO CONTROLO CONTROLO CONTROLO CONTROLO CONTROLAND REGULAAND REGULAAND REGULAAND REGULAAND REGULATE INCRETE INCRETE INCRETE INCRETE INCREASES IN WASES IN WASES IN WASES IN WASES IN WAAAAATERTERTERTERTER

RARARARARATESTESTESTESTES

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is a need to helpdepressed or newly formed water districtsdevelop their financial viability, but at thesame time avoid too abrupt increases in theirwater rates;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is a need to prescribecertain measures whereby increases of ratesimposed by water districts are controlled orregulated;

NONONONONOWWWWW, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E.....MARCOS,MARCOS,MARCOS,MARCOS,MARCOS, President of the Philippines, byvirtue of the powers vested in me by theConstitution, do hereby order theimplementation of the following measures inthe operation and development of waterdistricts;

(1) The Local Water UtilitiesAdministration (LWUA) shall:

(a) Implement a socialized pricing schemefor water districts in setting up water rateswhereby the more affluent, heavy users paymore per unit than the low income, minimalusers of water, LWUA shall prescribe guidelinesfor this purpose;

(b) Provide institutional developmentservices to water districts free of charge;

(c) Grant capital improvement loans towater districts on concessionary terms;

(d) On a case-to-case basis, defer loanamortization payments until improvementsare completed and actually in operation;

(e) Assist water districts improve theiroperational efficiency through skills/managerial training and systems development;

(f) Ensure that the water rates are notabruptly increased beyond the water usersability to pay, seeing to it that each increaseif warranted, does not exceed 60% of thecurrent rate;

(g) Limit charges for feasibility andengineering studies to not more than 15% ofthe actual construction cost of the projectimplemented;

(h) Require 100% metering to insurecorrect charging of water actually consumedand to discourage its wasteful use;

(i) Where indicated, consider theadoption of lower standards of service,especially for the marginally feasible areas,to reduce project cost; and;

(j) Reduce required reserves accumulationfor meeting emergency and contingency needsas will be appropriate.

(2) The National ElectrificationAdministration and the National PowerCorporation shall study ways and means togrant special reduce electric power rates tothe water districts concerned. Where feasible,the National Power Corporation shall alsodetermine ways by which the water districtscan directly tap the power lines.

(3) The Budget Commission shall providein the national government annual operatingbudget starting with CY 1979 such amount asshall be requested by LWUA and recommendedby the National Economic and DevelopmentAuthority for the conduct of feasibility studiesfor the development of waterworks systemsin established water districts. Such national


38

government contribution shall not constitutepart of LWUA’s equity nor shall it be chargedagainst the water districts.

(4) The local government concerned shallprovide subsidy for the operation of depressedor newly created water districts. The subsidyshall initially be up to the level provided bythe local government for the operation of thesystem immediately prior to the formation ofthe water district. The subsidy, however, shallbe reduced as the water services and revenuesimprove as determined by LWUA.

(5) The water district concerned shallconduct public hearings prior to any proposedincrease in water rates.

Done in the City of Manila, this 1st dayof June in the year of Our Lord, nineteenhundred and seventy eight.



39

MALAMALAMALAMALAMALACCCCCAŃANGAŃANGAŃANGAŃANGAŃANGManila

PRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NO. 1479. 1479. 1479. 1479. 1479

FURFURFURFURFURTHER AMENDING PRESIDENTIALTHER AMENDING PRESIDENTIALTHER AMENDING PRESIDENTIALTHER AMENDING PRESIDENTIALTHER AMENDING PRESIDENTIALDECREE NODECREE NODECREE NODECREE NODECREE NO. 198 O. 198 O. 198 O. 198 O. 198 OTHERTHERTHERTHERTHERWISE KNOWISE KNOWISE KNOWISE KNOWISE KNOWN ASWN ASWN ASWN ASWN ASTHE “PROTHE “PROTHE “PROTHE “PROTHE “PROVINCIAL WVINCIAL WVINCIAL WVINCIAL WVINCIAL WAAAAATER UTILITIES ATER UTILITIES ATER UTILITIES ATER UTILITIES ATER UTILITIES ACCCCCTTTTTOF 1973”, AS AMENDED BOF 1973”, AS AMENDED BOF 1973”, AS AMENDED BOF 1973”, AS AMENDED BOF 1973”, AS AMENDED BYYYYYPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NO. 768. 768. 768. 768. 768

WHEREWHEREWHEREWHEREWHEREAS, AS, AS, AS, AS, Presidential Decree NO. 198,as amended by Presidential Decree No. 768,declares as a national policy the localoperation and control of water systems;authorizes the formation of local waterdistricts; provides for the administration ofsuch districts and charters a nationaladministration to facilitate improvement oflocal water utilities;

WHEREWHEREWHEREWHEREWHEREASASASASAS, in order to accelerate thedevelopment and expansion of domestic watersystems, there is a need to further amendcertain provisions of Presidential Decree No.198, as amended.

NONONONONOWWWWW, THEREFORE, I FERDINAND E, THEREFORE, I FERDINAND E, THEREFORE, I FERDINAND E, THEREFORE, I FERDINAND E, THEREFORE, I FERDINAND E.....MARCOS,MARCOS,MARCOS,MARCOS,MARCOS, President of the Philippines, byvirtue of the powers vested in me by theConstitution, do hereby order and decree thefurther amendment of Presidential Decree No.198, as follows:

SECTION 1. The first paragraph ofSection 6 of Presidential Decree No. 198, asamended, is hereby amended to read asfollows:

“SEC. 6. Formation of District. - This Actis the source of authorization and power to

sectionsectionsectionsectionsection 6 form and maintain a district. For purposes ofthis Act, a district shall be considered as aquasi-public corporation performing publicservice and supplying public wants. As such,a district shall exercise the powers, rights andprivileges given to private corporations underexisting laws, in addition to the powersgranted in, and subject to such restrictionsimposed, under this Act.

x x x(c) A statement completely transferring

any and all waterworks and/or seweragefacilities managed, operated by or under thecontrol of such city, municipality or provinceto such district upon the filing of resolutionforming the district.

x x xSEC. 2. A new sentence is hereby added

to Section 8 of the same decree to read asfollows:

“SEC. 8. Number and Qualifications. –xxx Provided, however, that if the district hasavailed of the financial assistance of theAdministration, the Administration mayappoint any of its personnel to sit in the boardof directors with all the rights and privilegesappertaining to a regular member, for suchperiod as the indebtedness remains unpaid, inwhich case the board shall be composed ofsix members.”

SEC. 3. Section 25 of the same decree ishereby amended.

SEC. 4. Section 26 of the same decree ishereby amended to read as Section 25 asfollows:

“SEC. 25. Authorization. The district mayexercise all the powers which are expresslygranted by this Title or which are necessarilyimplied from, or incidental to the powers andpurposes herein stated. For the purpose ofcarrying out the objectives of this Act, a district


40

is hereby granted the power of eminentdomain, the exercise thereof shall, however,be subject to review by the Administration.”

SEC. 5. Sections 27, 28, 29, 30 and 31 ofthe same decree are hereby amended to readas Section 26, 27, 28, 29 and 30, respectively.

SEC. 6. Section 32 of the same decree ishereby amended to read as Section 31.

“SEC. 31. Protection of Waters andFacilities of District. A district shall have theright to

x x x(e) take over the management,

administration, operation and maintenanceof all watersheds within its territorialboundaries.”

SEC. 7. Sections 33, 34, 35, 36, 37, 38,39, 40 and 41 of the same decree are herebyamended to read as Sections 32, 33, 34, 35,36, 37, 38, 39 and 40, respectively.

SEC. 8. A new section is hereby insertedto be known as Section 41 which shall readas follows:

“SEC. 41. Disposition of Income. Theincome of the district shall be disposed ofaccording to the following priorities:

“First, to pay its contractual andstatutory obligations and to meet its essentialcurrent operating expenses.

“Second, to allocate at least fifty percent(50%) of the balance exclusively as a reservefor debt service and operating andmaintenance, to be used for such purposesonly during periods of calamities, forcemajeure or unforeseen events.

“Third, to allocate the residue as a reserveexclusively for expansion and improvement ofits physical facilities.”


“SEC. 47. Exclusive Franchise. No

franchise shall be granted to any other personor agency for domestic, industrial orcommercial water service within the districtor any portion thereof unless and except tothe extent that the board of directors of saiddistrict consents thereto by resolution dulyadopted, such resolution, however, shall besubject to review by the Administration.”


“SEC. 61. Loans.x x xFunding of Loan. When a loan is made to

local water utility, the necessary amount ofsuch loan shall be programmed to assurecompletion of the project for which such loanwas granted.”

SEC. 11. The last paragraph of Section63 of the same decree is hereby amended toread as follows:

“SEC. 63. Rate Review.x x xThe rates or charges established by such

local district, after hearing shall have beenconducted for the purpose, shall be subject toreview by the Administration to establishcompliance with the above-stated provisions.Said review of rates or charges shall beexecutory and enforceable after the lapse ofseven calendar days from posting thereof in apublic place in the locality of the water district,without prejudice to an appeal being takentherefrom by a water concessionaire to theNational Water Resources Council whosedecision thereon shall be appealable to theOffice of the President. An appeal to theCouncil shall be perfected within thirty daysafter the expiration of the seven-day period ofposting. The Council shall decide on appealwithin thirty days from perfection.

SEC. 12. Section 67 of the same decree


41

is hereby amended to read as follows:“SEC. 67. Capital Stock. The authorized

capital of the Local Water UtilitiesAdministration is Two Billion, Five HundredMillion Pesos divided into Twelve Million FiveHundred Thousand share of stock with a parvalue of Two Hundred Pesos per share whichshall be subscribed by the NationalGovernment and opened to subscription byprivate investors or government financialinstitutions.”


“SEC. 68. Payment for NationalGovernment Shares. All amounts x x x at parvalue. Whatever balance remaining of saidsubscription shall be paid from a continuingappropriation which is hereby made out ofany funds in the National Treasury nototherwise appropriated, such annualappropriation to be programmed and releasedin accordance with the pertinent budget laws:Provided, That this continuing appropriationshall remain in force until the balance of theunpaid subscription of the government to thecapital stock of the administration have beenpaid in full.”

SEC. 14. New sections are hereby insertedto be known as Section 76 and 77,respectively, which shall read as follows:

“SEC. 76. Government Assistance to Non-Viable Districts. There shall be included in theGeneral Appropriations Act an outlay in theform of National Government aid or subsidyto meet the financial requirements in thedevelopment of water supply systems of waterdistricts which are determined by theAdministration to be financially non-viable insuch amount as the Administration mayrecommend, but not exceeding the cost ofsource development and main transmission

line. Releases of such funds shall be madedirectly to the Administration. In thedevelopment of such water supply systems,the Administration shall exert all efforts tobring the levels of service within the costrepayment capacity of the beneficiaries.”

“SEC. 77. Special Projects. Wheneverrequired by the National Government to providefunding requirements for the development ofwaterworks and sewerage systems inmunicipalities, cities or provinces, or portionsthereof not yet covered by a duly formed waterdistrict, an outlay shall be provided in theGeneral Appropriations Act, upon the requestof the Administration, separate from itscapitalization, for the purposes of meetingthe financial requirements of the project:Provided, however, That in the event that fundsfor the project have already been appropriatedby the National Government, such funds shallbe released directly to the Administration.Expenses incurred by the Administration forthe service rendered may be drawn from suchaccount as provided in Section 70 of this Title.”

SEC. 15. Sections 76, 77, 78 and 79 ofthe same decree are hereby amended to readas Section 78, 79, 80 and 81, respectively.

SEC. 16. This Decree shall take effectimmediately.

Done in the City of Manila, this 11th dayof June in the year of Our Lord, nineteenhundred and seventy-eight.

By the President:

(SGD) JU(SGD) JU(SGD) JU(SGD) JU(SGD) JUAN C. TUVERAAN C. TUVERAAN C. TUVERAAN C. TUVERAAN C. TUVERAPresidential Assistant


42

Office of the President of the PhilippinesMalacańang


RELARELARELARELARELATIVE TTIVE TTIVE TTIVE TTIVE TO RELIABLO RELIABLO RELIABLO RELIABLO RELIABLE WE WE WE WE WAAAAATER SUPPLTER SUPPLTER SUPPLTER SUPPLTER SUPPLYYYYYAAAAAT RET RET RET RET REASONABLASONABLASONABLASONABLASONABLE RAE RAE RAE RAE RATES IN THETES IN THETES IN THETES IN THETES IN THE

COUNTRCOUNTRCOUNTRCOUNTRCOUNTRYSIDEYSIDEYSIDEYSIDEYSIDE

TO: The Minister of Public Works,Transportation and Communications

The Chairman and Members, NationalWater Resources Council

The General Manager, Local WaterUtilities Administration

The Chairman and General Managers ofWater Districts

All Others Concerned

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the provision of adequatewater supply at reasonable rates is a primaryobjective of the New Society;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the implementation of anational program for improved water supplyis the responsibility of local organizationsparticularly Water Districts and localgovernment units, assisted by the NationalWater Resources Council and the Local WaterUtilities Administration;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is need to improveplanning, monitoring and implementingactivities at all levels, and to reduce waterrates to minimum levels;

NONONONONOWWWWW, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E, THEREFORE, I, FERDINAND E.....MARCOS, MARCOS, MARCOS, MARCOS, MARCOS, President of the Philippines, dohereby order and instruct:

1. The Local Water UtilitiesAdministration and Water Districts shallimmediately review the facilities design,implementation plan and rates and feescharged, with the objective of:

a. Reducing water rates to minimumlevels;

b. Eliminating unnecessary fees andregulatory measure;

c. Implementing expansion plans inphases so as to keep in step with growth indemand without resulting in excess capacity;

d. Reducing cost of construction to aminimum

2. The National Water Resources Councilshall eliminate all unnecessary regulatorymeasures and fees particularly on privatelyowned and dug wells.

3. The Local Water UtilitiesAdministration and each Water Districts shallprepare a public education program whichshall concentrate on the need and methodsfor water conservation, water rates, waterfacilities requirements and need for financing,and other related aspects of Water Districtoperations. They shall, in addition, prepare acomprehensive program and system of publicconsultation, both formally in hearings andinformally through an education program,when considering increases in water rates,particularly at the time when Water Districtsinitiate operation.

4. The Local Water UtilitiesAdministration shall review the compositionof the Board of each Water District to makesure that consumers are properly and fullyrepresented. It shall initiate the necessarychanges.



43

5. The Local Water UtilitiesAdministration shall assess the terms of loansextended to Water Districts, including maturity,amortization schedule, and interest rates, forthe purpose of enabling Water Districts tomeet their obligations without chargingexcessive water rates to consumers.

6. The Committee on National Aid toLocal Government Units shall study andrecommended to the President a program forcommunal water pumps to serve areas notcovered by Water District or which do nototherwise have an adequate water supply. Theprogram shall provide for a sharing ofconstruction cost among national and localgovernment units, whereby the nationalgovernment shall provide counterpart-fundingassistance, charged to the funds provided asAid to Local Government Units under PD No.144.

Done in the City of Manila, this 28th dayof September, nineteen hundred and seventy-eight.



44

EXECUTIVE ORDER NOEXECUTIVE ORDER NOEXECUTIVE ORDER NOEXECUTIVE ORDER NOEXECUTIVE ORDER NO. 68. 68. 68. 68. 68

MODIFYING PRESIDENTIAL DECREEMODIFYING PRESIDENTIAL DECREEMODIFYING PRESIDENTIAL DECREEMODIFYING PRESIDENTIAL DECREEMODIFYING PRESIDENTIAL DECREENONONONONO. 198, AS AMENDED. 198, AS AMENDED. 198, AS AMENDED. 198, AS AMENDED. 198, AS AMENDED

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the Local Water UtilitiesAdministration (LWUA) was created by virtueof Presidential Decree No. 198, as amended;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, Section 58 of PresidentialDecree No. 198, as amended, provides for aGeneral Manager of the Local Water UtilitiesAdministration (LWUA) while Section 23 ofthe said Decree likewise provides for a generalmanager for a local water district;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is a need todistinguish the General Manager of the LocalWater Utilities Administration (LWUA) fromthe general managers of the various localwater districts by changing the designationof the General Manager of the Local WaterUtilities Administration (LWUA);

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, as a consequence, the titleof the next in rank of the General Managerof the Local Water Utilities Administration(LWUA) should be similarly changed;

NONONONONOWWWWW, THEREFORE, I, CORAZON C., THEREFORE, I, CORAZON C., THEREFORE, I, CORAZON C., THEREFORE, I, CORAZON C., THEREFORE, I, CORAZON C.AAAAAQUINOQUINOQUINOQUINOQUINO,,,,, President of the Philippines, dohereby order:

SECTION 1. Section 58 of Chapter 58,Title III of Presidential Decree No. 198, asamended, is hereby modified to the extentthat the title of the head of the Local WaterUtilities Administration (LWUA) is changed

sectionsectionsectionsectionsection 8 from General Manager to Administrator andthe officer(s) next in rank shall be designatedas Deputy Administrator(s).

DONE in the City of Manila, this 21st dayof November, in the year of Our Lord, NineHundred and Eighty-Six.

(SGD) CORAZON C. ACORAZON C. ACORAZON C. ACORAZON C. ACORAZON C. AQUINOQUINOQUINOQUINOQUINOPresident of the Philippines


45

SUPREME COURSUPREME COURSUPREME COURSUPREME COURSUPREME COURT RULING ON WT RULING ON WT RULING ON WT RULING ON WT RULING ON WAAAAATERTERTERTERTERDISTRICDISTRICDISTRICDISTRICDISTRICTTTTTS AS GOS AS GOS AS GOS AS GOS AS GOVERNMENTVERNMENTVERNMENTVERNMENTVERNMENT-O-O-O-O-OWNEDWNEDWNEDWNEDWNEDAND CONTROLLAND CONTROLLAND CONTROLLAND CONTROLLAND CONTROLLED CORPORAED CORPORAED CORPORAED CORPORAED CORPORATIONSTIONSTIONSTIONSTIONS

Republic of the PhilippinesRepublic of the PhilippinesRepublic of the PhilippinesRepublic of the PhilippinesRepublic of the PhilippinesSupreme CourtSupreme CourtSupreme CourtSupreme CourtSupreme Court

ManilaManilaManilaManilaManila

EN BEN BEN BEN BEN BANCANCANCANCANC

DDDDDAAAAAVVVVVAAAAAO CITY WO CITY WO CITY WO CITY WO CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,CCCCCAAAAAGAGAGAGAGAYYYYYAN DE ORO CITY WAN DE ORO CITY WAN DE ORO CITY WAN DE ORO CITY WAN DE ORO CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,METRO CEBU WMETRO CEBU WMETRO CEBU WMETRO CEBU WMETRO CEBU WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,ZAMBOZAMBOZAMBOZAMBOZAMBOANGA CITY WANGA CITY WANGA CITY WANGA CITY WANGA CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,LLLLLEYTE METRO WEYTE METRO WEYTE METRO WEYTE METRO WEYTE METRO WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,BUTUBUTUBUTUBUTUBUTUAN CITY WAN CITY WAN CITY WAN CITY WAN CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,CCCCCAMARINES NORAMARINES NORAMARINES NORAMARINES NORAMARINES NORTE WTE WTE WTE WTE WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,LALALALALAGUNA WGUNA WGUNA WGUNA WGUNA WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,DUMADUMADUMADUMADUMAGUETE CITY WGUETE CITY WGUETE CITY WGUETE CITY WGUETE CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,LA UNION WLA UNION WLA UNION WLA UNION WLA UNION WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,BBBBBAAAAAYBYBYBYBYBAAAAAY WY WY WY WY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,METRO LINGAMETRO LINGAMETRO LINGAMETRO LINGAMETRO LINGAYEN WYEN WYEN WYEN WYEN WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,URDURDURDURDURDANETANETANETANETANETA WA WA WA WA WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,COCOCOCOCOTTTTTABABABABABAAAAATTTTTO CITY WO CITY WO CITY WO CITY WO CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,MARAMARAMARAMARAMARAWI CITY WWI CITY WWI CITY WWI CITY WWI CITY WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,TTTTTAAAAAGUM WGUM WGUM WGUM WGUM WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,DIGOS WDIGOS WDIGOS WDIGOS WDIGOS WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,BISLIG WBISLIG WBISLIG WBISLIG WBISLIG WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT,,,,,and MEYCand MEYCand MEYCand MEYCand MEYCAAAAAUUUUUAAAAAYYYYYAN WAN WAN WAN WAN WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICTTTTT

Petitioners

versus

CIVIL SERVICE COMMISSION, andCIVIL SERVICE COMMISSION, andCIVIL SERVICE COMMISSION, andCIVIL SERVICE COMMISSION, andCIVIL SERVICE COMMISSION, andCOMMISSION ON ACOMMISSION ON ACOMMISSION ON ACOMMISSION ON ACOMMISSION ON AUDITUDITUDITUDITUDIT

Respondents

G. R. Nos. 95237-38G. R. Nos. 95237-38G. R. Nos. 95237-38G. R. Nos. 95237-38G. R. Nos. 95237-38Present:Present:Present:Present:Present:FERNAN, C. J.,FERNAN, C. J.,FERNAN, C. J.,FERNAN, C. J.,FERNAN, C. J.,NARNARNARNARNARVVVVVASASASASASA,A,A,A,A,MELMELMELMELMELENCIO-HERRERA,ENCIO-HERRERA,ENCIO-HERRERA,ENCIO-HERRERA,ENCIO-HERRERA,GUTIERREZ, JR.,GUTIERREZ, JR.,GUTIERREZ, JR.,GUTIERREZ, JR.,GUTIERREZ, JR.,CRUZ,CRUZ,CRUZ,CRUZ,CRUZ,PPPPPARAS,ARAS,ARAS,ARAS,ARAS,FELICIANOFELICIANOFELICIANOFELICIANOFELICIANO,,,,,PPPPPADILLA,ADILLA,ADILLA,ADILLA,ADILLA,BIDIN,BIDIN,BIDIN,BIDIN,BIDIN,SSSSSARMIENTARMIENTARMIENTARMIENTARMIENTOOOOO,,,,,GRIŃO-AGRIŃO-AGRIŃO-AGRIŃO-AGRIŃO-AQUINOQUINOQUINOQUINOQUINO,,,,,MEDIALDEMEDIALDEMEDIALDEMEDIALDEMEDIALDEA,A,A,A,A,REGALADO &REGALADO &REGALADO &REGALADO &REGALADO &DDDDDAAAAAVIDE, JR., JJ.VIDE, JR., JJ.VIDE, JR., JJ.VIDE, JR., JJ.VIDE, JR., JJ.

Promulgated: September 13, 199September 13, 199September 13, 199September 13, 199September 13, 19911111————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————

DDDDD EEEEE CCCCC IIIII SSSSS IIIII OOOOO NNNNN

MEDIALDEMEDIALDEMEDIALDEMEDIALDEMEDIALDEA, J.:A, J.:A, J.:A, J.:A, J.:Whether or not the Local Water Districts

formed and created pursuant to the provisionsof Presidential Decree No. 198, as amended,are government-owned or controlledcorporations with original charter fallingunder the Civil Service Law and/or covered bythe visitorial power of the Commission onAudit is the issue which the petitioners entreatthis Court, en banc to shed light on.

Petitioners are among the more than fivehundred (500) water districts existingthroughout the country formed pursuant tothe provisions of Presidential Decree No. 198,as amended by Presidential Decrees Nos. 768and 1479, otherwise known as the “ProvincialWater Utilities Act of 1973.”

Presidential Decree No. 198 was issuedby the then President Ferdinand E. Marcos by



46

virtue of his legislative power underProclamation No. 1981. It authorized thedifferent local legislative bodies to form andcreate their respective water districts througha resolution they will pass subject to theguidelines, rules and regulations therein laiddown. The decree further created and formedthe “Local Water Utilities Administration”(LWUA), a national agency attached to theNational Economic and Development Authority(NEDA), and granted with regulatory powernecessary to optimize public service fromwater utilities operations.

The respondents, on the other hand, arethe Civil Service Commission (CSC) and theCommission on Audit (COA), both governmentagencies and represented in this case by theSolicitor General.

On April 17, 1989, this Court ruled in thecase of Tanjay Water District v. Gabaton, etal. (G.R. No. 63742, 172 SCRA 253):

Significantly, Article IX (B),Section 2(1) of the 1987 Constitutionprovides that the Civil Serviceembraces all branches, subdivisions,instrumentalities, and agencies of thegovernment, including government-owned and controlled corporationswith original charters. Inasmuch asPD No. 198, as amended, is the originalcharter of the petitioner, Tanjay WaterDistrict, and respondent Tarlac WaterDistrict and all water districts in thecountry, they come under the coverageof the Civil Service Law, rules andregulations. (Sec. 35, Art. VIII and Sec.37, Art. IX of PD No. 807).”As an offshoot of the immediately cited

ruling, the CSC issued Resolution No. 90-575,the dispositive portion of which reads:

“NOW THEREFORE, in view of

all the foregoing, the Commissionresolved, as it hereby resolves, to rulethat Local Water Districts, beingquasi-public corporations created bylaw to perform public services andsupply public wants, the matter ofhiring and firing of its officers andemployees should be governed by theCivil Service Law, rules andregulations. Henceforth, allappointments of personnel of thedifferent local water districts in thecountry shall be submitted to theCommission for appropriate action.”(Rollo. p.22)However, on May 16, 1990, in G.R. No.

85760, entitled “Metro Iloilo Water District v.National Labor Relations Commission, et al.,”the Third Division of this Court ruled in aminute resolution:

“x x x“Considering that PD 198 is a

general legislation empowering and/or authorizing government agenciesand entities to create water districts,said PD 198 cannot be considered asthe charter itself creating the WaterDistricts. Public respondent NLRC didnot commit any grave abuse ofdiscretion in holding that theoperative act, that created the MetroIloilo Water District was theresolution of the SangguniangPanglungsod of Iloilo City. Hence, theemployees of Water Districts are notcovered by Civil Service Laws as thelatter do (sic) not have originalcharters.In adherence to the just cited ruling, the

CSC suspended the implementation ofResolution No. 90-575 by issuing Resolution


47

No. 90-770 which reads:“ x x x“NOW, THEREFORE, in view of

all the foregoing, the Commissionresolved to rule, as it hereby rules,that the implementation of CSCResolution No. 575 dated June 27,1990 be deferred in the meantimepending clarification from theSupreme Court as regards itsconflicting decisions in the cases ofTanjay Water District v. Gabaton andMetro Iloilo Water District v. NationalLabor Relations Commission.” (p.26,Rollo)In the meanwhile, there exists a

divergence of opinions between COA on onehand, and the LWUA on the other hand, withrespect to the authority of COA to audit thedifferent water districts.

COA opined that the audit of the waterdistricts is simply an act of discharging thevisitorial power vested in them by law (letterof COA to LWUA, dated August 13, 1985, pp.29-30, Rollo).

On the other hand, LWUA maintained thatonly those water districts with subsidies fromthe government fall within the COA’sjurisdiction and only to the extent of theamount of such subsidies, pursuant to theprovision of the Government Auditing Code ofthe Phils.

It is observed that just like the questionof whether the employees of the water districtsfalls under the coverage of the Civil ServiceLaw, the conflict between the water districtsand the COA is also dependent on the finaldetermination of whether or not water districtsare government-owned or controlledcorporations with original charter. The reasonbehind this is Sec. 2(1), Article IX-D of the

1987 Constitution which reads:“Sec. 2(1) The Commission on

Audit shall have the power, authorityand duty to examine, audit, and settleall accounts pertaining to the revenueand receipts of, and expenditures oruses of funds and property, ownedor held in trust by, or pertaining tothe Government, or any of itssubdivisions, agencies orinstrumentalities, includinggovernment-owned or controlledcorporations with original charters,and on a post audit basis.” (emphasissupplied).Petitioners’ main argument is that they

are private corporations without originalcharter, hence they are outside the jurisdictionof respondents CSC and COA. Reliance is madeon the Metro Iloilo case which declaredpetitioners as quasi-public corporationscreated by virtue of PD 198, a generallegislation which cannot be considered as thecharter itself creating the water districts.Holding on to this ruling, petitioners contendthat they are private corporations which areonly regarded as quasi-public or semi-publicbecause they serve public interest andconvenience and that since PD 198 is a generallegislation, the operative act which created awater district is not the said decree but theresolution of the sanggunian concerned.

After a fair consideration of the parties’arguments coupled with a careful study ofthe applicable laws as well as theconstitutional provisions involved. We ruleagainst the petitioners and reiterate Our rulingin Tanjay case declaring water districtsgovernment-owned or controlled corporationswith original charter.

As early as Baguio Water District v.


48

Trajano, et al., (G. R. No. 65428, February 20,1984, 127 SCRA 730), We already ruled that awater district is a corporation createdpursuant to a special law – P. D. No. 198, asamended, and as such its officers andemployees are covered by the Civil Service Law.

In another case (Hagonoy Water Districtv. NLRC, G. R. No. 81490, August 31, 1988,165 SCRA 272), W ruled once again that localwater districts are quasi-public corporationswhose employees belong to the Civil Service.The Court’s pronouncement in this case, asextensively quoted in the Tanjay case, supra,partly reads:

“The only question here iswhether or not local water districtsare government-owned or controlledcorporations whose employees aresubject to the provisions of the CivilService Law. The Labor Arbiterasserted jurisdiction over the allegedillegal dismissal of private respondentVillanueva by relying on Section 25of Presidential Decree No. 198, knownas the Provincial Water Utilities Actof 1973” which went onto effect in25 May 1973, and which provides asfollows:

Exemption from CivilService. - The district and itsemployees, being engaged in aproprietary function, are herebyexempt from the provision of theCivil Service Law. CollectiveBargaining shall be availableonly to personnel belowsupervisory levels: Provided,however, That the total of allsalaries, wages, emoluments,benefits or other compensationpaid to all employees in any

month shall not exceed fiftypercent (50%) of average netmonthly revenue. Said netrevenue representing incomefrom water sales and sewerageservice charges, les pro-ratashare of debt service andexpenses for fuel or energy forpumping during the precedingfiscal year.

The Labor Arbiter failed to takeinto account the provisions ofPresidential Decree No. 1479, whichwent into effect on 11 June 1978. P.D. No. 1479 wiped away Section 25of PD 198 quoted above, and Section26 of PD 198 was renumbered asSection 25 in the following manner:

“Section 26 of the same decreePD 198 is hereby amended to read asSection 25 as follows:

Section 25. Authorization.– The district may exercise allthe powers which are expresslygranted by this Title or whichare necessarily implied from orincidental to the powers andpurposes herein stated. For thepurpose of carrying out theobjectives of this Act, a districtis hereby granted the power ofeminent domain, the exercisethereof shall, however, besubject to review by theAdministration.

Thus, Section 25 of PD 198exempting the employees of waterdistricts from the application of theCivil Service Law was removed fromthe statute books:

“ x x x.


49

“We grant the petition forthe following reasons:

“1. Section 25 of PD No.198 was repealed by Section 3of PD No. 1479; Section 26 ofPD No. 198 was amended to readas Sec. 25 by Sec. 4 of PD No.1479. The amendatory decreetook effect on June 11, 1978.

“x x x“3. The BWD is a

corporation created pursuant toa special law – PD No. 198, asamended. As such its officersand employees are part of theCivil Service (Sec. 1, Art. XII-B,[1973] Constitution: PD No.868).”

Ascertained from a consideration of thewhole statute, PD 198 is a special lawapplicable only to the different water districtscreated pursuant thereto. In all its essentialterms, it is obvious that it pertains to a specialpurpose which is intended to meet a particularset of conditions and circumstances. The factthat said decree generally applies to all waterdistricts throughout the country does notchange the fact that PD 198 is a special law.Accordingly, this Court’s resolution in MetroIloilo case declaring PD 198 as a generallegislation is hereby abandoned.

By “government-owned or controlledcorporation with original charter,” We meangovernment owned or controlled corporationcreated by special law and not under theCorporation Code of the Philippines. Thus, inthe case of Lumanta v. NLRC (G. R. No. 82819,February 8, 1989, 170 SCRA 79, 82), We held:

“The Court, in National ServiceCorporation (NASECO) v. NationalLabor Relations Commission, G. R.

No. 69870, promulgated on 29November 1988, quoting extensivelyfrom the deliberations of the 1986Constitutional Commission in respectof the intent and meaning of the newphrase ‘with original charter’ in effectheld that government-owned andcontrolled corporations with originalcharter refer to corporationschartered by special law asdistinguished from corporationsorganized under out generalincorporation statute – theCorporation Code. In NASECO, thecompany involved had beenorganized under the generalincorporation statute and was asubsidiary of the National InvestmentDevelopment Corporation (NIDC)which in turn was a subsidiary ofthe Philippine National Bank, a bankchartered by a special statue. Thus,government-owned or controlledcorporations like NASECO areeffectively, excluded from the scopeof the Civil Service.” (emphasissupplied)From the foregoing pronouncement, it is

clear that what has been excluded from thecoverage of the CSC are those corporationscreated pursuant to the Corporation Code.Significantly, petitioners are not created underthe said code, but on the contrary, they werecreated pursuant to a special law and aregovernment primarily by its provision.

No consideration may thus be given topetitioners’ contention that the operative actwhich created the water districts are theresolutions of the respective local sangguniansand that consequently, PD 198, as amended,cannot be considered as their charter.


50

It is to be noted that PD 198, as amendedis the source of authorization and power toform and maintain a district. Section 6 ofsaid decree provides:

“Sec. 6. Formation of District. –This Act is the source of authorizationand power to form and maintain adistrict. Once formed, a district issubject to the provisions of this Actand not under the jurisdiction of anypolitical subdivision. x x x.”Moreover, it must be observed that PD

198, contains all the essential terms necessaryto constitute a charter creating a juridicalperson. For example, Section 6(a) provides forthe name that will be used by a water district,thus:

“Section 6. x x x. To form adistrict, the legislative body of anycity, municipality or province shallenact a resolution containing thefollowing:

“a) The name of the local waterdistrict, which shall include the nameof the city, municipality, or province,or region thereof, served by saidsystem, followed by the words‘Water District.’It also prescribes for the numbers and

qualifications of the members of the Board ofDirectors:

“Sec. 8. Number andQualifications. - The Board ofDirectors of a district shall becomposed of five citizens of thePhilippines who are of voting age andresidents within the district. Onemember shall be a representative ofcivic-oriented service clubs, onemember a representative ofprofessional associations, one

member a representative of business,commercial or financialorganizations, one member arepresentative of educationalinstitutions and one member arepresentative of women’sorganization. No public official shallserve as director. Provided, however,that if the district has availed of thefinancial assistance of theAdministration, the Administrationmay appoint any of its personnel tosit in the board of directors with allthe rights and privileges appertainingto a regular member for such periodas the indebtedness remains unpaidin which case the board shall becomposed of six members;” (asamended by PDs Nos. 768 & 1479).the manner of their appointment and

nominations;“Section 9. Appointment. –

Board members shall be appointedby the appointing authority. Saidappointments shall be made from alist of nominees, if any, submittedpursuant to Section 10. If nonominations are submitted, theappointing authority shall appointany qualified person of the categoryto the vacant position;

“Section 10. Nominations. - Onor before October 1 of each even-numbered year, the secretary of thedistrict shall contact each knownorganization, association, orinstitution being represented by thedirector whose term will expire onDecember 31 and solicit nominationsfrom these organizations to fill theposition for the ensuing term. One


51

nomination may be submitted inwriting by each such organization tothe Secretary of the district on orbefore November 1 of such year: Thislist of nominees shall be transmittedby the Secretary of the district to theoffice of the appointing authority onor before November 15 of such yearand he shall make his appointmentfrom the list submitted on or beforeDecember 15. In the event theappointing authority fails to makehis appointments on or beforeDecember 15, selection shall be madefrom said list of nominees by majorityvote of the seated directors of thedistrict constituting a quorum. Initialnominations for all five seats of theboard shall be solicited by thelegislative body or bodies at the timeof adoption of the resolution formingthe district. Thirty days thereafter, alist of nominees shall be submittedto the provincial governor in the eventthe resolution forming the district isby a provincial board, or the mayorof the city or municipality in the eventthe resolution forming the adoptionof the district is by the city ormunicipal board of councilors, whoshall select the initial directorstherefrom within 15 days after receiptof such nominations;

their terms of office:Section 11. Term of Office. - Of

the five initial directors of each newlyformed district, two shall beappointed for a maximum term oftwo years, two for a maximum termof four years, and one for a maximumterm of six years. Terms of office of

all directors in a given district shallbe such that the term of at least onedirector, but not more than two, shallexpire on December 31 of each even-numbered year. Regular terms ofoffice after the initial terms shall befor six years commencing on January1 of odd-numbered years. Directorsmay be removed for cause only,subject to review and approval of theAdministration;” (as amended by PD768)

the manner of filling up vacancies:“Section 12. Vacancies. - In the

event of a vacancy in the board ofdirectors occurring more than sixmonths before expiration of anydirector’s term, the remainingdirectors shall within 30 days, servenotice to or request the secretary ofthe district for nominations andwithin 30 days, thereafter a list ofnominees shall be submitted to theappointing authority for hisappointment of a replacementdirector from the list of nominees. Inthe absence of such nominations, theappointing authority shall make suchappointment. If within 30 days aftersubmission to him of a list ofnominees the appointing authorityfails to make an appointment, thevacancy shall be filled from such listby a majority vote of the remainingmembers of the Board of Directorsconstituting quorum. Vacanciesoccurring within the last six monthsof an unexpired term shall also befilled by the Board in the abovemanner. The director thus appointedshall serve the unexpired term only;”


52

(as amended by PD 768).and the compensation and personal

liability of the members of the Board ofDirectors:

“Section 13. Compensation. -Each director shall receive a per diem,to be determined by the board, foreach meeting of the board actuallyattended by him, but no directorsshall receive per diems in any givenmonth in excess of the equivalent ofthe total per diems of four meeting inany given month. No director shallreceive other compensation forservices to the district.

“Any per diem in excess ofP50.00 shall be subject to approvalof the Administration (as amendedby PD 768).

“Section 14. Personal Liability.No director may be held to bepersonally liable for any action ofthe district.”Noteworthy, the above quoted provisions

of PD 198, as amended, are similar to thosewhich are actually contained in othercorporate charters. The conclusion isinescapable that the said decree is in truthand in fact the charter of the different waterdistricts for it clearly defines the latter’sprimary purpose and its basic organizationalset-up. In other words, PD 198, as amended,is the very law which gives a water districtjuridical personality. While it is true that aresolution of a local sanggunian is stillnecessary for the final creation of a district,this Court is of the opinion that said resolutioncannot be considered as its charter, the samebeing intended only to implement theprovisions of said decree. In passing aresolution forming a water district, the local

sanggunian is entrusted with no authority ordiscretion to grant a charter for the creationof a private corporation. It is merely given theauthority for the formation of a water district,on a local option basis, to be exercised underand in pursuance of PD 198.

More than the aforequoted provisions,what is of important interest in the case atbar is Section 3, par. (b) of the same decreewhich reads:

“Section 3(b). Appointingauthority. - The person empowered toappoint the members of the Board ofDirectors of a local water district,depending upon the geographiccoverage and population make-up ofthe particular district. In the event thatmore than seventy-five percent of thetotal active water service connectionsof a local water districts are withinthe boundary of any city ormunicipality, the appointing authorityshall be the mayor of that city ormunicipality, as the case may be;otherwise, the appointing authorityshall be the governor of the provincewithin which the district is located:Provided, That if the existingwaterworks system in the city ormunicipality established as a waterdistrict under this Decree is operatedand managed by the province, initialappointment shall be extended by thegovernor of the province. Subsequentappointments shall be as specifiedherein.

If portions of more than oneprovince are included within theboundary of the district, and theappointing authority is to be thegovernors then the power to appoint


53

shall rotate between the governorsinvolved with the initial appointmentsmade by the governor in whoseprovince the greatest number ofservice connections exists (asamended by PD 768).The above-quoted section definitely sets

to naught petitioners’ contention that theyare private corporations. It is clear therefromthat the power to appoint the members whowill comprise the Board of Directors belongsto the local executives of the local subdivisionunits where such districts are located. Incontrast, the members of the Board ofDirectors or trustees of a private corporationare elected from among the members andstockholders thereof. It would not be amissto emphasize at this point that a privatecorporation is created for the private purpose,benefit, aim and end of its members orstockholders. Necessarily, said members orstockholders should be given a free hand tochoose those who will compose the governingbody of their corporation. But this is not thecase here and this clearly indicates thatpetitioners are definitely not privatecorporations.

The foregoing disquisitionnotwithstanding, We are, however, notunaware of the serious repercussion this maybring to the thousands of water districtsemployees throughout the country who standto be affected because they do not have thenecessary civil service eligibilities. As theseemployees are equally protected by theconstitutional guarantee to security of tenure.We find it necessary to rule for the protectionof such right which cannot be impaired by asubsequent ruling of this Court. Thus, thoseemployees who have acquired their permanentemployment status at the time of the

promulgation of this decision cannot beremoved by the mere reason that they lackthe necessary civil service eligibilities.

ACCORDINGLY, the petition is herebyDISMISSED. Petitioners are declared“government-owned or controlled corporationswith original charter” which fall under thejurisdiction of the public respondents CSC andCOA.

SO ORDERED.

(SGD) LLLLLEO D. MEDIALDEEO D. MEDIALDEEO D. MEDIALDEEO D. MEDIALDEEO D. MEDIALDEAAAAAAssociate Justice

WE CONCUR:

(SGD) MARCELMARCELMARCELMARCELMARCELO BO BO BO BO B. FERNAN. FERNAN. FERNAN. FERNAN. FERNANChief Justice

(SGD) ANDRES R. NARANDRES R. NARANDRES R. NARANDRES R. NARANDRES R. NARVVVVVASASASASASAAAAAAssociate Justice

(SGD) AMEURFINA A. MEL AMEURFINA A. MEL AMEURFINA A. MEL AMEURFINA A. MEL AMEURFINA A. MELENCIO-ENCIO-ENCIO-ENCIO-ENCIO-HERRERAHERRERAHERRERAHERRERAHERRERA

Associate Justice

(ON LEAVE)HUGO EHUGO EHUGO EHUGO EHUGO E. GUTIERREZ, JR.. GUTIERREZ, JR.. GUTIERREZ, JR.. GUTIERREZ, JR.. GUTIERREZ, JR.Associate Justice

(SGD) ISISISISISAAAAAGANI A CRUZGANI A CRUZGANI A CRUZGANI A CRUZGANI A CRUZAssociate Justice

(SGD) EDGARDO L. PEDGARDO L. PEDGARDO L. PEDGARDO L. PEDGARDO L. PARASARASARASARASARASAssociate Justice

(ON LEAVE)FLFLFLFLFLORENTINO PORENTINO PORENTINO PORENTINO PORENTINO P. FELICIANO. FELICIANO. FELICIANO. FELICIANO. FELICIANOAssociate Justice

(SGD) TEODORO R. PTEODORO R. PTEODORO R. PTEODORO R. PTEODORO R. PADILLAADILLAADILLAADILLAADILLA


54

Associate Justice

(SGD) ADBULADBULADBULADBULADBULWWWWWAHID A. BIDINAHID A. BIDINAHID A. BIDINAHID A. BIDINAHID A. BIDINAssociate Justice

(ON LEAVE)ABRAHAM FABRAHAM FABRAHAM FABRAHAM FABRAHAM F. S. S. S. S. SARMIENTARMIENTARMIENTARMIENTARMIENTOOOOOAssociate Justice

(SGD) CCCCCAROLINA C. GRINO-AAROLINA C. GRINO-AAROLINA C. GRINO-AAROLINA C. GRINO-AAROLINA C. GRINO-AQUINOQUINOQUINOQUINOQUINOAssociate Justice

(SGD) FLFLFLFLFLORENZ D. REGALADOORENZ D. REGALADOORENZ D. REGALADOORENZ D. REGALADOORENZ D. REGALADOAssociate Justice

(SGD) HILARIO G. DHILARIO G. DHILARIO G. DHILARIO G. DHILARIO G. DAAAAAVIDE, JR.VIDE, JR.VIDE, JR.VIDE, JR.VIDE, JR.Associate Justice

C E R T I F I C A T I O NCCCCC EEEEE RRRRR TTTTT IIIII FFFFF IIIII CCCCC AAAAA TTTTT IIIII OOOOO NNNNN

Pursuant to Article VIII, Section 13 of theConstitution, it is hereby certified that theconclusions in the above decision were reachedin consultation before the case was assignedto the writer of the opinion of the Court.

(SGD) MARCELMARCELMARCELMARCELMARCELO BO BO BO BO B. FERNAN. FERNAN. FERNAN. FERNAN. FERNANChief Justice

Separate Opinions:Separate Opinions:Separate Opinions:Separate Opinions:Separate Opinions:BIDIN, J., BIDIN, J., BIDIN, J., BIDIN, J., BIDIN, J., Dissenting:

I regret I have to register my dissent inthis case. I agree with the main ponencia thatP.D. 198, as amended, authorizes the differentlocal legislative bodies (Sanggunian) to formand create their respective water districtsthrough a Resolution which they will passsubject to the guidelines, rules and regulationstherein laid down. The issue, therefore, to beresolved is whether the local water districts

so created are government-owned or controlledcorporations with original charters embracedby the Civil Service as contemplated by Art.IX-B, Sec. 2[1] of the 1987 Constitution.

P. D. 198 is a general legislation whichauthorized the formation of water districts.However, the operative act which creates awater district is not said decree but theresolution of the Sanggunian concernedforming and maintaining a local water district.Thus, Section 2 of the P. D. 198, among others,provides:

“Sec. 2. Declaration of Policy – xx x To encourage the formulation ofsuch local water districts and thetransfer thereto of existing watersupply and waste water disposalfacilities, this Decree provides bygeneral act the authority for theformation thereof, on a local optionbasis. x x x” (Underscoring supplied)Implementing the above policy, Title II of

P. D. 198 provides:“TITL“TITL“TITL“TITL“TITLE II. – LE II. – LE II. – LE II. – LE II. – LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER DISTRICTER DISTRICTER DISTRICTER DISTRICTER DISTRICT LAT LAT LAT LAT LAWWWWW

CHAPTER I. - TitleCHAPTER I. - TitleCHAPTER I. - TitleCHAPTER I. - TitleCHAPTER I. - TitleSec. 4. Title – The provisions of

this Title shall be known and referredto as the ‘Local water District Law.’

CHAPTER II. – Purpose andCHAPTER II. – Purpose andCHAPTER II. – Purpose andCHAPTER II. – Purpose andCHAPTER II. – Purpose andFFFFFormationormationormationormationormation

Sec. 5. Purpose. – Local waterdistricts may be formed pursuant tothis Title for the purposes of (a)acquiring, installing, improving,maintaining and operating watersupply and distribution systems fordomestic, industrial, municipal andagricultural uses for residents andlands within the boundaries of suchdistricts (b) providing, maintainingand operating wastewater collection,


55

treatment and disposal facilities, and(c) conducting such other functionsand operations incidental to waterresource development, utilization anddisposal within such districts, as arenecessary or incidental to saidpurpose.

Sec. 6. Formation of District. –This Act is the source of authorizationand power to form and maintain adistrict. For purposes of this Act, adistrict shall be considered as a quasi-public corporation performing publicservice and supplying public wants.As such, a district shall exercise thepowers, rights and privileges givento private corporations under existinglaws, in addition to the powersgranted in, and subject to suchrestrictions imposed, under this Act.

x x xSec. 7. Filing of Resolution. - A

certified copy of the resolution orresolutions forming a district shallbe forwarded to the office of theSecretary of the Administration. Iffound by the Administration toconform to the requirements ofSection 6 and the policy objectives inSection 2, the resolution shall be dulyfiled. The district shall be deemed dulyformed and existing upon the date ofsuch filing. A certified copy of saidresolution showing the filing stampof the Administration shall bemaintained in the office of the district.Upon such filing, the local governmentor governments concerned shall loseownership, supervision and controlor any right whatsoever over thedistrict except as provided herein.”

(Underscoring supplied)It is apparent that insofar as the

formation of local water districts areconcerned, P. D. 198 is not an original charterbut a general act authorizing the formationof water districts on local opinion basis (Sec.2, P. D. 198) similar to the Corporation Code.What is chartered, formed and created underP. D. 198 as a government corporation is the“Local Water Utilities Administration”attached to the Office of the President asfollows:

“Sec. 49. Charter. – There ishereby chartered, created and formeda government corporation to beknown as the ‘Local Water UtilitiesAdministration’ which is herebyattached to the Office of thePresident. The provisions of this Titleshall be and constitute the charter ofthe Administration.”On the other hand, local water districts

are formed by resolutions of the respectiveProvincial, City and Municipal councils (Sec.7, P. D. 198) filed with the Local Water UtilitiesAdministration, a government corporationchartered under Section 49, P. D. 198 andattached to the Office of the President.Consequently, without the requisite resolutionof the Sanggunian concerned forming thewater district having been filed with the LocalWater Utilities Administration, no waterdistrict is formed. What gives the waterdistricts juridical personality is the resolutionof the respective Sanggunian forming thedistrict and filed with the Local Water UtilitiesAdministration. Once formed, a water districtis subject to the provisions of P. D. 198 and nolonger under the jurisdiction of any politicaladministration which shall thereafter loseownership, supervision and control over the


56

district (Sec. 7 PD 198).In view of the foregoing, I vote to Grant

the petition and to declare petitioners asquasi-public corporations performing publicservice without original charters, and thereforenot embraced by the Civil Service.

(SGD). ADBULADBULADBULADBULADBULWWWWWAHID A. BIDINAHID A. BIDINAHID A. BIDINAHID A. BIDINAHID A. BIDINAssociate Justice

(SGD) DDDDDANIEL TANIEL TANIEL TANIEL TANIEL T. MAR. MAR. MAR. MAR. MARTINEZTINEZTINEZTINEZTINEZClerk of Court


57


REORGANIZING THE METROPOLITREORGANIZING THE METROPOLITREORGANIZING THE METROPOLITREORGANIZING THE METROPOLITREORGANIZING THE METROPOLITANANANANANWWWWWAAAAATERTERTERTERTERWWWWWORKORKORKORKORKS AND SEWERAS AND SEWERAS AND SEWERAS AND SEWERAS AND SEWERAGE SGE SGE SGE SGE SYSTEMYSTEMYSTEMYSTEMYSTEM(MW(MW(MW(MW(MWSS) AND THE LSS) AND THE LSS) AND THE LSS) AND THE LSS) AND THE LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER UTILITIESTER UTILITIESTER UTILITIESTER UTILITIESTER UTILITIESADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATION (LTION (LTION (LTION (LTION (LWUWUWUWUWUA) PURSUA) PURSUA) PURSUA) PURSUA) PURSUANT TANT TANT TANT TANT TOOOOOREPUBLIC AREPUBLIC AREPUBLIC AREPUBLIC AREPUBLIC ACCCCCT NOT NOT NOT NOT NO. 804. 804. 804. 804. 8041, O1, O1, O1, O1, OTHERTHERTHERTHERTHERWISEWISEWISEWISEWISEKNOKNOKNOKNOKNOWN AS THE NAWN AS THE NAWN AS THE NAWN AS THE NAWN AS THE NATIONAL WTIONAL WTIONAL WTIONAL WTIONAL WAAAAATER CRISISTER CRISISTER CRISISTER CRISISTER CRISISAAAAACCCCCT OF 1995T OF 1995T OF 1995T OF 1995T OF 1995

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, as enunciated in Republic ActNo. 8041, it is the “declared policy of the Stateto adopt urgent and effective measures toaddress the nationwide water crisis whichadversely affects the health and well-being ofthe population, food production andindustrialization process;”

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, consistent with this policy,Section 7 of Republic Act No. 8041 authorizedthe President to revamp and reorganize theMWSS and the LWUA;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the Joint Executive-LegislativeWater Crisis Commission established underthe same law has, after consultingrepresentatives of the MWSS and the LWUA,proposed a reorganizational plan for the saidagencies; and

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the proposed reorganizationis consistent with the Administration’sframework for governance, having beendesigned to streamline and correctdysfunctions in the structure and operationsof the MWSS and the LWUA to enable theseagencies to become more effective, efficientand responsive to the country’s needs forpotable water, as well as prepare thegroundwork for their eventual privatization,

where feasible.NONONONONOWWWWW, THEREFORE, I, FIDEL V, THEREFORE, I, FIDEL V, THEREFORE, I, FIDEL V, THEREFORE, I, FIDEL V, THEREFORE, I, FIDEL V. RAMOS,. RAMOS,. RAMOS,. RAMOS,. RAMOS,

President of the Philippines, by virtue of thepowers vested in me by law, consistent withthe reorganization plan proposed by the JointExecutive-Legislative Water Crisis Commission,do hereby order:

SECTION 1. Framework and Objectives.- The reorganization of the MWSS and LWUAshall be undertaken in the context of theAdministration’s framework of governance.Accordingly, the role of the nationalgovernment shall be to steer rather than row.It shall, to the extent possible, encourage theprivate sector to participate in the delivery ofpublic goods through franchising, concession,management, privatization or otherarrangements of the concerned agenciesoperations or facilities.

Prudence and restraint in the use ofgovernment resources shall be exercised.Efforts at streamlining and correctingdysfunctions in the operations and structuresof the agencies concerned shall be undertakento achieve more with less. The delivery of moreeffective, efficient, and responsible publicservice shall be paramount.

SECTION 2. Reorganization Plan for theMWSS. - The MWSS shall be reorganized, asfollows:

2.1. Officers. - The MWSS shall be headedby an Administrator who shall be its chiefexecutive officer. He shall be assisted by two(2) Senior Deputy Administrators, one forOperations and Customers Service and anotherfor Resource Development and Management.There shall, moreover, be four (4) DeputyAdministrators, one (1) for Engineering andConstruction, one (1) for Finance andAdministration, and two (2) for CustomersService. The Senior Deputy Administrators and



58

Deputy Administrators shall be appointed bythe Board, upon the recommendation of theAdministrator.

2.2 Organization and Management. - TheAdministrator, with the assistance of hisSenior Deputy Administrators, shall provideoverall direction and control over theoperations and administration of MWSS.

(a) The Office of the Administrator shallhave the following services and/or departmentsdirectly under its supervision:

i. Corporate Planning Serviceii. Internal Audit Serviceiii. Management Information Serviceiv. System Development Departmentv. Computer Service Departmentvi. Legal Departmentvii. Public Affairs Department(b) The Office of the Senior Deputy

Administrator for Operations and CustomersService shall be in charge of the operationsand maintenance of the MWSS plants andother facilities, and the actual delivery ofservice to water users. It shall have directsupervision of the following departments:

i. Water Productionii. Water Transmission and Meter

Managementiii. Sewerage(c) To ensure more effective and

responsive delivery of water services andincrease revenues, Customers Service shall bedivided into two Districts, each District to beheaded by a Deputy Administrator. EachDistrict shall have four service areas with eachArea (or department) performing the followingfunctions, as well as such other functions thatmay be assigned to it consistent with thepurpose of decentralizing to ensure betterpublic service:

i. Revenue Generation, including

meter installation and reading, billing andcollection

ii. Facilities Operation Maintenanceand Improvement

iii. Meter Managementiv. Public Information(d) The Office of the Senior Administrator

for Resource Development and Managementshall have direct supervision over the DeputyAdministrators for Engineering andConstruction, and for Administration andFinance.

(e) The Office of the Deputy Administratorfor Engineering and Construction shallundertake planning and programming,monitoring, and evaluation of projects for thedevelopment and expansion of waterworksand sewerage facilities. Specifically, it shallhave direct supervision over the followingdepartments:

i. Project Planningii. Project Designiii. Applied Research and Quality

ControlThe same Deputy Administrator shall

have direct supervision over the ProjectManagement Office, which comprises a poolof project managers, presently consisting offive (5).

(f) The Office of the Deputy Administratorfor Finance and Administration shall beresponsible for resource management andprovision of administrative support services.It shall consist of the following departments:

i. Accountingii. Managerial Finance and Budgetiii. Human Resource Development and

Manpower Planningiv. General Servicesv. Personnel Management and Health

Services


59

vi. Treasury(g) The Table of Organization down to

department level is provided for in Annex “A”.2.3. Authority to Revise the Number of

Departments. - The MWSS is, subject to theapproval of the President, authorized to revisethe number of departments herein specified ifand when the same becomes necessary byreason of a franchising, concession,privatization or other arrangements that willreduce the scope of its current operations andactivities.”,

SECTION 3. Reorganization Plan for theLWUA. - The LWUA is hereby reorganized, asfollows:

3.1. Officers. - The LWUA shall be headedby an Administrator who shall be its chiefexecutive officer. He shall be assisted by aSenior Deputy Administrator. There shall,moreover, be three (3) Deputy Administrators,one (1) each for Finance, Administration andArea Operations. The Senior DeputyAdministrator and Deputy Administrators shallbe appointed by the Board upon therecommendation of the Administrator.

3.2. Organization and Management. - TheAdministrator, with the assistance of hisSenior Deputy Administrator, shall provideover-all direction and control over theoperations and administration of the LWUA.

(a) The Office of the Administrator shallhave direct supervision over the followingdepartments:

i. Internal Controlii. Management Servicesiii. Public Affairs(b) The Office of the Senior Deputy

Administrator shall have direct supervisionover the following departments:

i. Special Projectsii. Legal

iii. Water Resource Research and TrainingThe Senior Deputy Administrator shall

also exercise supervision over the three (3)Deputy Administrators.

(c) The Office of the DeputyAdministrator for Finance shall be responsiblefor financial resources management and loansadministration. Specifically, it shall havedirect supervision over the followingdepartments:

i. Treasuryii. Accountingiii. Loans Administrationiv. Water District Audit(d) The Office of the Deputy

Administrator for Administration shall beprimarily responsible for the provision ofadministrative services. It shall have directsupervision over the following departments:

i. Human Resource Managementii. Property Managementiii. General ServicesThe Office of the Deputy Administrator

for Area Operations shall have directsupervision over nine (9) area managers whowill be responsible for the following functionsat the field level:

i. Project Planningii. Project Monitoring and Evaluationiii. Water District Developmentiv. Loans Evaluation(f) The Table of Organization down to

department level is provided for in Annex “B”.3.3. Authority to Revise the Number of

Departments. - The LWUA is, subject to theapproval of the President, authorized to revisethe number of departments herein specified ifand when the same becomes necessary byreason of a franchising, concession,privatization or other arrangements that willreduce the scope of its current operations and


60

activities.SECTION 4. Detailed Staffing. - The

MWSS and LWUA are hereby directed toprepare their proposed detailed staffing ormanning patterns accounting for all positionsin the organization and the correspondingbudgetary and resource rearrangements asmay be necessary. They are, moreover, requiredto conduct a thorough personnel audit todetermine their respective manpowerrequirements. An inventory of contracts of allcontractual employees including casual andtemporary employees shall also be made todetermine the need for the continuation oftheir services.

The proposed staffing pattern shall besubmitted to the Department of Budget andManagement (DBM) for review not later thansixty (60) days from the date hereof. The DBMshall submit its recommendation to thePresident within thirty (30) days from receiptof the proposal but in no case later than ninety(90) days from the date hereof.

The revised staffing or manning patternshall in no case exceed the number of existingauthorized regular positions.

SECTION 5. Revised Compensation. - TheMWSS and the LWUA are hereby authorizedto adopt a revised and upgraded positionclassification and compensation package forits officers and employees, subject to thefollowing conditions:

a. no diminution of the present salariesand benefits of MWSS and LWUA personnel;

b. the revised rates of compensation shallbe commensurate to the improved and efficientrevenue collection of the agency concerned asdetermined by their respective Boards ofTrustees;

c. the adjusted rates shall not exceed

industry and private sector rates ofcompensation;

d. approval by the Board of Trustee oftheir respective budgets which must besufficient to cover the proposed adjustmentson compensation;

e. the non-revenue water of the agencyconcerned shall in no case be more than fortypercent (40%); and

f. final approval of the President.SECTION 6. Separation Pay. - Any

official or employee of the MWSS and LWUAwho may be phased out by reason of thereorganization shall be entitled to suchbenefits as may be determined by existinglaws. For this purpose, the MWSS, LWUA andDBM are hereby directed to study and proposeschemes or measures to provide personnel whoshall voluntarily retire from the serviceincentives and other benefits, including thepossibility of accelerating the application ofthe revised compensation package under theSalary Standardization Law, Republic Act No.6758. The recommendation should besubmitted to the President not later than thirty(30) days from the date hereof.

SECTION 7. Effectivity. - This ExecutiveOrder shall take effect the day after itscomplete publication in a newspaper ofgeneral circulation.

DONE in the City of Manila, this 6th dayof December, in the year of Our Lord, NineteenHundred and Ninety-Five.

Published in the Manila Times onDecember 11, 1995.


61

ANNEX A

METROPOLITMETROPOLITMETROPOLITMETROPOLITMETROPOLITAN WAN WAN WAN WAN WAAAAATERTERTERTERTERWWWWWORKORKORKORKORKS & SEWERAS & SEWERAS & SEWERAS & SEWERAS & SEWERAGE SGE SGE SGE SGE SYSTEM ORGANIZAYSTEM ORGANIZAYSTEM ORGANIZAYSTEM ORGANIZAYSTEM ORGANIZATIONALTIONALTIONALTIONALTIONALSTRUCSTRUCSTRUCSTRUCSTRUCTURETURETURETURETURE


62

ANNEX B

LLLLLOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER UTILITIES ADMINISTRATER UTILITIES ADMINISTRATER UTILITIES ADMINISTRATER UTILITIES ADMINISTRATER UTILITIES ADMINISTRATION ORGANIZATION ORGANIZATION ORGANIZATION ORGANIZATION ORGANIZATIONAL STRUCTIONAL STRUCTIONAL STRUCTIONAL STRUCTIONAL STRUCTURETURETURETURETURE


63

sectionsectionsectionsectionsection 11MALACAŃANG

Manila

BBBBBY THE PRESIDENT OF THE PHILIPPINESY THE PRESIDENT OF THE PHILIPPINESY THE PRESIDENT OF THE PHILIPPINESY THE PRESIDENT OF THE PHILIPPINESY THE PRESIDENT OF THE PHILIPPINES


INSTITUTING REFORMS IN THEINSTITUTING REFORMS IN THEINSTITUTING REFORMS IN THEINSTITUTING REFORMS IN THEINSTITUTING REFORMS IN THEFINANCING POLICIES FOR THE WFINANCING POLICIES FOR THE WFINANCING POLICIES FOR THE WFINANCING POLICIES FOR THE WFINANCING POLICIES FOR THE WAAAAATERTERTERTERTERSUPPLSUPPLSUPPLSUPPLSUPPLY AND SEWERAY AND SEWERAY AND SEWERAY AND SEWERAY AND SEWERAGE SECGE SECGE SECGE SECGE SECTTTTTOR ANDOR ANDOR ANDOR ANDOR ANDWWWWWAAAAATER SERTER SERTER SERTER SERTER SERVICE PROVICE PROVICE PROVICE PROVICE PROVIDERS ANDVIDERS ANDVIDERS ANDVIDERS ANDVIDERS ANDPROPROPROPROPROVIDING FOR THE RAVIDING FOR THE RAVIDING FOR THE RAVIDING FOR THE RAVIDING FOR THE RATIONALIZATIONALIZATIONALIZATIONALIZATIONALIZATION OFTION OFTION OFTION OFTION OFLLLLLWUWUWUWUWUA’S ORGANIZAA’S ORGANIZAA’S ORGANIZAA’S ORGANIZAA’S ORGANIZATIONAL STRUCTIONAL STRUCTIONAL STRUCTIONAL STRUCTIONAL STRUCTURETURETURETURETUREAND OPERAAND OPERAAND OPERAAND OPERAAND OPERATIONS IN SUPPORTIONS IN SUPPORTIONS IN SUPPORTIONS IN SUPPORTIONS IN SUPPORT THEREOFT THEREOFT THEREOFT THEREOFT THEREOF.....

WHEREWHEREWHEREWHEREWHEREASASASASAS, Presidential Decree No. 198(“PD 198”) established the Local Water UtilitiesAdministration (LWUA), mandating it to serveas a “specialized lending institution” for thepromotion, development and financing of localwater utilities;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the Local Government Units(LGUs) are responsible for the provision of basicservices and facilities as enumerated underSection 17 of the Republic Act. No. 7160 (LocalGovernment Code), including among others, theprovision of water supply and sewerageservices;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, shifts in government financingpolicies and constraints in the availability offinancing from the National Government, andlack of investor confidence in the water supplyand sewerage sector and limited capital stockand domestic and foreign borrowing authorityhave constrained LWUA from providingfinancing assistance to qualified WaterDistricts (WDs);

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is a need to tapfinancing resources available to the watersector, including international grants, andfunding from government financinginstitutions (GFIs), private financinginstitutions (PFls), and LGUs;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, there is a need to review andrationalize current financing policies for thePhilippine water supply and sewerage sectorto allow for the efficient flow of resourcesthereto;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, cognizant of the urgency ofthe aforecited need, the NEDA Board passed aresolution providing for the reforms in thefinancing of the water supply and seweragesector and the creation of an OversightCommittee for the purpose of coordinatingand overseeing the implementation of saidfinancing reforms in the Philippine watersupply and sewerage sector;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the implementation of therecommended reforms requires that LWUA, asthe focal government agency for financing andinstitutional development of local WDs,refocus its objectives and rationalize itsoperation;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, by virtue of’ Executive Order123, s. of 2002, the regulation of tariffs ofWDs will be undertaken by the National WaterResources Board (NWRB) with a proviso thatLWUA, consistent with its mandate under PD198, may continue reviewing the tariff of WDsin which it has financial exposure with theend view of ensuring their financial viability.

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, the LWUA is currentlyattached to the Department of Public Worksand Highways (DPWH) by virtue of ExecutiveOrder No. 124, s. of 1987;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, rationalization of LWUA’soperations require closer policy and programcoordination with the Office of the President


64

(OP);WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, under Section 31, Chapter

10, Book III of Executive Order No. 292 or theAdministrative Code of 1987, the President,in order to achieve simplicity, economy andefficiency, has continuing authority toreorganize the administrative structure ofagencies under it;

NONONONONOWWWWW, THEREFORE, I, GL, THEREFORE, I, GL, THEREFORE, I, GL, THEREFORE, I, GL, THEREFORE, I, GLORIAORIAORIAORIAORIAMAMAMAMAMACCCCCAPAPAPAPAPAAAAAGALGALGALGALGAL-ARRO-ARRO-ARRO-ARRO-ARROYYYYYOOOOO,,,,, President of theRepublic of the Philippines, by virtue of thepowers vested in me by law, do hereby order:

PPPPPARARARARART IT IT IT IT IGENERAL PROVISIONSGENERAL PROVISIONSGENERAL PROVISIONSGENERAL PROVISIONSGENERAL PROVISIONS

SECTION 1. Reform ObjectivReform ObjectivReform ObjectivReform ObjectivReform Objectives/Pes/Pes/Pes/Pes/Policiesoliciesoliciesoliciesolicies----- All concerned government agencies andinstrumentalities of the water supply andsewerage sector, including but not limited tothe Department of Finance (DOF), theMunicipal Finance Corporation (MFC),Department of Interior and Local Government(DILG), Department of. Budget andManagement (DBM), Department ofEnvironment and Natural Resources (DENR),DPWH, National Economic and DevelopmentAuthority (NEDA), LWUA, and the GFIs arehereby directed to pursue and implement thefollowing reform objectives / policies in thewater supply and sewerage sector:

(a) Improvement of investor confidencein the water supply and sewerage sector;

(b) Rationalization in the allocation ofscarce financial resources in the water supplyand sewerage sector through classificationand graduation initiatives;

(c) Freedom of choice of water serviceproviders in sourcing financing;

(d) Increase in the participation of LGUs,GFls, and PFIs in the financing of the water

supply and sewerage sector;(e) Stipulation of improved service and

creation of financial self-sustainability forwater service providers;

(f) Encouragement of initiatives aimedat self-sufficiency of water service providers,including, but not limited to, amalgamation,private sector participation, cost-recoverytariffs, and resource pooling;

(g) Grant of incentives for theimprovement and. graduation of water serviceproviders;

(h) Education of consumers towardstreating water as a scarce economic good;and

(i) Establishment of an independenteconomic regulator for the water supply andsewerage sector.

SEC. 2. Definition of TDefinition of TDefinition of TDefinition of TDefinition of Terms –erms –erms –erms –erms – Forpurposes of this Order, the term:

(a) Water Service Providers (WSPs) - referto local water utilities such as WDs, LGU-runwater utilities, rural waterworks andsanitation associations, barangay waterworksand sanitation associations, regardless oflocation.

(b) Amalgamation - refers to theconsolidation, joint operation or annexationof two or more WSPs resulting into a waterdistrict.

(c) Classification – refers to thecategorization of WSPs into non-creditworthy,pre-creditworthy, semi-creditworthy orcreditworthy to determine proper allocationof financing.

(d) Cost Recovery Tariff - is the tariffrequired to cover capital and operation andmaintenance costs of WSPs at all service levels.

(e) Creditworthy WSPs - are financiallyself-sustaining WSPs and capable of accessingfinancing from GFIs and/or PFIs.


65

(f) Government Financial Institutions(GFIs) – refer to the Development Bank of thePhilippines (DBP), Land Bank of the Philippines(LBP) and other financing institutions ownedand controlled by the Government

(g) Graduation - refers to the progressionof a WSP from semi-creditworthy tocreditworthy status or of a non-credit worthyto pre-creditworthy or of a pre-creditworthyWSP to semi-creditworthy status based onimprovements in financial and operationalindicators.

(h) Local Government Units (LGUs)- referto the territorial and political subdivisions ofthe Philippines, consisting, of provinces, citiesmunicipalities and barangays.

(i) Non-Creditworthy WSPs - refer toWSPs with potential to reach pre-creditworthystatus in the medium-term, based on relevantfinancial and operational indicators set bythe Oversight Committee.

(j) Pre-Creditworthy WSPs - refer toWSPs which are not likely to becomecreditworthy in the medium-term due toperformance’ issues but can demonstrate thepotential for creditworthiness in the long-term,based on relevant financial and operationalindicators set by the Oversight Committee.

(k) Semi-Creditworthy WSPs - refer toWSPs with the demonstrated ability to achievecreditworthiness in the short-term, based onrelevant financial and operational indicatorsset by the Oversight Committee, but either lackthe full criteria for creditworthiness or do notmeet the criteria consistently.

PPPPPARARARARART IIT IIT IIT IIT IIOVERSIGHT COMMITTEEOVERSIGHT COMMITTEEOVERSIGHT COMMITTEEOVERSIGHT COMMITTEEOVERSIGHT COMMITTEE

SEC. 3. Oversight Committee – Oversight Committee – Oversight Committee – Oversight Committee – Oversight Committee – An inter-agency Oversight Committee is hereby

constituted for purposes of coordinating andoverseeing the implementation of the reformsin the financing, graduation and regulatorypolicies in the water supply and seweragesector.

SEC. 4. Composition Composition Composition Composition Composition ----- The compositionof the Oversight Committee shall be asfollows:

Chair: Department of Finance (DOF)Vice-Chair: National Economic and

Development Authority (NEDA)Members: Department of Budget and

Management (DBM)Department of Interior and Local

Government (DILG):Office of the President (OP)Local Water Utilities Administration

(LWUA)Designated representatives of DOF, NEDA,

DBM, DILG and OP must preferably be ofUndersecretary level LWUA must be representedby its Administrator.

GFIs and the Municipal DevelopmentFund Office (MDFO) may serve as resourcepersons during meetings of the OversightCommittee.

SEC. 5. Functions Functions Functions Functions Functions ----- The OversightCommittee shall, among others:

(a) Formulate the implementing rules andregulations (IRR) of this Order;

(b) Review the rationalization plan to besubmitted by LWUA pursuant to Section 9 ofthis Order and submit its recommendationson said plan to the President for approval;

(c) Review the criteria for theclassification of WSPs, recommended by theWater Development Group (WDG) of LWUA;

(d) Review the classification of WSPsprepared by LWUA-WDG, duly certified byLWUA-Head that the same is in accordancewith the criteria presented to and reviewed by


66

the Oversight Committee. The OversightCommittee may subject the classification ofthe WSPs to audit;

(e) Prepare an action plan for the reformsin the financing policies in the water supplyand sewerage sector for the near term and themedium term including incentive schemes thatappropriate agencies may consider to offer toGFIs and PFIs to encourage such institutionsto lend to WSPs;

(f) Prepare and submit quarterly reportsto the agency to which LWUA is attached; and

(g) Review the charter of LWUA and whennecessary, propose amendments thereto.

The Oversight Committee shallimmediately organize itself and set its policiesand procedures to facilitate theimplementation of the said reforms in thewater supply and sewerage sector.

SEC. 6. T T T T Technical Secrechnical Secrechnical Secrechnical Secrechnical Secretariat - etariat - etariat - etariat - etariat - TheOversight Committee shall establish aTechnical Secretariat under DOF to be staffedby personnel assigned by government agenciescomprising it. It shall serve as the officialrepository of all data concerning theclassification and evaluation of all WSPS,

SEC. 7. Expenses Expenses Expenses Expenses Expenses ----- Members of theOversight Committee and its TechnicalSecretariat shall be entitled to receivehonoraria and/or reimbursement of expensesas may be allowed subject to availability offunds and prevailing rules and regulations.

PPPPPARARARARART IIIT IIIT IIIT IIIT IIILLLLLOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATER UTILITIESTER UTILITIESTER UTILITIESTER UTILITIESTER UTILITIES

ADMINISTRAADMINISTRAADMINISTRAADMINISTRAADMINISTRATIONTIONTIONTIONTION

SEC. 8. T T T T Trrrrransfer to OP ansfer to OP ansfer to OP ansfer to OP ansfer to OP ----- The LWUA,presently attached to the DPWH, is herebyattached to OP until such time it is transferredto DOF as provided for under Section 10 hereof.

In addition, the LWUA Board of Trustees (BOT)shall include representatives from the agencyto which it is attached.

SEC. 9. Rationalization of L Rationalization of L Rationalization of L Rationalization of L Rationalization of LWUWUWUWUWUA’sA’sA’sA’sA’sorganizational structure and operations -organizational structure and operations -organizational structure and operations -organizational structure and operations -organizational structure and operations -LWUA, subject to applicable laws andregulations, is hereby directed to review itsorganizational structure and internal policiesand programs, rationalize its operation andrefocus its objectives to include other WSPs,whenever feasible or applicable to facilitateimplementation of and conform with thepolicies enunciated in this Order. To this extent,LWUA shall constitute and designate from itscurrent organizational set-up, a WaterDevelopment Group (WDG), a WaterDevelopment Financier (WDF) and a TechnicalAssistance Group (TAG), or similar structures,with functions and responsibilities as follows:A. Water Development Group (WDG)

The WDG shall have the followingresponsibilities;

(a) The WDG which shall be primarilycharged with the continuation of LWUA’scurrent institutional development servicesaimed at graduating WSPs, as well as theclassification of WSPs.

(b) The WDG shall classify the WSPs intoeither creditworthy, semi-creditworthy, pre-creditworthy or non-creditworthy for thepurpose of determining the appropriatesources of financing. WSPs initially classifiedby WDG as creditworthy and/or non-creditworthy shall be subject to further reviewby the Oversight Committee pursuant toSection 5 of this Order.

WSPs classified as semi-creditworthyand pre-creditworthy and non-credit worthyshall be subject to periodic review by the WDGat least once every three (3) years for purposesof reclassification. At their own instance,


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WSPs may request the WDG for an annualreclassification review.

(c) Graduation - The WDG shall develop agraduation plan for non-creditworthy, pre-creditworthy and semi-creditworthy WSPsbased on the following graduation initiatives:

LWUA-WDG shall monitor theimplementation of the graduation plan andevaluate the effectiveness of the graduationinitiatives undertaken by the semi-creditworthy, pre-creditworthy and non-creditworthy WSPs.

LWUA-WDG shall initially cover theclassification and graduation plan andinitiatives of WDs. It may also cover otherWSPs as deemed applicable or feasible.

(d) Reporting - LWUA-WDG shall prepareand submit quarterly reports on its activitiesto the Oversight Committee and DOF.B. Water Development Financier (WDF)

The WDF shall have the followingresponsibilities:

(a) The WDF which shall be primarilytasked to enhance and/or strengthen LWUA’slending functions and evaluate the applicationsfor financial assistance.

(b) Re-orientation Towards BankingPrinciples - LWUA, through the WDF, shallenhance and/or strengthen its lending policiesand functions to carry out and implement itsmandate to provide financing particularly tonon-credit worthy, pre-creditworthy and semi-creditworthy WDs, grounded on sounddevelopment banking principles. To this effect,LWUA shall adopt development bankingprinciples which cater to the financing needsof WSPs and shall develop its own proceduresfor the monitoring of its loan portfolio. LWUAshall develop lending policies and guidelinesin pursuit of the policies and principlesespoused under this Executive Order within

90 days from its effectivity and submit thesame to the Oversight Committee. LWUA shallconduct its operations in a transparent,efficient and effective manner.

(c) Strengthening of Collection Function- In the exercise of its lending functions, LWUAshall also strengthen its collection functionfrom WDs as well as enhance its payment ofloans to LWUA creditors. To this effect, allcollections arising from LWUA’s receivablesshall constitute a special fund to beapportioned between debt servicing of LWUAloans and the additioned funding necessaryto support the LWUA’s graduation andtechnical assistance functions under the WDGand the TAG.

(i) Cost Recovery Tariff Initiatives - Theseare initiatives aimed at achieving widespreadfull cost recovery tariffs in the long term. Theinitiatives shall include the inventory of non-credit worthy, semi-creditworthy and pre-creditworthy WSPs to determine the degreeto which tariffs are sufficient to accumulateat least a minimal reserve for collateral orcounterpart equity. In. addition, should theLGUs invest in WSPs, they should be allowedrecovery of and’ some minimal return on itsinvestment.

(ii) Amalgamation and Private SectorParticipation Initiatives - These are initiativesaimed at achieving economies of scale andefficiency of service through the use ofidentified amalgamation and private sectorparticipation techniques based on technical,geographical, economic and other indicators.

LWUA shall develop the necessaryguidelines during the transition period for theamalgamated WDs and LGUs.

(iii) Management Structure andGovernance - These initiatives pertain toinstitutional improvements within the WSPs


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structure leading to greater accountability andimproved service.

(iv) LGU/WSP Resource Coordination forCredit Enhancement. - This refers to thepooling of resources between semi-creditworthy and/or pre-creditworthy or semi-creditworthy and/or non-creditworthy WSPsand the relevant LGUs in their service areas tofinance water supply and sewerage projectsor create the collateral needed to borrow fromGFls and PFIs.

(v) Education - This refers tocommunication and information initiatives onthe benefits of graduation initiatives includingcost recovery tariffs, amalgamation, privatesector participation and LGU/WSP resourcecoordination.

(vi) Technical Assistance to non-creditworthy and pre-creditworthy WSPs - Thisrefers to technical assistance to supportgraduation initiatives which may be given withor without charge within a value thresholdthat may be determined by LWUA-WDG.

(d) Segregation of LWUA Loan Portfolios- For purposes of identification andadministrative efficiency, LWUA shall maintainseparate accounting, payment and collectionsystems for existing loans and loans to begranted henceforth pursuant to the reformsinstituted in this Executive Order.C. Technical Assistance Group (TAG)

TAG shall have the followingresponsibilities:

(a) TAG shall continue LWUA’s programof providing technical assistance to WSPs, inaccordance with the proceeding sections.

(b) TAG shall extend project-relatedtechnical assistance to GFIs and credit-worthyWSPs on a competitive basis, consistent withapplicable laws, rules and regulations ongovernment procurement.

(c) Above a certain value threshold,which threshold shall be determined by LWUA,TAG shall extend project-related technicalassistance to semi-creditworthy WSPs on acompetitive basis, consistent with applicablelaws, rules and regulations on governmentprocurement.

(d) LWUA-TAG shall extend project-relatedassistance to non-creditworthy and pre-creditworthy WDs which may be with orwithout charge within a certain valuethreshold to be determined by LWUA tosupport projects funded by LWUA-WDF.

SEC. 10. Within thirty (30) days from theeffectivity of this Order, LWUA shall review itscurrent structure and submit its rationalizedplan to the Oversight Committee, consistentwith the policy reforms enunciated under thisOrder. The Oversight Committee shall evaluatethe rationalization plan within thirty (30) daysfrom receipt. LWUA, with the endorsement ofthe Oversight Committee, shall submit therationalization plan to the President for finalapproval.

Upon approval by the President of thereforms in the water supply and seweragesector, including the rationalized organizationand manpower structure of LWUA, LWUA shallthen be transferred to DOF. Pursuant to Section51 of PD 198, at least three (3) of the trusteesmust be employees of the National Government.DOF shall always be represented in the LWUA-BOT.

PPPPPARARARARART IVT IVT IVT IVT IVFINANCING POLICIESFINANCING POLICIESFINANCING POLICIESFINANCING POLICIESFINANCING POLICIES

SEC. 11. Responsibility of LResponsibility of LResponsibility of LResponsibility of LResponsibility of LGUs -GUs -GUs -GUs -GUs - In linewith the principle of devolution of the provisionof basic services under the Local GovernmentCode, LGUs shall be encouraged to provide


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delivery of water supply and sewerage servicesthrough, but not limited to, investments in, orloans to WSPs. LGUs shall as a general policy,be financially and operationally responsiblefor the WSPs within their respectivejurisdictions.

SEC. 12. Sources of Financing - Sources of Financing - Sources of Financing - Sources of Financing - Sources of Financing - Thesources of financing for the water supply andsewerage sector shall be as follows:

(a) Creditworthy WSPs shall be eligibleto source financing at commercial lendingrates from GFIs and PFIs. Pursuant thereto,LWUA, with respect to creditworthy WDs shallenhance and streamline its waiver proceduresto effect the reform objectives/policiesenunciated herein. GFIs shall strengthen theirskills base and develop lending programsspecially tailored to the needs of the watersupply and sewerage sector.

(b) Semi-creditworthy WDs snail beeligible to source concessional debt financingfrom the LWUA-WDF, as well as GFIs and PFIswhen possible.

(c) Pre-creditworthy WDs shall be eligibleto source grants from donors and deepconcessional financing from the LWUA-WDF.

(d) Non-creditworthy WDs shall continueto be eligible for financing under the LWUA-WDF. However, LGUs are hereby encouragedto provide financial and operational supportfor such WDs and other WSPs within theirrespective jurisdictions. DILG and MDFO shallprovide the necessary technical and financialsupport within their respective mandates.

(e) WSPs, including eligible WDs, canaccess financing from GFIs, PFIs, MDFO, andLGUs, whenever possible.

LWUA-WDG shall provide the necessaryincentives for graduation such as extensionof greater flexibility in WD’s operation as aWD graduate from one stage to the next.

LWUA-WDG shall provide guidelines toencourage graduation, which shall beapproved by LWUA-BOT for submission to theOversight Committee.

SEC. 13. Role of Financial Institution – Role of Financial Institution – Role of Financial Institution – Role of Financial Institution – Role of Financial Institution –The classification of WSPs shall merely be adeterminant of eligibility for the varioussources of financing, but shall not in any waybe construed as an outright guarantee ofactual financing from the designated source.

PPPPPARARARARART VT VT VT VT VFINAL PROVISIONSFINAL PROVISIONSFINAL PROVISIONSFINAL PROVISIONSFINAL PROVISIONS

SEC. 14. The Oversight Committee shallformulate the IRR of this Order within 90 daysfrom its effectivity, which shall be publishedin accordance with the requirements of theAdministrative Code of 1987 and otherpertinent laws.

SEC. 15. The Oversight Committee shallcease to exist three (3) years after the approvalby the President of the rationalizedorganization and manpower structure ofLWUA, with any remaining function of theCommittee to be assumed by the DOF.

SEC. 16..... Any violation of this Order andof its IRR shall be subject to disciplinary actionand other penalties as provided for in saidIRR and other relevant laws and issuances.

SEC. 17. If any provision of this Order isdeclared unconstitutional or invalid, the otherprovisions not affected thereby shall remainin full force and effect.

SEC. 18. All orders, executive issuances,rules and regulations, administrativeresolutions, or parts thereof, inconsistent withthe provisions of this Order are hereby repealedor modified accordingly.

SEC. 19. This Order shall take effect uponits publication in the Official Gazette or in a


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newspaper of general circulation in thePhilippines.

DONE,DONE,DONE,DONE,DONE, in the City of Manila, this 2nd ofday of February in the year of our Lord, TwoThousand and Four.

By the President:

(SGD) ALBER(SGD) ALBER(SGD) ALBER(SGD) ALBER(SGD) ALBERTTTTTO G. ROMULO G. ROMULO G. ROMULO G. ROMULO G. ROMULOOOOOExecutive Secretary


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Republic of the PhilippinesDEPDEPDEPDEPDEPARARARARARTMENT OF FINANCETMENT OF FINANCETMENT OF FINANCETMENT OF FINANCETMENT OF FINANCE

Manila

IMPLIMPLIMPLIMPLIMPLEMENTING RULEMENTING RULEMENTING RULEMENTING RULEMENTING RULES ANDES ANDES ANDES ANDES ANDREGULAREGULAREGULAREGULAREGULATIONS OF EXECUTIVE ORDER NOTIONS OF EXECUTIVE ORDER NOTIONS OF EXECUTIVE ORDER NOTIONS OF EXECUTIVE ORDER NOTIONS OF EXECUTIVE ORDER NO.....279, SERIES OF 2004, “PRESCRIBING279, SERIES OF 2004, “PRESCRIBING279, SERIES OF 2004, “PRESCRIBING279, SERIES OF 2004, “PRESCRIBING279, SERIES OF 2004, “PRESCRIBINGGUIDELINES ON INSTITUTING REFORMSGUIDELINES ON INSTITUTING REFORMSGUIDELINES ON INSTITUTING REFORMSGUIDELINES ON INSTITUTING REFORMSGUIDELINES ON INSTITUTING REFORMSIN THE FINANCING POLICIES FOR THEIN THE FINANCING POLICIES FOR THEIN THE FINANCING POLICIES FOR THEIN THE FINANCING POLICIES FOR THEIN THE FINANCING POLICIES FOR THEWWWWWAAAAATER SUPPLTER SUPPLTER SUPPLTER SUPPLTER SUPPLY AND SEWERAY AND SEWERAY AND SEWERAY AND SEWERAY AND SEWERAGE SECGE SECGE SECGE SECGE SECTTTTTORORORORORAND WAND WAND WAND WAND WAAAAATER SERTER SERTER SERTER SERTER SERVICE PROVICE PROVICE PROVICE PROVICE PROVIDERS ANDVIDERS ANDVIDERS ANDVIDERS ANDVIDERS ANDPROPROPROPROPROVIDING FOR THE RAVIDING FOR THE RAVIDING FOR THE RAVIDING FOR THE RAVIDING FOR THE RATIONALIZATIONALIZATIONALIZATIONALIZATIONALIZATIONTIONTIONTIONTIONOF LOF LOF LOF LOF LWUWUWUWUWUA’S ORGANIZAA’S ORGANIZAA’S ORGANIZAA’S ORGANIZAA’S ORGANIZATIONALTIONALTIONALTIONALTIONALSTRUCSTRUCSTRUCSTRUCSTRUCTURE AND OPERATURE AND OPERATURE AND OPERATURE AND OPERATURE AND OPERATIONS INTIONS INTIONS INTIONS INTIONS INSUPPORSUPPORSUPPORSUPPORSUPPORT THEREOFT THEREOFT THEREOFT THEREOFT THEREOF

Section 1. PurposePurposePurposePurposePurposeTo prescribe the guidelines, criteria,

grounds and procedures which shall governfinancing policies for the water supply andsewerage sector and the rationalization ofLWUA’s organizational structure, operationand refocusing of its objectives.

Section 2. CoverageCoverageCoverageCoverageCoverageThese IRR shall cover all water districts

(WDs) other water service providers (WSPs)outside the coverage of MWSS/Maynilad/Manila Water and all concerned governmentagencies which have a role in theimplementation of EO 279, such as but notlimited to the Department of Finance (DOF),National Economic and Development Authority(NEDA), Department of Budget andManagement (DBM), Department of Interiorand Local Government (DILG), Office of thePresident (OP), Local Water UtilitiesAdministration (LWUA), Government FinancialInstitutions (GFIs), Municipal FinanceCorporation (MFC), Department of PublicWorks and Highways (DPWH), Department ofEnvironment and National Resources (DENR),

Rural Waterworks and SanitationAssociations (RWSAs) and BarangayWaterworks and Sanitation Associations(BWSAs).

Section 3. Reforms, Objectives andReforms, Objectives andReforms, Objectives andReforms, Objectives andReforms, Objectives andPPPPPoliciesoliciesoliciesoliciesolicies

In view of the shifts in governmentfinancing policies and constraints in theavailability of financing from the NationalGovernment, there is a need to review andrationalize current financing policies for thePhilippine water supply and sewerage sectorto allow for the efficient flow of resources tothe sector. Cognizant of the need, these IRRhope to address the following reforms,objectives and policies:

(a) Improvement of investor confidencein the water supply and sewerage sector;

(b) Rationalization in the allocation ofscarce financial resources in the water supplyand sewerage sector through classificationand graduation initiatives;

(c) Freedom of choice of WSPs in sourcingfinancing;

(d) Increase in the participation of LGUs,GFIs, and PFIs in the financing of the watersupply and sewerage sector;

(e) Stimulation of improved service andcreation of financial self-sustainability forWSPs;

(f) Encouragement of initiatives aimedat self-sufficiency of water service providers,including, but not limited to, amalgamation,private sector participation, cost-recoverytariffs, and resource pooling;

(g) Grant of incentives for theimprovement and graduation of WSPs; and

(h) Education of consumers towardstreating water as a scarce economic good.

Section 4. Definition of TDefinition of TDefinition of TDefinition of TDefinition of TermsermsermsermsermsFor the purpose of these IRR, the


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following terms are defined:(a) Amalgamation – consolidation, joint

operation or annexation of two or more WSPsresulting into a WD.

(b) Classification – categorization ofWSPs into non-creditworthy, pre-creditworthy,semi-creditworthy or creditworthy todetermine proper allocation of financing.

(c) Cost Recovery Tariff – tariff that isrequired to cover investment in capitalexpenditures, operating expenditures and debtservicing, including minimal reserve forcollateral or counterpart equity, and reservefor recovery of and some minimal return onLGU’s investment/infusion in the WDs or WSPs.

(d) Creditworthy WSPs – financially self-sustaining WSPs capable of accessingfinancing from GFIs and/or PFIs.

(e) Government Financial Institutions(GFIs) – Development Bank of the Philippines(DBP), Land Bank of the Philippines (LBP) andother financing institutions owned andcontrolled by the Government.

(f) Graduation – the progression of a WSPfrom non-creditworthy to pre-creditworthystatus or from a pre-creditworthy to semi-creditworthy status and/or from a semi-creditworthy to creditworthy status based onimprovements in financial and operationalindicators.

(g) Local Government Units (LGUs) –territorial and political subdivisions of thePhilippines, consisting of provinces, cities,municipalities and barangays.

(h) Long Term – period covering more thanfive (5) years,

(i) Medium Term – period coveringbetween three (3) and five (5) years.

(j) Non-Creditworthy WSPs – WSPs withpotential to reach pre-creditworthy status inthe medium-term, based on relevant financial

and operational indicators set by the OversightCommittee.

(k) Pre-Creditworthy WSPs – WSPswhich are not likely to become creditworthyin the medium-term due to performance issuesbut can demonstrate the potential forcreditworthiness in the long-term, as may bedetermined based on relevant financial andoperational indicators set by the OversightCommittee.

(l) Private Financial Institutions (PFIs) –private entities which are primarily organizedfor the purpose of extending credit facilitiesto consumers and to industrial or agriculturalenterprises. Financing institutions other thangovernment financial institutions. Theseinclude universal and commercial banks.

(m) Semi-Creditworthy WSPs – WSPswith the demonstrated ability to achievecreditworthiness in the short-term, based onrelevant financial and operational indicatorsset by the Oversight Committee, but either lackthe full criteria for creditworthiness or do notmeet the criteria consistently.

(n) Short Term – period covering one year(1) to less than three (3) years.

(o) Technical Assistance – includesfeasibility study, detailed engineering design,review of feasibility study and engineeringdesign, preparation of work program,construction supervision, start-up operations,operations and maintenance assistance,rehabilitation of dilapidated systems, welldrilling and construction of new wells,rehabilitation and repair of old wells andemergency repair of water supply system.Financing for technical assistance involvingpre-feasibility or feasibility studies, projectidentification, sector survey, institutionbuilding activities including training, shall becharged against beneficiaries unless grants


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are available for the purpose. On the otherhand, consultancy/advisory services relatedto construction activities, including detailedengineering shall be considered as part of theproject capital cost and may be financed bythe project loan.

(p) Value Threshold – the level at whichLWUA may grant project related technicalassistance for free to the PCW and NCW WSPswithout affecting LWUA’s viability. This willbe determined by LWUA on a yearly basisdepending on LWUA’s capability to absorbsuch additional cost.

(q) Water Service Providers (WSPs) – localwater utilities such as WDs, LGU-run waterutilities, rural waterworks and sanitationassociations (RWSAs), and barangaywaterworks and sanitation associations(BWSAs), regardless of location.Section 5. Responsibilities Responsibilities Responsibilities Responsibilities Responsibilities

The implementation of the recommendedreforms requires that LWUA as the localgovernment agency for financing andinstitutional development of local WDs,focuses its objectives and rationalizes itsoperations. Accordingly, the rationalizationof LWUA’s organizational structure, operationand refocusing of its objectives, and theimplementation of the reforms in the financingpolicies for the water supply and seweragesector, as defined in Section 2 of these IRR,require close policy coordination among theconcerned government agencies.

5.1 Local Water Utilities AdministrationLWUA, subject to applicable laws and

regulations, shall review its organizationalstructure and internal policies and programs,rationalize its operations and refocus itsobjectives to include WSPs, whenever feasibleor applicable, to facilitate implementation ofand conform with the policies enunciated in

EO 279. Further, LWUA shall conduct itsoperations in a transparent, efficient andeffective manner.

LWUA shall constitute and designate fromits current organization set-up, a WaterDevelopment Group (WDG), a WaterDevelopment

Financier (WDF) and a TechnicalAssistance Group (TAG), or similar structures,with functions and responsibilities as follows:

5.1 A Water Development Group (WDG)WDG shall have the following

responsibilities:(a) It shall be primarily charged with the

continuation of LWUA’s current institutionaldevelopment services aimed at graduatingWSPs, as well as the classification of WSPs.

(b) It shall classify the WSPs into eithercreditworthy, semi-creditworthy, pre-creditworthy or non-creditworthy for thepurpose of determining the appropriatesources of financing WSPs initially classifiedby WDG as creditworthy and/or non-creditworthy shall be subject to further reviewby the Oversight Committee pursuant toSection 5.2(b) of these IRR.

LWUA shall initially cover theclassification and graduation plan andinitiatives of WDs. It may also cover otherWSPs as deemed applicable or feasible.

To facilitate the classification of the WDs,LWUA shall prepare the criteria forclassification and submit the same to theOversight Committee for review within 30 daysupon effectivity of EO 279.

The criteria shall consider:i. financial indicators such as current

ratio, debt service ratio, debt/equity ratio,profit margin ratio and cash flow ratio; and

ii. operational indicators such ascollection efficiency; non-revenue water and


74

service connections/staff.LWUA shall closely coordinate with the

GFIs in determining the criteria forclassification.

The classification of WDs shall be dulyapproved by the LWUA Administrator forsubmission to the Oversight Committee forreview within 90 days upon completion ofreview of classification criteria by the OC.

For the initial classification, WDs haveto meet the criteria for three (3) consecutiveyears to be considered creditworthy. WDsclassified as semi-creditworthy, pre-creditworthy and non-creditworthy shall besubject to periodic review by WDG at leastonce every three (3) years for purposes ofreclassification. In like manner, subsequentclassification shall require three (3) yearsconsistent favorable evaluation. At their owninstance, WDs may request the WDG for anannual reclassification review.

Any changes in the classification shouldbe submitted to the Oversight Committee.

Lending to WDs initially classified ascreditworthy shall be governed by Section 9(b) of these IRR.

c. It shall develop a graduation plan fornon-creditworthy, pre-creditworthy and semi-creditworthy WSPs based on the followinggraduation initiatives:

i. Cost Recovery Tariff Initiatives - theseare initiatives aimed at achieving widespreadfull cost recovery tariffs in the long-term. Theinitiatives shall include the inventory of non-creditworthy, semi-creditworthy and pre-creditworthy WSPs to determine the degreeto which tariffs are sufficient to accumulateat least a minimal reserve for collateral orcounterpart equity. In addition, should theLGUs invest in WSPs, they should be allowedrecovery of and some minimal return on their

investment.ii. Amalgamation and Private Sector

Participation initiatives - these are initiativesaimed at achieving economics of scale andefficiency of service through the use ofidentified amalgamation and private sectorparticipation techniques based on technical,geographical, economic and other indicators.

LWUA shall formulate within 180 daysupon effectivity of these IRR, the necessaryguidelines to be observed by the amalgamatedWSPs during the transition period. Amongother things, the guidelines shall address thea) incentives for amalgamation, b) mechanicsof amalgamation, c) restructuring of theBoard of Directors and officer of theamalgamated WSPs with respect but notlimited to tenure of office and survivingpositions, and d) controlling WSPs taking intoaccount considerations such as the size,financial condition and the location of theparticipating WSPs.

iii. Management Structure andGovernance - These initiatives pertain toinstitutional improvements within the WSPsstructure leading to greater accountability andimproved service.

iv. LGU/WSP Resource Coordination forCredit Enhancement - this refers to the poolingof resources between semi-creditworthy and/or pre-creditworthy and/or non-creditworthyWSPs and the relevant LGUs in their serviceareas to finance water supply and sewerageprojects or create the collateral needed toborrow from GFIs and PFIs.

To allow LGU recovery of and someminimal return on its investments in the WSPspursuant to (c) (i) and (c) (iv) of this Section,LWUA shall formulate benchmarks for LGUsharing in the earnings of the WSPs incoordination with the MFC and the DOF within


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180 days upon effectivity of these IRR.v. Education – refers to communication

and information initiatives on the benefits ofgraduation initiatives including cost recoverytariffs, amalgamation, private sectorparticipation and LGU/WSP resourcecoordination.

vi. Technical Assistance to non-creditworthy and pre-creditworthy WSPs –refers to technical assistance to supportgraduation initiatives which may be given withor without charge within the value thresholdthat may be determined by LWUA-WDG.

LWUA-WDG shall monitor theimplementation of the graduation plan andevaluate the effectiveness of the graduationinitiatives undertaken by the semi-creditworthy, pre-creditworthy and non-creditworthy WSPs.

d. The LWUA-WDG shall prepare andsubmit quarterly reports on its activities tothe Oversight Committee and DOF.

For the purposes of Section 5.1 A (c ) ofthese IRR and Sec. 12 of EO 279, LWUA shallsubmit to the Oversight Committee, guidelinesto encourage graduation as approved by theLWUA Board of Trustees within 180 days uponeffectivity of these IRR. Said guidelines shallinclude incentives such as, but not limited togreater flexibility in WD’s operation as WDgraduates from one stage to the next, andenjoyment of LWUA’s streamlined waiverprocedures.

5.1.B Water Development Financier(WDF)

WDF shall have the followingresponsibilities:

a. It shall be primarily tasked to enhanceand/or strengthen LWUA’s lending functionsand evaluate the applications for financialassistance.

b. Re-orientation Towards BankingPrinciples - LWUA, through the WDF, shallenhance and/or strengthen its mandate as aspecialized lending agency under PD 198 asamended by providing financing particularlyto non-creditworthy, pre-creditworthy andsemi-creditworthy WDs, grounded on sounddevelopment banking principles. To this effect,LWUA shall adopt development bankingprinciples, which cater to the financing needsof WSPs and shall develop its own proceduresfor the monitoring of its loan portfolio. LWUAshall develop lending policies and guidelinesin pursuit of the policies and principlesespoused under EO 279 in coordination withthe MFC and GFIs within 90 days from itseffectivity and submit the same to theOversight Committee. The new lending policiesand guidelines shall only apply to new loansto be approved by LWUA for prospective WD-borrowers.

c. Strengthening of Collection Function -In the exercise of its lending functions, LWUAshall also strengthen its collection functionfrom WDs as well enhance its payment ofloans to LWUA creditors. To this effect, allcollection arising from LWUA receivables shallconstitute a special fund to be apportioned todebt servicing of LWUA loans, additionalfunding necessary to support the LWUA’sgraduation and technical assistance functionsunder the WDG and the TAG.

d. Segregation of LWUA Loan Portfolios -For purposes of identification andadministrative efficiency, LWUA shall maintainseparate accounting, payment and collectionsystems for existing loans and loans to begranted henceforth pursuant to the reformsinstituted under EO 279.

5.1.C Technical Assistance Group (TAG)TAG shall have the following


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responsibilities:a. It shall continue LWUA’s program of

providing technical assistance to WSPs, inaccordance with the proceeding sections.

b. It shall extend project-related technicalassistance to GFIs, PFIs and creditworthyWSPs on a competitive basis, consistent withthe applicable laws, rules and regulations ongovernment procurement.

c. Above a certain value threshold, whichthreshold shall be determined by LWUA inaccordance with the definition provided forunder Section 4 of these IRR, TAG shall extendproject-related technical assistance to semi-creditworthy WSPs on a competitive basis,consistent with applicable laws, rules andregulations on government procurement.

d. It shall extend project-relatedassistance to non-creditworthy and pre-creditworthy WSPs funded by the LWUA-WDF.This assistance may be with or without chargewithin a certain value threshold to bedetermined by LWUA on a yearly basis.

5.1.D Within 30 days from the effectivityof EO 279, LWUA shall review its currentstructure and submit its rationalized plan tothe Oversight Committee, consistent with thepolicy reforms enunciated under the said EO.The Oversight Committee shall evaluate therationalization plan within 30 days fromreceipt.

5.1.E LWUA with the endorsement of theOversight Committee, shall submit therationalization plan to the President for finalapproval not later than 75 days upon theeffectivity of the EO.

a. Upon approval by the President of thereforms in the water supply and seweragesector, including the rationalized organizationand staffing structure of LWUA, an EO shallbe issued attaching LWUA to DOF, for policy

and program coordination.Oversight Committee (OC)The Oversight Committee constituted

pursuant to Section 3 of EO 279 shallcoordinate and oversee the implementationof the reforms in the financing and graduationpolicies in the water supply and seweragesector.

In addition to the function explicitly takenfrom the EO, the OC shall:

a. Review the criteria for theclassification of WSPs, recommended by theLWUA within 30 days upon submission byLWUA;

b. Review the classification of WSPsprepared by LWUA pursuant to Sec. 9 A(b) EO279, duly certified by the LWUA Administratorthat the same is in accordance with the criteriapresented to and reviewed by the OversightCommittee pursuant to Sec. 5 (d) of EO 279.The Oversight Committee shall review thesame within 60 days upon submission byLWUA. The Oversight Committee may subjectthe classification of the WSP to audit;

Immediate actions include, among others,the review of LWUA Charter as provided underSection 5 of EO 279 including theclassification of water districts, graduationof WSPs, reform in LWUA financial waiverprocess and compliance of LWUA to provisionsof EO 279 and of these IRR within the specifiedtimelines. On the other hand, medium termactions include the determination ofappropriate incentives for GFIs and the PFIsto lend to WSPs.

All functions of the Oversight Committee,which are continuing in nature, shall beperformed by the DOF, as provided for underSection 15 of EO 279.

Section 6. Attachment Attachment Attachment Attachment AttachmentUpon approval by the President of the


77

reforms in the water supply and seweragesector, including the rationalized organizationstructure and the staffing pattern of LWUA,LWUA shall then be attached to the DOF.Pursuant to Section 51 of PD 198, at leastthree (3) of the trustees must be employees ofthe National Government (NG). NGrepresentatives must be at least Director level,DOF shall always be represented in the LWUABoard of Trustees.

Section 7. Expenses Expenses Expenses Expenses ExpensesMembers of the Oversight Committee and

its Technical Secretariat shall be entitled toreceive honoraria and/or reimbursement ofexpenses as may be allowed subject toavailability of funds and prevailing rules andregulations.

FINANCING POLICIESFINANCING POLICIESFINANCING POLICIESFINANCING POLICIESFINANCING POLICIES

Section 8. Responsibility of LResponsibility of LResponsibility of LResponsibility of LResponsibility of LGUsGUsGUsGUsGUsIn line with the principle of devolution of

the provision of basic services under the LocalGovernment Code, LGUs shall be encouragedto provide delivery of water supply andsewerage through, but not limited to,investments in, or loans to WSPs. LGUs shallas general policy, be financially andoperationally responsible for the WSPs,excluding WDs and RWSAs, within theirrespective jurisdictions.

Section 9. Source of Financing Source of Financing Source of Financing Source of Financing Source of FinancingThe source of financing for the water

supply and sewerage sector shall be asfollows:

a. Creditworthy WSPs shall be eligibleto source financing at commercial lendingrates from GFIs and PFIs. Pursuant thereto,LWUA with respect to creditworthy WDs shallenhance and streamline its waiver proceduresto effect the reform objectives/policies

enunciated under EO 279. However, LWUA shallwork out an arrangement to GFIs/PFIs toensure repayment of LWUA loan to WSP. GFIsshall strengthen their skills base and developlending programs specially tailored to theneeds of the water supply and seweragesector;

b. Creditworthy WDs may be eligible forfinancing from LWUA in case no funds areavailable from other sources, subject toprioritization criteria giving preference to NCWup to SCW WDs/WSPs, availability of fundsand provided that these WDs undertakegraduation initiatives such as pooling ofresources, amalgamation, among others withthe end objective of accessing financing fromGFIs/PFIs and sources other than LWUA;

c. Semi-creditworthy (SCW) WDs shallbe eligible to source concessional projectfinancing as grants from donor agencies,financial assistance made available throughrepresentative of the District, LGU financialassistance packages or financing from otherdonors made available and are coursedthrough the LWUA-WDF. Said WSPs shall bere-oriented towards meeting the lendingcriteria of GFIs and PFIs to qualify them foreventual financing in the medium termwhenever possible;

d. Pre-creditworthy (PCW) WDs shall beeligible from donors and deep concessionalfinancing from the LWUA-WDF.

e. Non-creditworthy (NCW) WDs shallcontinue to be eligible for financing under theLWUA-WDF. However, LGUs are herebyencouraged to provide financial andoperational support for such WDs and otherWSPs within their respective jurisdictions. DILGand MFC shall provide the necessary technicaland financial support within their respectivemandates;


78

f. Whenever concessionary loan/grantfunds are available from the NG and othersources, the LWUA shall allocate the said fundsto the SCW, PCW and NCW WDs which havethe potential to demonstrate increasedviability; and

g. WSPs including eligible WDs, canaccess financing from the GFIs, PFIs, MFC,and LGUs, whenever possible and shall beconsistent with the provisions of these IRR.

DILG shall, within the mandate andexisting programs, pursue and activecampaign program to implement policies inthe EO which concern the LGU.

Section 10. Role of Financing InstitutionRole of Financing InstitutionRole of Financing InstitutionRole of Financing InstitutionRole of Financing InstitutionThe classification of WSPs shall merely

be a determinant of eligibility for the varioussources of financing, and shall not in any waybe construed as an outright guarantee ofactual financing from the designated source.

Section 11. Repealing Clause Repealing Clause Repealing Clause Repealing Clause Repealing ClauseAll Circulars or Resolutions or part

thereof, which are inconsistent with these IRR,are hereby repealed or modified accordingly.

Section 12. Effectivity Effectivity Effectivity Effectivity EffectivityThese IRR shall take effect fifteen (15)

days after its publication in the Official Gazetteor in a newspaper of general circulation.

Done in the City of Manila, this 16th dayof July in the year of our Lord, Two Thousandand Four.

Oversight CommitteeOversight CommitteeOversight CommitteeOversight CommitteeOversight Committee

(SGD) JU(SGD) JU(SGD) JU(SGD) JU(SGD) JUANITANITANITANITANITA D. AMAA D. AMAA D. AMAA D. AMAA D. AMATTTTTONGONGONGONGONGSecretary of Finance

Chairman

(SGD) ROMUL(SGD) ROMUL(SGD) ROMUL(SGD) ROMUL(SGD) ROMULO L. NERIO L. NERIO L. NERIO L. NERIO L. NERINational Economic & Development

AuthorityDirector-GeneralVice-Chairman

(SGD) EMILIA T(SGD) EMILIA T(SGD) EMILIA T(SGD) EMILIA T(SGD) EMILIA T. BONCODIN. BONCODIN. BONCODIN. BONCODIN. BONCODINDepartment of Budget & Management

SecretaryMember

(SGD) JOSE D. LINA, JR.(SGD) JOSE D. LINA, JR.(SGD) JOSE D. LINA, JR.(SGD) JOSE D. LINA, JR.(SGD) JOSE D. LINA, JR.Department of Interior & Local Government

SecretaryMember

(SGD) GAMALIEL A. CORDOB(SGD) GAMALIEL A. CORDOB(SGD) GAMALIEL A. CORDOB(SGD) GAMALIEL A. CORDOB(SGD) GAMALIEL A. CORDOBAAAAAOffice of the President

Deputy Executive SecretaryMember

(SGD) L(SGD) L(SGD) L(SGD) L(SGD) LORENZO H. JORENZO H. JORENZO H. JORENZO H. JORENZO H. JAMORAAMORAAMORAAMORAAMORALocal Water Utilities Administration

AdministratorMember


79

sectionsectionsectionsectionsection 12Republic of the PhilippinesCongress of the Philippines

Metro Manila

TTTTTwwwwwelfth Congrelfth Congrelfth Congrelfth Congrelfth Congressessessessess

Third Regular SessionThird Regular SessionThird Regular SessionThird Regular SessionThird Regular Session

Begun and held in Metro Manila, onMonday, the twenty-eighth day of July, twothousand and three.

Republic ARepublic ARepublic ARepublic ARepublic Act No. 9286ct No. 9286ct No. 9286ct No. 9286ct No. 9286

AN AAN AAN AAN AAN ACCCCCT FURT FURT FURT FURT FURTHER AMENDINGTHER AMENDINGTHER AMENDINGTHER AMENDINGTHER AMENDINGPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NOPRESIDENTIAL DECREE NO. 198,. 198,. 198,. 198,. 198,OOOOOTHERTHERTHERTHERTHERWISE KNOWISE KNOWISE KNOWISE KNOWISE KNOWN AS “THEWN AS “THEWN AS “THEWN AS “THEWN AS “THEPROPROPROPROPROVINCIAL WVINCIAL WVINCIAL WVINCIAL WVINCIAL WAAAAATER UTILITIES ATER UTILITIES ATER UTILITIES ATER UTILITIES ATER UTILITIES ACCCCCT OFT OFT OFT OFT OF1973”, AS AMENDED1973”, AS AMENDED1973”, AS AMENDED1973”, AS AMENDED1973”, AS AMENDED

Be it enacted by the Senate and House ofRepresentatives of the Philippines in Congressassembled:

Section 1. Section 13 of PresidentialDecree No. 198, as amended, is hereby amendedto read as follows:

“Sec. 13. Compensation. - Each directorshall receive per diem to be determined by theBoard, for each meeting of the Board actuallyattended by him, but no director shall receiveper diems in any given month in excess of theequivalent of the total per diem of fourmeetings in any given month.

“Any per diem in excess of One hundredfifty pesos (P150.00) shall be subject to theapproval of the Administration. In additionthereto, each director shall receive allowances

and benefits as the Board may prescribesubject to the approval of the Administration.”

Sec. 2. Section 23 of Presidential DecreeNo. 198, as amended, is hereby amended toread as follows:

“Sec. 23. The General Manager. - At thefirst meeting of the Board, or as soonthereafter as practicable, the Board shallappoint, by a majority vote, a general managerand shall define his duties and fix hiscompensation. Said officer shall not beremoved from office, except for cause and afterdue process.”

Sec. 3. Separability Clause. - If anysection or provision of this Act is declaredunconstitutional or invalid, the other sectionsor provisions not affected thereby shallcontinue to be in force and effect.

Sec. 4. Repealing Clause. - All acts,decrees, executive orders, rules andregulations, part or parts thereof inconsistentwith the provisions of this Act are herebyrepealed or modified accordingly.

Sec. 5. Effectivity Clause. - This Act shalltake effect upon its approval.

Approved.

(Signed) JOSE DE VENECIA JR.(Signed) JOSE DE VENECIA JR.(Signed) JOSE DE VENECIA JR.(Signed) JOSE DE VENECIA JR.(Signed) JOSE DE VENECIA JR.Speaker of the House of Representatives

(Signed) FRANKLIN M. DRIL(Signed) FRANKLIN M. DRIL(Signed) FRANKLIN M. DRIL(Signed) FRANKLIN M. DRIL(Signed) FRANKLIN M. DRILONONONONONPresident of the Senate

This Act which is a consolidation ofSenate Bill No. 2727 and House Bill No. 4861was finally passed by the Senate and theHouse of Representatives on February 6, 2004and February 7, 2004, respectively.


80

(Signed) ROBER(Signed) ROBER(Signed) ROBER(Signed) ROBER(Signed) ROBERTTTTTO PO PO PO PO P. NAZARENO. NAZARENO. NAZARENO. NAZARENO. NAZARENOSecretary GeneralHouse of Representatives

(Signed) OSC(Signed) OSC(Signed) OSC(Signed) OSC(Signed) OSCAR G. YAR G. YAR G. YAR G. YAR G. YABESABESABESABESABESSecretary of the Senate

Approved: April 02, 2004

(Signed) GL(Signed) GL(Signed) GL(Signed) GL(Signed) GLORIA MAORIA MAORIA MAORIA MAORIA MACCCCCAPAPAPAPAPAAAAAGALGALGALGALGAL-----ARROARROARROARROARROYYYYYOOOOO

President of the Philippines


81


TRANSFERRING THE LTRANSFERRING THE LTRANSFERRING THE LTRANSFERRING THE LTRANSFERRING THE LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATERTERTERTERTERUTILITIES ADMINISTRAUTILITIES ADMINISTRAUTILITIES ADMINISTRAUTILITIES ADMINISTRAUTILITIES ADMINISTRATION FROM THETION FROM THETION FROM THETION FROM THETION FROM THEOFFICE OF THE PRESIDENT TOFFICE OF THE PRESIDENT TOFFICE OF THE PRESIDENT TOFFICE OF THE PRESIDENT TOFFICE OF THE PRESIDENT TO THEO THEO THEO THEO THEDEPDEPDEPDEPDEPARARARARARTMENT OF PUBLIC WTMENT OF PUBLIC WTMENT OF PUBLIC WTMENT OF PUBLIC WTMENT OF PUBLIC WORKORKORKORKORKS ANDS ANDS ANDS ANDS ANDHIGHWHIGHWHIGHWHIGHWHIGHWAAAAAYS (DPWH) ANDYS (DPWH) ANDYS (DPWH) ANDYS (DPWH) ANDYS (DPWH) ANDSTRENGSTRENGSTRENGSTRENGSTRENGTHENING THE SUPERTHENING THE SUPERTHENING THE SUPERTHENING THE SUPERTHENING THE SUPERVISION BVISION BVISION BVISION BVISION BYYYYYTHE DPWH SECRETTHE DPWH SECRETTHE DPWH SECRETTHE DPWH SECRETTHE DPWH SECRETARARARARARY OY OY OY OY OVER THEVER THEVER THEVER THEVER THEMETROPOLITMETROPOLITMETROPOLITMETROPOLITMETROPOLITAN WAN WAN WAN WAN WAAAAATERTERTERTERTERWWWWWORKORKORKORKORKS ANDS ANDS ANDS ANDS ANDSEWERASEWERASEWERASEWERASEWERAGE SGE SGE SGE SGE SYSTEM.YSTEM.YSTEM.YSTEM.YSTEM.

WHEREWHEREWHEREWHEREWHEREASASASASAS, the Local Water UtilitiesAdministration (LWUA), which was created byvirtue of Presidential Decree No. 198, asamended, is currently attached to the Officeof the President by virtue of Executive OrderNo. 279, series of 2004;

WHEREWHEREWHEREWHEREWHEREASASASASAS, the MetropolitanWaterworks and Sewerage System (MWSS)was created by virtue of Republic Act No. 6234,as amended, and is currently attached to theDPWH by virtue of Executive Order No. 124,series of 1987;

WHEREWHEREWHEREWHEREWHEREASASASASAS, there is a need for a concertedand well-coordinated effort in formulatingpolicies as well as planning and implementingprograms and projects for the water sector;

WHEREWHEREWHEREWHEREWHEREASASASASAS, there is a need to speed-upthe provision of potable water in everybarangay;

WHEREWHEREWHEREWHEREWHEREASASASASAS, the DPWH is mandated toensure that the planning, design, constructionand maintenance of infrastructure facilitiessuch as national highways, flood control andwater resource development systems are inaccordance with the highest level and safety

and efficiency and with the overall nationaldevelopment objectives;

WHEREWHEREWHEREWHEREWHEREASASASASAS, under Section 31, Chapter10, Book III of Executive Order No. 292, seriesof 1987, otherwise known as the“Administrative Code of 1987”, the President,in order to achieve simplicity, economy andefficiency, has the continuing authority toreorganize the administrative structure of theOffice of the President.

NONONONONOW THEREFORE, I, GLW THEREFORE, I, GLW THEREFORE, I, GLW THEREFORE, I, GLW THEREFORE, I, GLORIAORIAORIAORIAORIAMAMAMAMAMACCCCCAPAPAPAPAPAAAAAGALGALGALGALGAL-ARRO-ARRO-ARRO-ARRO-ARROYYYYYOOOOO, President of theRepublic of the Philippines, by virtue of thepowers vested in me by law, do hereby order:

SECTION 1. TTTTTrrrrransfer of Lansfer of Lansfer of Lansfer of Lansfer of LWUWUWUWUWUA toA toA toA toA toDPWHDPWHDPWHDPWHDPWH. – The Local Water UtilitiesAdministration (LWUA) is hereby transferredfrom the Office of the President to theDepartment of Public Works and Highways(DPWH).

SECTION 2. AAAAAuthority to Exeruthority to Exeruthority to Exeruthority to Exeruthority to ExerciseciseciseciseciseAdministrative SupervisionAdministrative SupervisionAdministrative SupervisionAdministrative SupervisionAdministrative Supervision. – The Secretaryof Public Works Highways is hereby authorizedto exercise administrative supervision over theLWUA and the MWSS, with the objective ofproviding a concerted and well-coordinatedeffort in formulating policies, as well asplanning and implementing programs andprojects for the water sector.

For the purpose, the DPWH Secretaryshall among others:

a. Coordinate and oversee the policy-making processes of the respective governingboards of the LWUA and the MWSS;

b. Require the submission of reports asthe DPWH Secretary may deem necessary,including periodic reports of their respectivepolicies and the implementation of their majorprograms and projects, and their respectiveaudited financial statements within sixty (60)



82

days after the close of the fiscal year;c. Initiate measures within the agency to

promote efficiency and effectiveness,including, but not limited to, the conduct ofmanagement audits, performance evaluationsand inspections to determine compliance withestablished policies, standards and guidelines;

d. To take such action as may benecessary for the proper performance ofofficial functions, including rectification ofviolations, abuses and other forms ofmaladministration; and

e. In general, to oversee the operations ofthe LWUA and the MWSS to ensure that theseagencies are managed efficiently andeffectively.

SECTION 3. . . . . Rules and RegulationsRules and RegulationsRules and RegulationsRules and RegulationsRules and Regulations. –The DPWH Secretary, in consultation with theChairman of the LWUA and the MWSS, ishereby authorized to issue rules andregulations for the effective implementationof the provisions of this Executive Order;

SECTION 4. Repealing ClauseRepealing ClauseRepealing ClauseRepealing ClauseRepealing Clause. – Theprovisions of Executive Order No. 279 (s. 2004)which are inconsistent with the provisions ofthis Executive Order hereby repealed, amendedor modified accordingly. All other executiveissuance, rules, regulations or parts thereof,which are inconsistent with any of theprovisions thereof are hereby repealed,amended or modified accordingly.

SECTION 5. EffectivityEffectivityEffectivityEffectivityEffectivity. – This ExecutiveOrder shall take effect upon its publication inthe Official Gazette or in an newspaper ofgeneral circulation in the Philippines.

DONEDONEDONEDONEDONE in the City of Manila, this 18th

day of November in the year of Our Lord, TwoThousand and Four.

By the President:EDUEDUEDUEDUEDUARDO R. ERMITARDO R. ERMITARDO R. ERMITARDO R. ERMITARDO R. ERMITAAAAAExecutive Secretary


83

sectionsectionsectionsectionsection 14MALACAŃANG

MANILA


IMPLIMPLIMPLIMPLIMPLEMENTING THE REFOCUSING OFEMENTING THE REFOCUSING OFEMENTING THE REFOCUSING OFEMENTING THE REFOCUSING OFEMENTING THE REFOCUSING OFFUNCFUNCFUNCFUNCFUNCTIONS AND ORGANIZATIONS AND ORGANIZATIONS AND ORGANIZATIONS AND ORGANIZATIONS AND ORGANIZATIONALTIONALTIONALTIONALTIONALSTRUCSTRUCSTRUCSTRUCSTRUCTURE OF THE LTURE OF THE LTURE OF THE LTURE OF THE LTURE OF THE LOCOCOCOCOCAL WAL WAL WAL WAL WAAAAATERTERTERTERTERUTILITIES ADMINISTRAUTILITIES ADMINISTRAUTILITIES ADMINISTRAUTILITIES ADMINISTRAUTILITIES ADMINISTRATION UNDER EOTION UNDER EOTION UNDER EOTION UNDER EOTION UNDER EO279 AND PROVIDING OPTIONS AND279 AND PROVIDING OPTIONS AND279 AND PROVIDING OPTIONS AND279 AND PROVIDING OPTIONS AND279 AND PROVIDING OPTIONS ANDBENEFITBENEFITBENEFITBENEFITBENEFITS FOR EMPLS FOR EMPLS FOR EMPLS FOR EMPLS FOR EMPLOOOOOYEES WHO MAYEES WHO MAYEES WHO MAYEES WHO MAYEES WHO MAYYYYYAFFECAFFECAFFECAFFECAFFECTED THEREONTED THEREONTED THEREONTED THEREONTED THEREON

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, it is the policy of governmentof adopt institutional reforms and effectfunctional, operational and organizationaladjustments in the bureaucracy tocontinuously improve the quality andefficiency of public service delivery andtransform it into an efficient and results-oriented structure;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, Executive Order (EO) No. 279provides for the rationalization of LWUA’sorganizational structure and refocusing itsobjectives to fully implement the reforms inthe financing policies in the water supply andsewerage sector and water service providers;

WHEREWHEREWHEREWHEREWHEREAS,AS,AS,AS,AS, section 79 of the GeneralProvisions of RA 9336 (General AppropriationsAct of 2005) mandates, among others, theadoption of institutional strengtheningmeasures to improve service delivery andenhance productivity; identification of areaswhere improvement are necessary; andimplementation of corresponding structure,functional and operational adjustments thatwill result in streamlined organization and

operation and improved performance andproductivity.

NONONONONOWWWWW, THEREFORE, I, GL, THEREFORE, I, GL, THEREFORE, I, GL, THEREFORE, I, GL, THEREFORE, I, GLORIAORIAORIAORIAORIAMAMAMAMAMACCCCCAPAPAPAPAPAAAAAGAL ARROGAL ARROGAL ARROGAL ARROGAL ARROYYYYYOOOOO,,,,, President of thePhilippines, by virtue of the powers vested inme by law, do hereby order the following:

SECTION 1. CorCorCorCorCore functionse functionse functionse functionse functions..... LWUA shallproved institutional development services, andstrengthen its, ending practices and policieson granting financial assistance grounded onsound development banking principles aimedat graduating water districts (WDs) and otherwater service providers (WSPs), allowingefficient use of financial resources, extendtechnical assistance to WDs/WSPs andaddressing the need for a greater number ofWDs/WSPs.

SECTION 2. Specific Shifts in PSpecific Shifts in PSpecific Shifts in PSpecific Shifts in PSpecific Shifts in PolicolicolicolicolicyyyyyDirections, Functions, Programs, ActivitiesDirections, Functions, Programs, ActivitiesDirections, Functions, Programs, ActivitiesDirections, Functions, Programs, ActivitiesDirections, Functions, Programs, Activitiesand Strand Strand Strand Strand Strategiesategiesategiesategiesategies..... To fully implement the reformobjectives/policies in the water supply andsewerage sector, LWUA shall:

a. Improve investor’s confidence in thewater supply and sewerage sector;

b.Rationalize the allocation of financialresources in the water supply andsewerage sector through classificationand graduation initiatives;

c. Expand the freedom of choice of waterservice providers in sourcing theirfunding requirements;

d.Increase the participantion of LocalGovernment Units (LGUs), GovernmentFinancial Institutions (GFIs), andPrivate Financial Institutions (PFIs) infinancing the water supply andsewerage sector;

e. Stimulate improved service and createfinancial self-sustainability for waterservice providers;

f. Encourage initiatives aimed at self-


84

sufficiency of water service providers,including, but not limited to,amalgamation, private sectorparticipation, cost recovery tariffs, andresource pooling;

g. Grant initiatives for the improvementand graduation of water serviceproviders;

h. Educate consumers towards treatingwater as a scarce economic good; and

i. Perform such other functions as arenecessary for the implementation ofthe foregoing objectives/policies.

SECTION 3. OrOrOrOrOrganizational Structurganizational Structurganizational Structurganizational Structurganizational Structureeeee.....LWUA rationalized organization andmanagement structure shall be composed ofthe following:

3.1 BoarBoarBoarBoarBoard of Td of Td of Td of Td of Trusteesrusteesrusteesrusteesrustees. . . . . - The LWUA Boardof Trustees (BOT) shall formulate policydirection for the over-all development of thecountry’s water supply program. It shall becomposed of a Chairman and four memberswith at least three (3) trustees coming fromthe National Government, provided that DOFshall always be represented in the LWUA -BOT. The Administrator of LWUA shall be anex-officio Vice Chairman of the LWUA-BOT.There shall be a Board Secretariat, a LegalCounsel and an Internal Audit Departmentunder the Board of Trustees.

3.2 The LThe LThe LThe LThe LWUWUWUWUWUA AA AA AA AA Administrdministrdministrdministrdministratoratoratoratorator. . . . . TheLWUA shall be headed by an Administrator tobe appointed by the President. As chiefexecutive officer of LWUA, the Administratorshall direct and supervise the operation ofLWUA and its corporate performance, executeand administer policies and guidelinesapproved by the Board of Trustees.

3.3 Deputy Administrators.Deputy Administrators.Deputy Administrators.Deputy Administrators.Deputy Administrators. There shallbe a Deputy Administrator for each of thefollowing major Groups:

1. Water Development Group (WDG)(Luzon),2. WDG- Visayas/Mindanao,3. Water Financier Group, and4. Administrative Service Group.3.3.1 WWWWWater Deater Deater Deater Deater Devvvvvelopment Grelopment Grelopment Grelopment Grelopment Groupoupoupoupoup(WDG).(WDG).(WDG).(WDG).(WDG). There shall be two WDGs: onegroup for Luzon and another for Visayas/Mindanao.The WDG shall be primarily responsiblefor the continuation of LWUA’s currentinstitutional development services aimedat graduating WDs/WSPs, as well as theclassification of the credit worthiness ofWDs/WSPs for purposes of determiningthe appropriate source of financing; itshall develop a graduation plan for semi-creditworthy, pre-creditworthy and non-creditworthy WDs/WSPs based on thegraduation initiatives provided under EO279; and, it shall also monitor theimplementation of the graduation planand evaluate the effectiveness of thegraduation initiatives undertaken byWDs/WSPs and other functionsundertaken by WDs/WSPs.

The WDG shall operate in four (4) areas,as follows;

I. WDG-Luzon shall be handling Areas 1and 2

Area 1 (covers Region I, 2, 3 andCAR), and

Area 2 (covers Regions 4 and 5).

2. WDG- Visayas/Mindanao shall behandlingAreas 3 and 4;

Area 3 (covers Regions 6, 7 and 8),


85

Area 4 (covers Regions 9, 10, II, 12and ARMM region).

Each Area shall be composed of thefollowing divisions namely;

2.1 Corporate Governance Division2.2 Cost Recovery Tariff Division2.3 Special Coordination Division2.4 Engineering Division

3. Technical Assistance Department(TAD). - The TAD shall continue LWUA’sprogram of providing technicalassistance to WDs/WSPs. Consistentwith applicable laws, rules andregulations on government procurement,the TAD shall extend project-relatedtechnical assistance to GFIs andcreditworthy WDs/WSPs on acompetitive basis: Provided that abovea certain value threshold, LWUA shallextend project related technicalassistance to semi creditworthy, pre-creditworthy WDs/WSPs on acompetitive basis. The TAD shall alsoextend project related assistance to non-creditworthy WDs/WSPs which may bewith or without charge within a certainvalue threshold. The TAD shall have threedivisions, to wit:

3.1 Project Development Division3.2 Water Services Training Division3.3 Research/Water Laboratory

Division

3.3.2 WWWWWater Deater Deater Deater Deater Devvvvvelopment Financeelopment Financeelopment Financeelopment Financeelopment FinanceGroup (WDFG).Group (WDFG).Group (WDFG).Group (WDFG).Group (WDFG). The WDFG shall enhanceand/or strengthen LWUA’s lending policiesand functions for the purpose of carryingout and implementing its mandate inproviding financing, particularly to non-creditworthy, pre-creditworthy and semi-

creditworthy WDs/WSPs, grounded onsound development banking principles.It shall develop its own procedure for themonitoring of its loan portfolio; it shallstrengthen the collection functions fromWDs/WSPs as well as enhance itspayment of loans to L WUA creditors.The WDF shall have three departmentsto wit:

3.3.2.1 Treasury Department3.3.2.2 Loan Portfolio Management

Department3.3.2.3 Accounting Department3.3.3 Administrative ServicesAdministrative ServicesAdministrative ServicesAdministrative ServicesAdministrative Services

Group (ASG).Group (ASG).Group (ASG).Group (ASG).Group (ASG). The ASG shall provide therequisite support and ancillary servicesto the organization, with the followingdepartments:

3.3.3.1 Human ResourcesManagement Department

3.3.3.2 Property ManagementDepartment

3.3.3.3 General Services Department

3.4 Abolition of the Office of the SeniorAbolition of the Office of the SeniorAbolition of the Office of the SeniorAbolition of the Office of the SeniorAbolition of the Office of the SeniorDeputy ADeputy ADeputy ADeputy ADeputy Administrdministrdministrdministrdministratoratoratoratorator..... The Office of theSenior Deputy Administrator is herebyabolished and its functions subsumed underthe Office of the Administrator and the DeputyAdministrators for each WDG.

SECTION 4. Staffing PStaffing PStaffing PStaffing PStaffing Patternatternatternatternattern. Within 30days after the issuance of this Order, thestaffing pattern of LWUA shall be submittedto the Department of Budget and Management(DBM) for review and approval.

LWUA is given the flexibility to makechanges in its staffing pattern; Provided, thatthe number of plantilla positions ismaintained; Provided further, that the sameshall be subject to the approval of DBM.

SECTION 5. Options for POptions for POptions for POptions for POptions for Pererererersonnel Whosonnel Whosonnel Whosonnel Whosonnel Who


86

May Be Affected by the Rationalization ofMay Be Affected by the Rationalization ofMay Be Affected by the Rationalization ofMay Be Affected by the Rationalization ofMay Be Affected by the Rationalization ofFunctionsFunctionsFunctionsFunctionsFunctions..... Personnel who may be affected bythe rationalization of functions shall have thefollowing options:

5.1 Remain in government service,provided that their appointments, whetherpermanent or temporary, shall be attested bythe Civil Service Commission (CSC); Providedfurther, that those with temporaryappointments shall be guaranteed tenure upto the expiration of their appointment only, or

5.2 Avail of the retirement/separationbenefits herein provided.

SECTION 6. PPPPPererererersonnel Who Wsonnel Who Wsonnel Who Wsonnel Who Wsonnel Who Would Optould Optould Optould Optould Optto Remain in Government Service.to Remain in Government Service.to Remain in Government Service.to Remain in Government Service.to Remain in Government Service. Affectedpersonnel who would opt to remain ingovernment service shall be either be:

a. placed by the CSC in other agencieswhere additional personnel arerequired;

orb. transferred to CSC, if not placed

within two (2) months, to remaintherein until a match could be found.

Their compensation shall be transferredto the recipient agency or to CSC as the maybe.

Affected LWUA personnel who choose toremain in government service but would laterobject to his/her new job assignment, withoutjustifiable meritorious reasons approved bythe CSC, shall be deemed separated/retiredand shall be paid the appropriate retirement,separation or unemployment under existingretirement/separation laws, without theincentives provided herein.

SECTION 7. Benefits of PBenefits of PBenefits of PBenefits of PBenefits of Pererererersonnel Whosonnel Whosonnel Whosonnel Whosonnel WhoWWWWWould Opt to Retirould Opt to Retirould Opt to Retirould Opt to Retirould Opt to Retire or Be Separe or Be Separe or Be Separe or Be Separe or Be Separated frated frated frated frated fro mo mo mo mo mthe Service.the Service.the Service.the Service.the Service. Affected personnel, withappointments attested by the CSC, whetherhired on a permanent or temporary basis, who

would opt to retire or be separated from theservice pursuant to Section 5 hereof and thosehired on a casual or contractual basis, ifqualified, shall be given the option to availthemselves of any of the following, whicheveris beneficial to them:

7.1 Retirement gratuity provided underRA 1616, as amended, payable by the lastemployer of the affected personnel, plus therefund of retirement premiums payable by theGovernment Service Insurance Service (GSIS),without the incentive herein provided.

7.2 Retirement benefit under RA 660 orapplicable retirement, separation orunemployment benefit under RA 8291, ifqualified, plus the following applicableincentives:

7.2.1 1/2 month of the present basicsalary for every year of governmentservice, for those who have rendered20 years of service and below;

7.2.2 3/4 month of the present basicsalary for every year of governmentservice, computed starting from 1styear, for those who have rendered21-30 years of service; and

7.2.3 one (1) month of the present basicsalary for every year of governmentservice, computed starting from the1st year, for those who haverendered more than 30 years ofservice.For purpose of Section 7.2.1 to

7.2.3, employment for a fraction of ayear shall be considered as employmentfor the whole year.

PROVIDED:PROVIDED:PROVIDED:PROVIDED:PROVIDED: That for the purposeof computing the total amount ofincentive that an affected personnelwould receive, only his/her governmentservice up to age 59 and a fraction thereof


87

would be counted: government servicestarting at the age 60 would no longerbe subject to the incentive herein provided;

PROPROPROPROPROVIDED FURVIDED FURVIDED FURVIDED FURVIDED FURTHER:THER:THER:THER:THER: That for thepurpose of complying with the requirednumber of years of service under RA8291, the portability scheme under RA7699 (An Act Instituting LimitedPortability Scheme in the Social SecurityInsurance Systems by Totalizing theWorkers’ Creditable Services orContributions in Each of the Systems)may be applied, subject to existingpolicies and guidelines;

PROPROPROPROPROVIDED FURVIDED FURVIDED FURVIDED FURVIDED FURTHERMORE: THERMORE: THERMORE: THERMORE: THERMORE: Thaton the day of separation, the GSIS shallpay the amount of retirement/separation/unemployment benefits payable by theGSIS, to which an affected employee maybe entitled to under the provisions of thisOrder, subject to the submission of therequired documents to the GSIS one (1)month before the set date of retirement/separation.

7.3 Those with less than three (3)years of government service may opt toavail of the separation gratuity underRA No. 6656; plus the appropriateincentive provided under Section 7.2.

No affected employee whoopted for retirement/separationshall receive less than an aggregateamount of Fifty Thousand Pesos(P50,000.00) as his retirement/separation gratuity benefit fromboth the National Government andthe GSIS.

SECTION 8. Return bReturn bReturn bReturn bReturn by the GSIS of they the GSIS of they the GSIS of they the GSIS of they the GSIS of theNational Government’s Share in theNational Government’s Share in theNational Government’s Share in theNational Government’s Share in theNational Government’s Share in theRetirement Premiums of Personnel WhoRetirement Premiums of Personnel WhoRetirement Premiums of Personnel WhoRetirement Premiums of Personnel WhoRetirement Premiums of Personnel WhoCannot Avail of RA No. 660 or RA 8291.Cannot Avail of RA No. 660 or RA 8291.Cannot Avail of RA No. 660 or RA 8291.Cannot Avail of RA No. 660 or RA 8291.Cannot Avail of RA No. 660 or RA 8291. -

The GSIS shall return to the NationalGovernment the corresponding share of thegovernment to the retirement premiums, withinterest, of employees who are not yet entitledto avail either RA 660 or RA 8291.

SECTION 9. Other Benefits of RetirOther Benefits of RetirOther Benefits of RetirOther Benefits of RetirOther Benefits of Retired/ed/ed/ed/ed/SeparSeparSeparSeparSeparated Pated Pated Pated Pated Pererererersonnel.sonnel.sonnel.sonnel.sonnel. - LWUA affectedpersonnel who opted to retire or be separatedshall, in addition to the applicable benefitsabove, be entitled to the following:

9.1 Refund of Pag-IBIG Contributions. Allaffected personnel who are members of thePag-IBIG shall be entitled to the refund of theircontributions (both personal and government),pursuant to existing rules and regulations ofthe Home Development Mutual Fund;

9.2 Commutation of Unused Vacationand Sick Leave Credits. All LWUA affectedpersonnel shall be entitled to the commutationof unused vacation and sick leave credits in aaccordance with existing rules and regulations.They are also allowed to monetize theiraccumulated compensatory time-off credits,if any.

SECTION 10. Resulting Staffing PResulting Staffing PResulting Staffing PResulting Staffing PResulting Staffing Patternatternatternatternatternand Pand Pand Pand Pand Pererererersonnel.sonnel.sonnel.sonnel.sonnel. - To ensure that the newrationalized organization is staffed withcompetent and dedicated civil servants, theLWUA Management shall draw up thedeployment of personnel to the new OSSPwith utmost care, subject to all pertinent CivilService rules and regulations. Further, LWUAManagement shall ensure the implementationof appropriate personnel action on affectedemployees in accordance with thecorresponding guidelines as may be issued bythe DBM.

SECTION 11. TTTTTrrrrransition Plan.ansition Plan.ansition Plan.ansition Plan.ansition Plan. - Towardsthe smooth and expeditious implementationof its plan, the LWUA Management shallprepare and implement a step-by-step action


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plan for the transition from the old structureto the new rationalized organization. In thisregard, it shall closely supervise and properlydocument turnover of responsibilities andaccountabilities.

SECTION 12. Funding.Funding.Funding.Funding.Funding. - Funds needed toimplement this rationalization, as well as thepayment of the separation/retirement benefits,not covered by the GSIS, shall be taken fromavailable LWUA corporate funds, subject tothe usual accounting and auditing rules andregulations. In case of funding deficiency, theNational Government may provide assistancein the payment of incentives to affectedpersonnel, in accordance with applicable laws,and subject to the usual accounting andauditing rules and regulations.

SECTION 13. Effectivity of theEffectivity of theEffectivity of theEffectivity of theEffectivity of theRetirement/Separation package.Retirement/Separation package.Retirement/Separation package.Retirement/Separation package.Retirement/Separation package. The optionto avail of the retirement /separation packageshall be available up to two (2) months afterthe DBM approval of the L WUA staffingpattern, provided that such period may beextended only in exceptional circumstancesupon the recommendation of the LWUAAdministrator and approval by the DBM. LWUA shall ensure that there is a smoothtransition from the old to the new rationalizedorganization. Affected employee who optedto avail of the retirement/separation packageshall not be included in the selection andplacement process of employees in the newstaffing pattern. However, they shall not beconsidered retired/separated from the serviceuntil their actual receipt of the benefitsprovided herein.

SECTION 14. PrPrPrPrProhibition on Rehiring ofohibition on Rehiring ofohibition on Rehiring ofohibition on Rehiring ofohibition on Rehiring ofPersonnel Retired/separated from thePersonnel Retired/separated from thePersonnel Retired/separated from thePersonnel Retired/separated from thePersonnel Retired/separated from theService.Service.Service.Service.Service. - A personnel who would opt to retireor be separated as a result of therationalization efforts shall not be appointed

or hired in any agency of of the ExecutiveBranch, except in educational institutions andhospitals, within a period of five (5) years.Reemployment in any other Branch ofGovernment shall be considered as new entryto the civil service.

SECTION 15. Repealing ClauseRepealing ClauseRepealing ClauseRepealing ClauseRepealing Clause..... - Allissuances, order, rules and regulations or partsthereof that are inconsistent with thisExecutive Order are hereby revoked, amendedor modified accordingly.

SECTION 16. . . . . EffectivityEffectivityEffectivityEffectivityEffectivity..... - This ExecutiveOrder shall take effect immediately.

DONE in the City of Manila, this 13thday of April, in the year of our Lord twothousand and five.

By Authority of the President:

(SGD) EDU(SGD) EDU(SGD) EDU(SGD) EDU(SGD) EDUARDO R. ERMITARDO R. ERMITARDO R. ERMITARDO R. ERMITARDO R. ERMITAAAAAExecutive Secretary


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Republika ng PilipinasKAGAWARAN NG KATARUNGAN

Department of JusticeManila

OFFICE OF THE SECRETOFFICE OF THE SECRETOFFICE OF THE SECRETOFFICE OF THE SECRETOFFICE OF THE SECRETARARARARARYYYYY

– Case No. OSJ-2005-03

CCCCCAMARINES NORAMARINES NORAMARINES NORAMARINES NORAMARINES NORTE WTE WTE WTE WTE WAAAAATERTERTERTERTERDISTRICDISTRICDISTRICDISTRICDISTRICT (CNWD),T (CNWD),T (CNWD),T (CNWD),T (CNWD),Petitioner,

-versus-

BUREBUREBUREBUREBUREAAAAAU OF INTERNALU OF INTERNALU OF INTERNALU OF INTERNALU OF INTERNALREVENUE (BIR),REVENUE (BIR),REVENUE (BIR),REVENUE (BIR),REVENUE (BIR),Respondent,

x————————————————-------------------x

D E C I S I O ND E C I S I O ND E C I S I O ND E C I S I O ND E C I S I O N

Subject herein is the petition forArbitration filed by Camarines Norte WaterDistrict (CNWD), through its statutorycounsel, the Office of the GovernmentCorporate Counsel (OGCC) against the Bureauof Internal Revenue (BIR), represented by itsCommissioner, pursuant to Chapter 14, BookV of Executive order (E.O.) No. 292, whichadopted the provisions of P. D. 242 prescribingthe procedure for the administrativesettlement or adjudication of disputes, claimsand controversies between and amonggovernment offices, agencies andinstrumentalities, including government-owned or controlled corporations.

In its Amended Petition, herein petitioner

prays that this Office issue an Order againstrespondent to defer from collecting the allegedtax deficiency amounting to Php9,736,486.17, plus increments as containedin its decision dated April 19, 2005, and that,after proceeding, we render a ruling (a) todeclare that it is not subject to income taxpursuant to Section 32 (B) (7) (b) of theNational Internal Revenue Code (NIRC) of 1997,(b) to declare that it is not subject to franchisetax, or, in the alternative, should it be liablefor franchise tax, it should no longer be liablefor value added tax and (c) to declare that thepetitioner is not liable for payment ofincrements for deficiency income and valueadded taxes for taxable year 2000.

Petitioner alleges, among others, that itseeks from this Office “proper interpretationand application of laws relative to theexemption, or liability, of the petitioner frompayment of income tax, franchise tax, andother internal revenue taxes;” that it is a publicwater utility performing an essentialgovernment function; that its income isexempt from taxes pursuant to Section 32 (B)97) (b) of the Tax Code, as amended; that BIRRuling No. 074-98 has already beensuperseded or abandoned by BIR Ruling Nos.018-2000 and DA-088-2001; that theassessments issued against it is contrary tothe uniformity and equal protection clausesof the Constitution; that P. D. No. 198 is aspecial law that should prevail over the TaxCode which is a general law and that theassessments are contrary to the generalwelfare clause of the constitution and inimicalto public interest.

As alleged in the pleadings, the followingare the background facts relevant to



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petitioner’s claim for exemption from paymentof income tax, franchise tax, value added taxand other deficiency income and value addedtaxes for taxable year 2000:

1. On November 13, 2001, Letter ofAuthority No. 00061324 was issuedauthorizing and directing RevenueOfficer Romulo C. Baguid of RevenueDistrict Office 64, Daet, CamarinesNorte, to examine the books ofaccounts and other accountingrecords of CNWD for all internalrevenue tax purposes covering thetaxable year 2000.

2. As a result, it was determined thatCNWD is liable to deficiency incomeand value added taxes for the sameyear.

3. On February 3, 2003, a PreliminaryAssessment Notice was issuedfollowed by a Formal Letter of Demandand the corresponding FinalAssessment Notices on July 3, 2003,against CNWD demanding paymentallegedly of the total amount ofP9,736,486.17.

4. CNWD disputed the assessments andon August 26, 2003, the BIR renderedas decision denying the protest ofCNWD.

5. On November 11, 2003, CNWD,through the OGCC, filed a request forreconsideration and on April 19, 2005,the Commissioner of Internal Revenuedenied with finality the protest ofCNWD and consequently orderedCNWD to pay the aggregate amount

allegedly of P9,734,486.17 asdeficiency income and value addedtaxes for taxable year 2000, plusincrements that have accrued thereonuntil the actual date of payment.

6. On May 25, 2005, the petitionerelevated the matter to this Office asto the proper interpretation or thecorrectness of ruling of theCommissioner of Internal Revenue.

In its Answer, dated October 20, 2005,which was filed beyond the reglementaryperiod of fifteen (15) days to file an answer,the respondent specifically denies the natureof this petition and prays for the dismissal ofthis petition for lack of merit.

Respondent avers that petitioner seeksto dispute the decision rendered by respondenton its protest against the assessments issuedby it. It submits that this Office lacksjurisdiction to take cognizance of its decisionon disputed assessments; that it is the Courtof Tax Appeals that has jurisdiction; that theappellate jurisdiction of the Court of TaxAppeals is exclusive; and that the power tointerpret the provisions of the Tax Code iswith the respondent and this interpretationis subject to review by the Secretary ofFinance and not by the Secretary of Justice.

Respondent also contends that when R.A. No. 7109, entitled “An Act Granting TaxExemption Privileges to Local WaterDistricts,” took effect, it expresslyextinguished the tax exemption privileges ofpetitioner after the lapse of five (5) years fromits effectivity thereby making CNWD liablefor income and franchise taxes.


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Respondent further argues that in orderfor the petitioner to be exempt under section32 (B) (7) (b) of the Tax Code two conditionsshould be met: (1) the income derived must befrom a public utility or from the exercise ofany essential government function, and (2)the income must accrue to the Government ofthe Philippines or to any political subdivisionthereof; and that failure to satisfy both twoconditions makes the petitioner liable.

Finally, respondent argues, amongothers, that petitioner cannot contend that itis performing government functions when thelaw creating it states that it is engaged in aproprietary functions; that its exemptionprivilege cannot hinge on previous BIRRulings; and that local water districts havedifferent charters and are governed bydifferent laws.

By way of reply to the respondent’sAnswer, petitioner maintains that this Officehas jurisdiction over the instant case; thatrespondent is estopped from assailing thejurisdiction of this Office; and that petitionersatisfies the requirements of Section 32 (B)(7) (b) of the Tax Code.

No amicable settlement having beenreached during the preliminary conference, theinstant petition, on motion of petitioner, dulyconcurred in by the respondent, wasconsidered submitted for resolution based onthe pleadings and memoranda to be filed withthis Office. However, while petitionersubmitted its Memorandum, the respondentfailed to submit any.

Petitioner reiterated in its position paperthat this Office has jurisdiction over theinstant case; that respondent is estopped

from assailing the jurisdiction of this Officeand that it complies with the requirementsfor exemption under section 32 (B) (7) (b) ofthe Tax Code.

We find for the petitioner.

It bears stress, at the outset, that whileon its face, it appears that the instant petitionwas brought up to question the validity ofthe disputed assessment made by therespondent against CNWD, the petitionerherein, there is also here, in fact and on closerscrutiny, a question of law involved, i.e., theproper interpretation of Section (B) (7) (b) ofthe NIRC of 1997, and both parties haveconflicting interpretations thereof requiring,therefore, this Office to interpret the samepursuant to its authority under Section 66and 68, Chapter 14, Book IV of E. O. No. 292,to wit:

“Chapter 14 – Controversies amongGovernment Offices and Corporations

Sec. 66. How Settled. – All disputes,claims and controversies, solely betweenor among the departments, bureaus,office, agencies and instrumentalities ofthe National Government, includinggovernment-owned or controlledcorporations, such as those arising fromthe interpretation and application ofstatutes, contracts or agreements, shallbe administratively settled oradjudicated in the manner provided inthis Chapter. xxx

xxx xxx

Sec. 68. Disputes InvolvingQuestions of Fact and Law. – C ases


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involving mixes questions of law and offact or only factual issues shall besubmitted to and settled or adjudicatedby:

The Solicitor General, if the dispute,claim or controversy involves onlydepartments, bureaus, offices and otheragencies of the National Government aswell as government-owned or controlledcorporations or entities of whom he isthe principal law officer or generalcounsel; and

The Secretary of Justice in all othercases not falling under paragraph (1).”(underscoring supplied)

The jurisdiction of this Department overthe case cannot, thus, be disputed.

Moreover, assuming, argumentatively,that the provisions of E. O. No. 292, earlier-quoted, do not apply, this Office can stillassume jurisdiction over the case based onthe principle of estoppel. Respondent, it mustbe noted, had, on at leat one occasion, whichwe take judicial notice of, involving the sameissues that have been raised in the instantcase, assailed the jurisdiction of the Court ofTax Appeals (CTA) and claimed that since thepetitioner MCWD is a government-owned andcontrolled corporation, the dispute should besettled in accordance with the provisions ofChapter 14, Book IV of the AdministrativeCode of 1987. As a result thereof, CTAdismissed the petition for review in order tobe filed before this Office.

“The operation of the principle ofestoppel on the question of jurisdictionseemingly depends upon whether the lower

court actually had jurisdiction or not. If ithad no jurisdiction but the case was triedand decided upon the theory that it hadjurisdiction, the parties are not barred, onappeal, from assailing such jurisdiction, forthe same ‘must exist as a matter of law, andmay not be conferred by consent of the partiesor by estoppel’ (5C.J.S. 861-863). However, ifthe lower court had jurisdiction, and the casewas heard and decided upon a given theory,such, for instance, as the court had nojurisdiction, the party who induced it to adoptsuch theory will not be permitted, on appeal,to assume an inconsistent position-that thelower court had jurisdiction. Here, the principleof estoppel applies. The rule that jurisdictionis conferred by law, and does not depend uponthe will of the parties, have no bearingthereon. (underscoring supplied)

Respondent, is therefore, estopped fromassailing the jurisdiction of this Office. It doesnot matter if it is a rule that government isnever estopped by the mistakes or errors ofits agents. The rationale is because certainaffirmative acts of public officials may giverise to estoppel, as what happened in thiscase.

Going now to the merits of the case, thesubject provision of the National InternalRevenue Code, insofar as pertinent, is clearand categorical:

“SEC. 32. Gross Income. –

xx xx

(B) Exclusion from Gross Income.– The following items shall not beincluded in gross income and shall beexempt form taxation under this Title:


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xx xx

Miscellaneous Items. –

xx xx

Income Derived by theGovernment or its PoliticalSubdivisions. – Income derived fromany public utility or from the exerciseof any essential governmentalfunction accruing to the Governmentof the Philippines or to any politicalsubdivision thereof.”

It is a basic rule in statutoryinterpretation that when the words andphrases of a statute are clear and unequivocal,their meaning must be determined from thelanguage employed and the statute must betaken to mean exactly what it says. Theprobable intent cannot be speculated apartfrom the language used because when thelaw is clear, it is not susceptible tointerpretation-only to application.

A careful perusal of Section 32(B) (7) ofthe NIRC, above-quoted, shows that incomederived (a) from any public utility and thatderived (b) from the exercise of any essentialgovernment function accruing to theGovernment of the Philippines or to anypolitical subdivision thereof are two differentitems which shall not be included in grossincome and shall be exempt from taxationunder the law. The subject NIRC provision isclear enough as to require an interpretation.

Cconsequently, if the GOCC, as thepetitioner herein, derives income from itsoperation as a public utility, the income isexcluded from gross income, irrespective of

whether or not said income accrued to theGovernment of the Philippines or to anypolitical subdivision thereof. But if theincomewas derived from the exercise of any essentialgovernment function, the above-quotedprovision requires that the income mustaccrue to the government or any of its politicalsubdivision for it to be excluded from grossincome.

The exemption in the first case isjustified by its nature as a public utility. Apublic utility has been defined as “1. acompany that provides necessary services tothe public, such as telephone lines and service,electricity, and water, xxx, 2. a person,corporation or other association that carrieson an enterprise for the accommodation ofthe publice, the members of which are entitledas a matter of right to use its facilities.”Likewise, the Supreme Court, in one case, hashad occasion to define a public utility as oneorganized for “hire or compensation” to servethe public, which is given the right to demandits service.

Indeed, the income of the petitioner fallsunder the first category of income that isexempt from taxation having derived the samefrom its operation as a public utility thatrenders necessary services to the public, andwhich status had even been recognized andacknowledged by the respondent, albeitimpliedly and indirectly, when, in its ruling,respondent admitted that local water districtsare public utilities.

Upon the other hand, the other exemptionis justified by the fact that the income resultsfrom the exercise of an essential governmentfunction and accrues to the government or its


94

political subdivision. In both instances, acontrary view would also be opposed to therule that, generally, the government cannottax itself for to do so would not be beneficialto the government.

We cannot subscribe to the positionadvanced by the respondent that in order tosatisfy the requirements of said provision oflaw two conditions should be met, namely,(1) the income derived must be from a publicutility or from the exercise of any essentialgovernment function, and (2) the income mustaccrue to the Government of the Philippinesor to any political subdivision thereof, notonly because the law is clear enough torequire an interpretation but also because ofthe use of the disjunctive article “or’.

In statutory construction, the use of theword “or” signifies “alternative”,“dissatisfaction” and “independence” of onething from each of the other thingsenumerated. When used, the various membersof the sentence are to be taken separately.This must be distinguished from the use ofthe conjunctive word “and” which, when used,connotes that the various members of asentence are to be taken jointly. Thus, wecannot but agree more with the petitioner’sclaim that the phrase “accruing to theGovernment of the Philippine or to anypolitical subdivision thereof ” only qualifiesthe income from the exercise of any essentialgovernment function to which it is attachedand does not qualify the income derived froma public utility.

Moreover, anent the section heading ofSection 32 (B) (7) (b), suffice it to say thatwhile the same can be resorted to in the

construction of statutes to determine orascertain legislative intent, the same is notconclusive. In the language of the SupremeCourt:

It is a familiar law that when thetext itself of a statute or a treaty isclear and unambiguous, there is neithernecessity nor propriety in resorting tothe preamble or headings or epigraphsof a section for interpretation of thetext, especially where such epigraphsor headings of sections are merecatchwords or reference aids indicatingthe general nature of the test thatfollows. Xxx Being nothing more than aconvenient index to the contents of thearticles of the Code, they cannot in anyevent have the effect of modifying orlimiting the unabiguous words of thetext. Secondary aids may be consultedto remove, not to create doubt.

Neither are we prepared to subscribe torespondent’s claim that since under Section3 of R.A. No. 7109, the tax exemption privilegesgranted to “all water districts shall be enjoyedonly for a period of five (5) years from theeffectivity of (the) Act,” “all LWD’s, such asherein peitioner, became liable for income andfranchise taxes,” among others.

It must be stressed that while in its rulingin Tanjay Water District vs. Gabaton, 172SCRA 253, dated April 17, 1989, the SupremeCourt, citing Hagonoy Water District vs.NLRC, said’ that local water districts arequasi-public corporations, in Davao CityWater District vs. Civil Service Commission,201 SCRA 593, it categorically stated thatwater districts are “government-owned or


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controlled corporations created under aspecial law and not under the CorporationCode of the Philippines.” As the Courtexplicityly expounded in the much later caseof Felicianbo vs. Commission on Audit, 419SCRA 3673, quoting Section 16, Article XII ofthe Constitution:

“In short, Congress cannot enact a lawcreating a private corporation with a specialcharter. Such legislation would beunconstitutional. Private corporations mayexist only under a general law. If thecorporation is private, it must necessarilyexist under a general law. Stated differently,only corporations created under a general lawcan qualify as private corporations. Underexisting laws, that general law is theCorporation Code, except that the CooperativeCode governs the incorporation ofcooperatives.

The Constitution authorizes Congress tocreate government-owned or controlledcorporations through special charters. Sinceprivate corporations cannot have specialcharters, it follows that Congress can createcorporations with special charters only if suchcorporations are government-owned orcontrolled.

Obviously, LWDs are not privatecorporations because they are not createdunder the Corporation Code. xxx.

At this point, it may significant to pointout that while, as rightfully interpreted bythe respondent in its Ruling No. 074-98, underSection 27 (c) of the NIRC, which states that–

“Sec. 27 xxx

(c) Government-owned orControlled Corporations, Agencies orInstrumentalities-The provisions ofexisting special or general laws to thecontrary not withstanding, allcorporations, agencies orinstrumentalities owned or controlled bythe Government, except the GovernmentService Insurance System (GSIS), theSocial Secutiry System (SSS), thePhilippine Health Insurance (PHIC), thePhilippine Charity Sweepstakes Office(PCSO), and the Philippine Amusementand Gaming Corporation (PAGCOR),shallpay such rate of tax upon theirtaxable income as are imposed by thisSectio upon corporations or associationsengaged in similar business, industry oractivity.”

only five (5) corporations, namely GSIS,SSS, PHIC, PCSO and PAGCOR are exemptedfrom the payment of regular corporate incometax, this Office has occasion to rule that theenumeration under the law is not exclusive.In fact, respondent impliedly agreed with ourview when it issued BIR Ruling No. 018-2000,dated January 20, 2000, declaring that theincome of the National Power Corporation(NPC), a government-owned or controlledcorporation at the same time a public utilityengaged in the supply of electricity, isexempted from income tax pursuant to Section32 (B) (7) (b) of the Tax Code, and BIR RulingNo. DA 088, dated May 16, 2001, declaringthat MWSS, a government-owned publicutility, is equally exempted from income taxpursuant to the same section.

We feel that it is timely at this point intime to set the record straight, that water


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districts all over the country must be declaredas exempt from tax as they are no differencefrom MWSS that is engaged in the supply ofpotable drinking water to the public in MetroManila.

To rule otherwise violates the equalprotection of the laws. The phrase equalprotection of the laws signifies that “allpersons subject to legislation shall be treatedalike under like circumstances and conditionsboth in the privileges conferred and liabilitiesimposed.”

We do not see rational basis in exemptingPAGCOR and PCSO vis-a-vis MWSS and WaterDistricts from income tax where one proceedsfrom gambling while the other proceeds frombasic necessity. This could be the reason whythe respondent find it wise to exempt MWSSand NAPOCOR in its ruling by breeching thenon-exclusivity of Section 27(c) of the NIRC.If respondent can exempt MWSS there is noreason why it cannot exempt the waterdistricts all over the country. There is noreason why a huge company can be exemptwhile a small entity cannot be exempt.

On the issue of Franchise Tax and Value-Added Tax, Section 119, of the Tax code of1997 provides that:

“Sec. 119. Tax on Franchises.Any provision of general or speciallaw to the contrary notwithstanding, there shall levied,assessed and collected in respect toall franchises on radio and/ortelevision broadcasting companieswhose annual gross receipts of thepreceding year does not exceed Ten

Million pesos (P10,000,000.00),subject Section 236 of this code, atax of three percent (3%) and onelectric, gas and water utilities, a taxof two percent (2%) on the grossreceipts derived from the businesscovered by the law granting thefranchise: xxx”

It is clear from the above provision thatthe CNWD is liable for Franchise Tax of twopercent (2%) of its gross receipts, howeversince it is now subject to franchise tax, theyare exempt from VAT on their services thatare already subject to franchise.

WHEREFORE, premises considered,CNWD is declared exempt from payment ofincome tax as an exclusion from gross income,liable for payment of franchise tax but exemptfrom VAT and all other increments thereto.

With respect to the prayer of thepetitioner that this Office issue a Cease andDesist Order against respondent to defer fromcollecting the amount of Php 9,736,486.17the same is hereby GRANTED.

No costs.

SO ORDERED.

Manila, Philippines, March 20, 2006-05-29

(Sgd) RARARARARAUL M. GONZALUL M. GONZALUL M. GONZALUL M. GONZALUL M. GONZALESESESESES Secretary


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