Download - PD 198 (Revised 2010)

amended pd 198 and other related issuances

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table of contentstable of contentstable of contentstable of contentstable of contentsSECTION 1

Presidential Decree No. 198 4zzzzz Local Water District Law 7zzzzz Local Water Utilities 1 7

Administration LawSECTION 2

Presidential Decree No. 768 2 6SECTION 3

Letter of Instructions No. 683 37SECTION 4


Presidential Decree No.1479 41SECTION 6


Executive Order No. 68 46SECTION 8

Supreme Court Ruling on Water 47Districts as Government Ownedand Controlled Corporations

SECTION 9Executive Order No. 286 59

SECTION 10Republic Act No. 9286 65

SECTION 11Executive Order No. 279 67Implementing Rules & Regulationsof Executive Order No. 279



SECTION 14Department of Justice Ruling 91on Water District Tax Exemption



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amended presidential decree no. 198and other related issuances

Note: For the users guidance, all amendments in this new edition of PresidentialDecree No. 198 manual are printed in gray.


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sectionsectionsectionsectionsection 1

MALACAANGMANILA

PRESIDENTIAL DECREE NO. 198(As amended by Presidential Decree Nos. 768 and 1479, R.A. 9286)

DECLARING A NATIONAL POLICY FAVORING LOCAL OPERATION AND

CONTROL OF WATER SYSTEMS; AUTHORIZING THE FORMATION OF LOCAL

WATER DISTRICTS AND PROVIDING FOR THE GOVERNMENT AND

ADMINISTRATION OF SUCH DISTRICTS; CHARTERING A NATIONAL

ADMINISTRATION TO FACILITATE IMPROVEMENT OF LOCAL WATER

UTILITIES; GRANTING SAID ADMINISTRATION SUCH POWERS AS ARE

NECESSARY TO OPTIMIZE PUBLIC SERVICE FROM WATER UTILITY

OPERATIONS, AND FOR OTHER PURPOSES:


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RARARARARATIONALETIONALETIONALETIONALETIONALE

TITLE ITITLE ITITLE ITITLE ITITLE I

PRELIMINARY PROVISIONS

WHEREAS, one of the pre-requisites tothe orderly and well-balanced growth orurban areas is an effective system of localutilities, the absence of which is recognizedas a deterrent to economic growth, a hazardto public health and an irritant to the spiritand well-being of the citizenry;

WHEREAS, domestic water systems andsanitary sewers are two of the most basicand essential elements of local utility systems,which, with a few exceptions, do not exist inprovincial areas in the Philippines;

WHEREAS, existing domestic waterutilities are not meeting the needs of thecommunities they serve; water quality isunsatisfactory; pressure is inadequate; andreliability of service is poor, in fact, manypersons receive no piped water servicewhatsoever;

WHEREAS, conditions of service continueto worsen for two (2) apparent reasons,namely: (1) that key elements of existingsystems are deteriorating faster than they arebeing maintained or replaced, and (2) that theyare not being expanded at a rate sufficient tomatch population growth; and

WHEREAS, local water utilities shouldbe locally-controlled and managed, as well ashave support on the national level in the areaof technical advisory services and financing;

NOW, THEREFORE, I, FERDINAND E.MARCOS, President of the Philippines, by virtueof the powers vested in me by theConstitution, as Commander-in-Chief of allthe Armed Forces of the Philippines, andpursuant to Proclamation No. 1081 datedSeptember 21, 1972 and General Order No. 1dated September 22, 1972, as amended, do

hereby decree, order and make as part of thelaw of the land the following measure:

SECTION 1. Title. - This Decree shall beknown and referred to as the Provincial WaterUtilities Act of 1973.

SEC. 2. Declaration of Policy. - Thecreation, operation, maintenance andexpansion of reliable and economically viableand sound water supply and wastewaterdisposal systems for population centers ofthe Philippines is 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 districts isfound and declared to be the most feasibleand favored institutional structure. To thisend, it is hereby declared to be in the nationalinterest that said district be formed and thatlocal water supply and wastewater disposalsystems to be operated by and through suchdistricts to the greatest extent practicable. Toencourage the formulation of such local waterdistricts and the transfer thereto of existingwater supply and wastewater disposalfacilities, this Decree provides by general actthe authority for the formation thereof, on alocal option basis. It is likewise declaredappropriate, necessary and advisable that allfunding requirement for such local watersystems, other than those provided by localrevenues, should be channeled through andadministered by an institution on the nationallevel, which institution shall be responsiblefor and have authority to promulgate and


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enforce certain rules and regulations to achievenational goals and the objective of providingpublic waterworks services to the greatestnumber at least cost, to offset systemintegration 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. - 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 of its variants.

(a) Act. - This Provincial Water UtilitiesAct of 1973.

(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 ofthat 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 province areincluded within the boundary of the district,and the appointing authority is to be the

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. (As amended bySec. 1, PD 768)

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

(d) NEDA. - The National Economicand Development Authority. (Note: Thisparagraph should properly have been deleted).

(e) Board or Board of Directors. - Theboard of directors of a district.

(f) Contracts. - All agreements,including leases, conveyances and obligations.

(g) District. - A local water districtformed pursuant to Title II of this Act.

(h) Local Water Utility. - Any district,city, municipality, province, investor-ownedpublic utility or cooperative corporation whichowns or operates a water system serving anurban center in the Philippines, except thatsaid term shall not include the MetropolitanWaterworks and Sewerage System (MWSS)or any system operated by the Bureau ofPublic Works as successor to the Wells andSprings Department of the NationalWaterworks and Sewerage Authority.

(i) Person. - A natural person,corporation, cooperative, partnership,association, city, municipality or otherjuridical entity.

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

(k) Street. - Includes road, valley,avenue, highway or other public way.

(l) Trustees or Board of Trustees. -The Board of Trustees of the Administration.


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TITLE IITITLE IITITLE IITITLE IITITLE II

LOCAL WATER DISTRICT LAW

CHAPTER I TitleSEC. 4. Title. The provisions of this

Title shall be known and referred to as theLocal Water District Law.

CHAPTER II Purpose and FormationSEC. 5. Purpose. - Local water districts

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 resource development, utilization anddisposal within such districts, as are necessaryor incidental to said purpose.

SEC. 6. Formation of District. - ThisAct is the source of authorization and powerto form and maintain a district. For purposesof this 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. To form a district,the legislative body of any city, municipalityor province shall enact a resolution containingthe 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 said system, followed by the wordsWater 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 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. (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. 2,PD 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 thirdeven-numbered year after assuming office, asset forth 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.

(g) A statement acknowledging thepowers, rights and obligations as set forth inSection 36 of this Title.

Nothing in the resolution of formationshall 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 or


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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. (Asamended by Sec. 2, PD 768)

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 foundby the Administration to conform to therequirements 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 filing stamp of the Administrationshall be maintained in the office of the district.Upon such filing, the local government orgovernments concerned shall lose ownership,supervision and control or any rightwhatsoever over the district except as providedherein. (As amended by Sec. 3, PD 768)

CHAPTER III - DirectorsSEC. 8. Number and Qualifications. -

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 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 womens organizations. Nopublic officials shall serve as director.

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. (As amended by Sec. 4, PD 768;Sec. 2, PD 1479)

SEC. 9. Appointment. - Board membersshall be appointed by the appointingauthority. Said appointments shall be madefrom a list of nominees, if any, submittedpursuant to Section 10. If no nominations aresubmitted, the appointing authority shallappoint any qualified person of the categoryto the vacant position.

SEC. 10. Nominations. - 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 such organization to the secretary of thedistrict on or before November 1 of such year.This list of nominees shall be transmitted bythe Secretary of the district to the office ofthe appointing authority on or beforeNovember 15 of such year and he shall makehis 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 the


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board 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 therefromwithin 15 days after receipt of suchnominations.

SEC. 11. Term of Office. - Of the fiveinitial directors of each newly-formed district,two shall be appointed for a maximum termof two years, two for a maximum term offour years, and one for a maximum term ofsix years. Terms of office of all directors in agiven district shall be such that the term of atleast one director, but not more than two,shall expire on December 31 of each even-numbered year. Regular terms of office afterinitial terms shall be for six years commencingon January 1 of odd-numbered years.Directors may be removed for cause only,subject to review and approval of theAdministration. (As amended by Sec. 5, PD768)

SEC. 12. Vacancies. - In the event of avacancy in the board of directors occurringmore than six months before expiration of anydirectors term, the remaining directors shall,within 30 days, serve notice or request thesecretary of the district for nominations andwithin 30 days thereafter 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 30

days 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. 6, PD 768)

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.

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 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. Personal Liability. Nodirector may be held to be personally liablefor any action of the district.

CHAPTER IV The BoardSEC. 15. Organizational Meeting. - The

board shall hold its first meeting as soon aspracticable 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 year, 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 secretary and


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treasurer may be held by the same person.SEC. 16. Quorum. - A majority of the

board 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 V Powers and Duties of BoardSEC. 17. Performance of District

Powers. - All powers, privileges, and dutiesof the 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 Policy-Making. - The function of the board shall beto establish policy. The board shall not engagein the detailed management of the district.

SEC. 19. By-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 BusinessAdministration. - The Board shall, as soonas practicable, prescribe and define byresolution a system of business administrationand accounting for the district, which shallbe patterned upon and conform to thestandards established by the Administration.Auditing shall be performed by a certifiedpublic accountant not in the governmentservice. The Administration may, however,conduct annual audits of the fiscal operations

of the district to be performed by an auditorretained by the Administration. Expensesincurred in connection therewith shall be borneequally by the water district concerned andthe Administration. (As amended by Sec. 8,PD 768)

SEC. 21. Depository. - The districtsdepository shall be the Philippine NationalBank, unless use of such bank is impractical:Provided, however, That any and all reservesaccumulated for capital improvements maybe deposited with the Administration.

SEC. 22. Contracts. - All contracts ofthe district shall be entered into by or pursuantto authority of the board: Provided, however,That the board may be resolution delegateand redelegate to officers or agents of thedistricts, under such conditions andrestrictions as shall be fixed by the board, thepower to bind the district by contract.

CHAPTER VI- Officers and EmployeesSEC. 23. The General 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;R. A. 9286)

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 thedistrict: Provided, That the appointment ofpersonnel in the supervisory level shall be


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subject to approval by the board. (As amendedby Sec. 10, PD 768)

CHAPTER VII Powers of DistrictSEC. 25. Authorization. - The

district may exercise all the powers which areexpressly granted by this Title or which arenecessarily implied from, or incidental to thepowers and purposes herein stated. For thepurpose of carrying out the objectives of thisAct, a district is hereby granted the power ofeminent domain, the exercise thereof shall,however, be subject to review by theAdministration. (As amended by Sec. 4, PD1479)

SEC. 26. Acquisition ofWaterworks. - A district may purchase,construct, or otherwise acquire works, water,water rights, land, rights and privileges usefulor necessary to convey, supply, store, collect,treat, dispose of or make other use of waterfor any purpose authorized by this Title. Inthe acquisition of water or water rights thedistrict shall cooperate with existing agenciesof the government of the Philippines. (Asamended by Sec. 5, PD 1479)

SEC. 27. Sale of Water. - The districtshall have the power to sell water, pursuantto generally applicable rules and regulations,to any 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 regular

domestic 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 successor. (Asamended by Sec. 5, PD 1479)

SEC. 28. 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 servicesoutside 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 require allbuildings used by human beings to beconnected to the sewer system within suchreasonable time 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 districts sewer system. After due noticethereof and refusal on the part of the propertyowner to so connect with the districts sewersystem, the district may declare the furthermaintenance or use of cesspools, septic tanks,or other local means of sewerage disposal insuch area to be a public nuisance and, afternotice in writing of at least 10 days, deprivesaid property owner of any and all servicesprovided by the district, which sanction maybe co-extensive with the period during whichthe property owner persists in refusing toconnect with the districts sewer system. (Asamended by Sec. 5, PD 1479)

SEC. 29. Rights of Way. - The rightof way is hereby granted to locate, constructand maintain works of the district on any


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land 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 any mannerwhich will afford security for life and property:Provided, That in planning any such works,the environmental aspects shall also beconsidered. (As amended by Sec. 5, PD 1479)

SEC. 30. Contracts. - A district shallhave the power to enter into contracts withany person for the purpose of performing anyfunctions 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 withthe Government of the Philippines or any ofits agencies or political subdivisions for thecooperative or joint performance of anyfunction of the district.

(b ) In-Lieu Share. As an incident tothe acquisition of the existing water systemof a city, municipality, or province, a districtmay enter into a contract to pay in-lieu sharefor such utility plant, an annual amount notexceeding three percent (3%) of the districtsgross 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. (As amended by Sec. 11,PD 768; Sec. 5, PD 1479)

(c) MWSS Agreement. - In the event

the city, municipality or province has notreached agreement with the MetropolitanWaterworks and Sewerage System pursuantto Section 15 and 17 of R. A. 6234, a districtmay, with the consent of the local government,act for and 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. Protection of Watersand Facilities of District. - A districtshall have the right 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 thedistricts 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 of


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this 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 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. Fire Protection Capacity.- The district may install and maintain pipeline

capacity 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 Financial ProvisionsSEC. 33. Receipt, Deposit and

Payment of District Funds. - Thetreasurer shall receive, to the credit of thedistrict and in trust for its use and benefit, allmonies belonging to the district. All moniesbelonging to the District shall, wherepracticable, be deposited by the treasurer inthe Philippine National Bank. (As amendedby Sec. 13, PD 768; Sec. 7, PD 1479)

SEC. 34. Bonds or Other Evidenceof Indebtedness. - A district may borrowmoney to raise funds to pay all cost of anypublic improvements authorized by this Titleand may 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 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.(As amended by Sec. 14 and 15, PD 768; Sec.7, PD 1479)

SEC. 35. Authority for SubsequentBorrowings. - Where a water district has


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borrowed money from the Administration, thedistrict shall not borrow money or incurfurther obligations from other sources withoutthe prior written consent of theAdministration. (As amended by 16, PD 768;Sec. 7, PD 1479)

SEC. 36. Default. - In the event ofthe default 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. (As amendedby 16, PD 768; Sec. 7, PD 1479)

CHAPTER IX - RevenuesSEC. 37. Rates and Charges. -

Water. - A district may sell water under itscontrol, under schedules of rates and chargesas may be determined by the Board, to anyand all water users within the district. Saidschedule may provide for differential rates fordifferent categories of use and differentquantity blocks. The district, as far aspracticable, shall fix such rates and chargesfor water as will result in revenues which will:

(a) Provide for reimbursement from all

new 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-byCharges Sewer. - A district may prescribeand collect rates and other charges for sewerservices furnished. A district may also fix,levy and collect a sewerage and wastewaterservice stand-by or availability charge in theevent sewer service is available and noconnection 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 Assessment.- In the event the board of a district finds,after notice and hearing, that production ofgroundwater by other entities within thedistrict for commercial or industrial uses ininjuring or reducing the districts financialcondition, the board may adopt and levy agroundwater production assessment to


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compensate for such loss. In connectiontherewith, the district may 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 Section32 of this Title. (As amended by Sec. 18, PD768; Sec. 7, PD 1479)

SEC. 40. Assessment and Stand-By Charges. - In order to obtain capital tofinance installation of sanitary sewerage, adistrict shall have the power to establish byresolution of the board of directors the areato be benefited from such facilities. After ahearing and upon notice to all parties affected,the district may levy and collect assessment,or stand-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 fronting 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 Income.The income 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 reserve

exclusively for expansion and improvement ofits physical facilities. (As amended by Sec. 8,PD 1479)

CHAPTER X - Changes in OrganizationSEC. 42. Exclusion of a Territory.

- Any territory within the boundary of districtmay be excluded by resolution of the board ofdirectors after notice to land owners 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 theprovisions applicable to the resolution formingthe district. (As amended by Sec. 18, PD 768)

SEC. 43. Annexations andDeannexations. - The Administration may,after notice to property owners within theterritory proposed for annexation ordeannexation, and following a hearing, makefindings of benefit or potential benefit, andthereafter, require annexation or deannexationshall be accomplished by adoption and filingof an appropriate resolution in the samemanner as the filing of the resolution forminga district or of exclusion, as the case may be.(As amended by Sec. 18, PD 768)

SEC. 44. Consolidation and JointOperation. - The Administration may requirethe merger or consolidation of the facilities oroperations of two or more districts 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. - A districtmay be dissolved by resolution of its board of


16

directors 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 Sec. 19, PD768)

CHAPTER XI - Protection to DistrictsSEC. 46. Exemption from Taxes. -

A district shall (1) be exempt from payingincome taxes, and (2) shall be exempt fromthe payment of (a) all National Government,local government and municipal taxes andfees, including any franchise, filing,recordation, license or permit fees or taxesand any fees, charges or costs involved in anycourt of administrative proceeding in which itmay be a party and (b) all duties or impostson imported machinery, equipment andmaterials required for its operations. (Asamended by Sec. 20, PD 768)

*SEC. 47. Exclusive Franchise. -No franchise shall be granted to any otherperson or 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)

* See Metropolitan Cebu Water District vs. Margarita Adala (G.R. No. 168914, July 4, 2007) declaring as unconstitutional Section 47of PD 198, as amended.


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TITLE IIITITLE IIITITLE IIITITLE IIITITLE III

LOCAL WATER UTILITIESADMINISTRATION LAW

CHAPTER I TitleSEC. 48. Title. - This Title of the

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

CHAPTER II Charter and Purpose*SEC. 49. Charter. - 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 . - TheAdministration shall primarily be a specializedlending institution for the promotion,development and financing of local waterutilities. In the implementation of itsfunctions, the Administration shall, amongothers: (1) prescribe minimum standards andregulations in order to assure acceptablestandards of construction materials andsupplies, maintenance, operation, personneltraining, accounting and fiscal practices forlocal water utilities; (2) furnish technicalassistance and personnel training programsfor local water utilities; (3) monitor andevaluate local water standards; and (4) effectsystem integration, joint investment and

operation, district annexation anddeannexation whenever economicallywarranted. (As amended by Sec. 22, PD 768)

CHAPTER III - Board of TrusteesSEC. 51. 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 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. (As amended by Sec.23, PD 768)

SEC. 52. Appointment and Termof Office. - The trustees, with 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 amendmentshall continue to hold such office until theexpiration of their original terms as defined in

* EO 738 dated July 14, 2008, transferred LWUA from DPWH toDOH, giving DOH administrative supervision over LWUA


18

their appointments. (As amended by Sec. 24,PD 768)

SEC. 53. Vacancies. - Vacancies inthe Board of Trustees for any reasonwhatsoever shall be filled by the President ofthe Philippines 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. Powers. - 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 Sec. 25, PD 768)

SEC. 55. Compensation . - TheTrustees shall each receive a per diem as maybe fixed by 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 hundredpesos per meeting shall be subject to 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 amount as may bedetermined by the Board of Trustees. (Asamended by Sec. 26, PD 768)

CHAPTER IV By-LawsSEC. 56. By-Laws. - The Board of

Trustees 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 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 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. (Asamended by Sec. 26, PD 768)

CHAPTER V - Officers and EmployeesSEC. 57. 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 Administrator andOther Employees. - 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. (per E. O. 68 dated11-21-86)

The incumbent manager holding officeas such upon the effectivity of this amendmentshall continue to hold such office unless soonerterminated by competent authority. (As


19

amended by Sec. 29, PD 768)The regular professional and technical

personnel 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 VI - PowersSEC. 59. General Corporate Powers.

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

SEC. 60. Borrowing and SecurityTherefor. - The Administration may borrowfunds as authorized in Section 72 of this Title,and issue as security therefor 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. (As amended bySec. 30, PD 768)

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

(a) Qualification of Borrower . -Before any loan may be granted, the localwater utility shall (1) hold a valid certificateof conformance or a conditional certificate ofCompliance from the Administration, and (2)meet such other and further loan qualificationrequirements as the trustees may establish;

(b) Feasibility Study. A feasibilitystudy which may be required by the

Administration for any proposed project forwhich loan funds are sought may beundertaken by the water district, theAdministration or by a consultant prequalifiedby the Administration; (As amended 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 andProcedures. - The Board of Trustees shalladopt rules, loan documents and proceduresto be used in the granting of loans. Suchrules shall include provisions 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 ofprincipal 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 have


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been met. (As amended by Sec. 31, PD 768)(f) Funding of Loan. - When a loan is

made to local water utility, the necessaryamount of such loan shall be programmed toassure completion of the project for whichsuch loan was granted. (As amended by Sec.10, PD 1479)

SEC. 62. Regulations. -Administration shall have the power and dutyto establish standards for local water utilitiesand adopt rules and regulations for theenforcement thereof. The Administration shallvigorously consult and coordinate its actionswith all government agencies active in theareas of public works and all other concernedagencies in the promulgation of thesestandards. Said standards and regulationsshall include the following:

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

(b) Design and Construction . -Minimum criteria for the design andconstruction of new or additional facilitiesfor water supply, treatment, transmission anddistribution, and for wastewater collection,treatment and disposal;

(c) Equipment, Materials andSupplies. - Standards for the optimumselection and effective utilization ofequipment, materials and supplies by localwater and sewer utilities;

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

(e) Personnel. - The training ofpersonnel who operate or manage local waterutilities. For this purpose, at least a majorityof the personnel of a local water district must

have satisfactorily completed appropriatetraining courses, programs or seminarsconducted by the Administration, and mustbe holders of a certificate of completion orcompetence, as the case may be, before acertificate of conformance is issued to thewater 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. 32, 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. Saidstandard and regulations also shall includestipulated levels of internal reporting to localwater utility management.

SEC. 63. Rate Review. - 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 deliveriesand services performed by the district;

(c) Annual operating expense of thedistrict;

(d) The maintenance and repairs of theworks;


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(e) A reasonable surplus forreplacement, extension and improvement; and

(f) Payment of the interest andprincipal and provide a sinking fund forpayment of debts of the district as theybecome due and establish a fund for reasonablereserves. (As amended by Sec. 33, PD 768)

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 on appealwithin thirty days from perfection. (Asamended by Sec. 11, PD 1479)

SEC. 64. Technical Assistance. -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. Training Programs. -Administration shall establish training

programs 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 issueCertificate of Completion for the satisfactorycompletion of a specified course of instruction.In the case of operational personnel,Administration may conduct appropriateexaminations and issue correspondingCertificates of Competence to assist localwater utilities to meet the personnel standardsset pursuant to Section 62 (d) of this Title.

SEC. 66. 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 this Title. Upon afinding that said standards are met, theAdministration shall issue a Certificate ofConformance to any such water utility. SaidCertificate maybe revoked after due notice andhearing 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 VII Financial ProvisionsSEC. 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 par


22

value of Two Hundred Pesos per share whichshall be subscribed by the NationalGovernment and opened to subscription byprivate investors or government financialinstitutions. (As amended by Sec. 34, PD 768;Sec. 12, PD 1479)

SEC. 68. Payment for NationalGovernment 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. (Asamended by Sec. 34, PD 768; Sec. 13, PD 1479)

SEC. 69. Operational Expenses. -The Board 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. (Asamended by Sec. 34, PD 768)

SEC. 70. Charges. - 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 which

are of general benefit to water districts orutilities including, but not limited to, generaladministration and supervision. (As amendedby Sec. 34, PD 768)

SEC. 71. Receipt and Investmentof Funds. - Whenever the Administrationreceives money whether as payment forsubscriptions to shares of stock, principalrepayments, interest income, payment forservices rendered or for any purposewhatsoever, 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. (Asamended by Sec. 34, PD 768)

SEC. 72. Domestic BorrowingAuthority. - The Administration shall havethe authority to borrow money from alldomestic loan sources whether governmentor private; Provided, That its loansoutstanding from domestic sources at any onetime shall not exceed One Billion Pesos. (Asamended by Sec. 36, PD 768)

SEC. 73. Authority to ContractForeign Loan. - The Administration ishereby authorized to contract loans, credits,in any convertible foreign currency or capitalgoods, and to incur indebtedness from timeto time with foreign governments, or anyinternational financial institutions or fundsources, including suppliers credits or deferredpayment arrangements, the total outstandingamount of which, excluding interests, shallnot exceed five hundred million United Statesdollars or the equivalent thereof in othercurrencies, on terms and conditionspromulgated by the Secretary of Finance andthe Monetary Board for the accomplishmentof its objectives; and to enter into and executecontracts and other documents specifying


23

such terms and conditions.The President of the Philippines, by

himself, or through his duly authorizedrepresentative, is hereby authorized tonegotiate and contract with foreigngovernments or any international financialinstitution or fund sources in the name andon behalf of the Administration, one or severalloans, for the purpose of implementing theAdministrations program for the promotionand development of local water utilitiesthrough the Administrations 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 financialinstitution or fund sources.

The loans, 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. -Any local 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 over

All Releases of Appropriations forWaterworks and Sewerage Systems. -Since the Administration is charged with thedevelopment of local water utilities, fundsfrom prior and future appropriations of theNational Government for waterworks andsewerage systems in cities, municipalities,and provinces that are covered by duly formedwater districts shall be released directly tothe Administration for the account of thewater districts concerned. The Administrationmay, however, draw from such account feesand charges for services rendered to the waterdistricts concerned as specified in Section 70of this Title. (As amended by Sec. 38, PD 768)

SEC. 76. Government Assistanceto Non-Viable 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 non-viable 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.(As amended by Sec. 14, PD 1479)

SEC. 77. Special Projects. -Whenever required by the National Governmentto provide funding requirements for thedevelopment of waterworks and seweragesystems in municipalities, cities or provinces,or portions thereof not yet covered by a dulyformed water district, an outlay shall beprovided in the General Appropriations Act,


24

upon the request of the Administration,separate from its capitalization, for thepurposes of meeting the financialrequirements of the project: Provided,however, That in the event that funds for theproject have already been appropriated by theNational Government, such funds shall bereleased 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.(As amended by Sec. 14, PD 1479)

SEC. 78. Exemption from AllTaxes, Duties, Fees, Imposts and OtherCharges by the Government. - To enablethe Administration to pay its indebtednessand obligations, and in furtherance andeffective implementation of the policies andobjectives of this Decree, the Administrationis 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 realty 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 required for itsoperations and projects. (As amended by Sec.38, PD 768; Sec. 15, PD 1479)


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GENERAL PROVISIONSSEC. 79. Separability of

Provisions. If any provision of this Decree,or the application of such provision to anyperson or circumstances, is declared invalid,the remainder of the Decree or the applicationof such provision to other persons orcircumstances shall not be affected by suchdeclaration. (As amended by Sec. 39, PD 768;Sec. 15, PD 1479)

SEC. 80. Effect on Other Acts. - AllActs or 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. Effectivity. - This Decree shalltake effect immediately.

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

(SGD) FERDINAND E. MARCOS

By the President:(SGD) ALEJANDRO MELCHORExecutive Secretary

Presidential Decree No. 768 was promulgatedon August 15, 1975.

Presidential Decree No. 1479 was promulgatedon June 11, 1978.


26

sectionsectionsectionsectionsection 2MALACAANG

MANILA

Presidential Decree No. 768

AMENDING PRESIDENTIAL DECREENO.198 ENTITLED DECLARING ANATIONAL POLICY FAVORING LOCALOPERATION AND CONTROL OF WATERSYSTEMS; AUTHORIZING THEFORMATION OF LOCAL WATER DISTRICTSAND PROVIDING FOR THE GOVERNMENTAND ADMINISTRATION OF SUCHDISTRICT; CHARTERING A NATIONALADMINISTRATION TO FACILITATEIMPROVEMENT OF LOCAL WATERFACILITIES; GRANTING SAIDADMINISTRATION SUCH POWERS AS ARENECESSARY TO OPTIMIZE PUBLICSERVICE FROM WATER UTILITYOPERATIONS, AND FOR OTHERPURPOSES.

WHEREAS, 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;

WHEREAS, under Presidential Decree No.198, the Government declared as a nationalpolicy the local operation and control of watersystems; authorized the formation of localwater districts; provided for theadministration of such districts, and chartereda national administration to facilitateimprovement of local water utilities;

WHEREAS, 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;

NOW, THEREFORE, I, FERDINAND E .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.


27

SEC. 2. Paragraphs (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 xIf 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 orgovernments concerned 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 womens organizations. Nopublic officials shall serve as director.


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


28

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 anydirectors term, the remaining directors shallwithin 30 days, serve notice to or request thesecretary of the district for nominations andwithin 30 days thereafter 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 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.


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 shallreceive other compensation for services to thedistrict.

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

SEC. 8. Section 20 of the same decree is

hereby amended to read as follows:SEC. 20. System of Business

Administration. - 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. 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 thedistrict: 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 as


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follows:(b) In-Lieu Share. - As an incident to the

acquisition 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 districtsgross 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 thedistricts 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 waters

of the district.(b) Require a developer or builder of any

structure 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 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 perpetually


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disqualified 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 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.

SEC. 16. Two new sections are herebyinserted to be known as Section 36 andSection 37, respectively, which shall read asfollows:

SEC. 36. Authority for SubsequentBorrowings. - Where a water district hasborrowed money from the Administration, the

district 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 thispurpose, 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 fixsuch 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;


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(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.

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 asSections 46, 47 and 48, respectively.

SEC. 21. Section 48 of the same decree ishereby amended to read as Section 49 asfollows:

SEC. 49. Charter. - 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.


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 systems integration,joint investment and operations, 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 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 systems


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operations. 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 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 hundredpesos per meeting shall be subject to 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 amount as may bedetermined by the Board of Trustees.

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

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