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 ADMINI…

WHEREAS, one of the prerequisites to the orderly and
well-balanced growth of urban areas is an effective system of local
utilities, the absence of which is recognized as a deterrent to economic
growth, a hazard to public health and an irritant to the spirit and
well-being of the citizenry;

WHEREAS, domestic water systems and sanitary sewers are two
of the most basic and essential elements of local utility system, which,
with a few exceptions, do not exist in provincial areas in the
Philippines;

WHEREAS, existing domestic water utilities are not meeting
the needs of the communities they serve; water quality is
unsatisfactory; pressure is inadequate; and reliability of service is
poor; in fact, many persons receive no piped water service whatsoever;

WHEREAS, conditions of service continue to worsen for two
apparent reasons, namely: (1) that key elements of existing systems are
deteriorating faster than they arc being maintained or replaced, and (2)
that they are not being expanded at a rate sufficient to match
population growth; and

WHEREAS, local water utilities should be locally-con trolled
and managed, as well as have support on the national level in the area
of technical advisory services and financing;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution as
Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1.972, and
General Order No. 1, dated September 22, 1972, as amended, do hereby
decree, order and make as part of the law of the land the following
measure:

TITLE I— PRELIMINARY PROVISIONS

SECTION 1. Title. — This Decree shall be known and
referred to as the “Provincial Water Utilities Act of 1973.”

SEC. 2. Declaration of Policy. — The creation,
operation, maintenance and expansion of reliable and economically viable
and sound water supply and wastewater disposal systems for population
centers of the Philippines is hereby declared to be an objective of
national policy of high priority. For purposes of achieving said
objective, the formulation and operation of independent, locally
controlled public water districts is found and declared to be the most
feasible and favored institutional structure. To this end, it is hereby
declared to be in the national interest that said districts be formed
and that local water supply and wastewater disposal systems be operated
by and through such districts to the greatest extent practicable. To
encourage the formulation of such local water districts and the transfer
thereto of existing water supply and wastewater disposal facilities,
this Decree provides by general act the authority for the formation
thereof, on a local option basis. It is likewise declared appropriate,
necessary and advisable that all funding requirements for such local
Water systems, other than those provided by local revenues, should be
channeled through and administered by an institution on the national
level, which institution shall be responsible for and have authority to
promulgate and enforce certain rules and regulations to achieve national
goals and the objective of providing public waterworks services to the
greatest number at least cost, to effect system integration or joint
investments and operations whenever economically warranted and to assure
the maintenance of uniform standards, training of personnel and the
adoption of sound operating and accounting procedures.

SEC. 3. Definitions. — As used in this Decree, the
following words and terms shall have the meanings herein set forth,
unless a different meaning clearly appears from the context. The
definition of a word or term applies to any of its variants.

(a) Act. — This Provincial Water Utilities Act of
1973.

(b) Appointing authority. — The person empowered to
appoint the members of the Board of Directors of a local water
district, depending upon the geographic coverage and population,
make-up of the particular district. In the event that more than
seventy-five percent of the total active water service connections of a
local water district are within the boundary of any city or
municipality, the appointing authority shall be the mayor of that city
or municipality, as the case may be; otherwise, the appointing authority
shall be the governor of the province within which the district is
located. If portions of more than one province are included within the
boundary of the district, and the appointing authority is to be the
governors then the power to appoint shall rotate between the governors
involved with the initial appointments made by the governor in whose
province the greatest number of service connections exists.
(c) Administration. — The Local Water Utilities
Administration chartered in Title III of this Decree.

(d) NEDA. — The National Economic and Development
Authority,
(e) Board or Board of Directors. — The board of directors of a
district.

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

(g) Districts. — A local water district formed pursuant
to Title II of this Act.
(h) Local Water Utility. — Any district, city,
municipality, province, investor-owned public utility or cooperative
corporation which owns or operates a water system serving an urban
center in the Philippines, except that said term shall not include the
Metropolitan Waterworks and Sewerage System (MWSS) or any system
operated by the Bureau of Public Works as successor to the Wells and
Springs Department of the National Waterworks and Sewerage Authority.
(i) Person, — A natural person, corporation, cooperative,
partnership, association, city, municipality or other juridical entity.

(j) Property. — All real and personal property, 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 Hoard of Trustees
of the Administration.

TITLE II – LOCAL WATER DISTRICT LAW
Chapter I — Title

SEC. 4. Title. — The provisions of this Title shall
be known and referred to as the “Local Water District Law.”

Chapter II — Purpose and Formation

SEC. 5. Purpose. — Local water districts may be
formed pursuant to this Title for the purposes of (a) acquiring,
installing, improving, maintaining and operating water supply and
distribution systems for domestic, industrial, municipal and
agricultural uses for residents and lands within the boundaries of such
districts; (b) providing, maintaining and operating wastewater
collection, treatment and disposal facilities; and (c) conducting such
other functions and operations incidental to water resource development,
utilization and disposal within such districts, as are necessary or
incidental to said purpose.

SEC. 6. Formation of District. — This Act is the
source of authorization and power to form and maintain a district. Once
formed, a district is subject to the provisions of this Act and not
under the jurisdiction of any political subdivision. To form a district,
the legislative body of any city, municipality or province shall enact a
resolution containing the following:

(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 words “Water District.”

(b) A description of the boundary of the district. In the case
of a city or municipality, such boundary may include all lands within
the city or municipality. A district may include one or more
municipalities, cities or provinces, or portions thereof.

(c) A statement of intent to transfer any and all waterworks
and/or sewerage facilities owned by such city, municipality or province
to such district pursuant to a contract authorized by Section 31 (b)
of this Title.
(d) A statement identifying the purpose for which the district
is formed, which shall include those purposes outlined in Section 5
above.
(e) The names of the initial directors of the district with the
date of expiration of term of office for each.
(f) A statement that the district may only be dissolved on the
grounds and under the conditions set forth in Section 44 of this Title.

(g) A statement acknowledging the powers, rights and
obligations as set forth in Section 36 of this Title.

Nothing in the resolution of formation shall state or infer that
the local legislative body has the power to dissolve, alter or affect
the district beyond that specifically provided for in this Act.

If two or more cities, municipalities or provinces, or any combination
thereof, desire to form a single district, a similar resolution shall be
adopted in each city, municipality and province.

SEC. 7. Filing
of Resolution. — A certified copy of the resolution or resolution
forming a district shall be forwarded to the Office of the Secretary of
the Administration. If found by the Administration to conform to the
requirements of Section 6 and the policy objectives in Section 2, the
resolution shall be duly filed. The district shall be deemed duly formed
and existing upon the date of such filing. A certified copy of said
resolution showing the filing stamp of the Administration, shall be
maintained in the office of the district.

Chapter III — Directors

SEC. 8. Number and Qualifications. — The Board of
Directors of a district shall be composed of five citizens of the
Philippines who are of voting age and residents within the district. One
member shall be a representative of civic-oriented service clubs, one
member a representative of professional associations, one member a
representative of business, commercial, or financial organizations, one
member a representative of educational or religious institutions and one
member a representative of women’s organizations. No director may be
an elected official of the Government.

SEC. 9. Appointment. — Board members shall be
appointed by the appointing authority. Said appointments shall be made
from a list of nominees, if any, submitted pursuant to Section 10. If no
nominations are submitted, the appointing authority shall appoint any
qualified person of the category to the vacant position.

SEC. 10. Nominations. — On or before October 1 of
each even-numbered year, the secretary of the district shall contact
each known organization, association or institution being represented by
the director whose term will expire on December 31 and solicit
nominations from these organizations to fill the position for the
ensuing term. One nomination may be submitted in writing by each such
organization to the secretary of the district on or before November 1 of
such year. The list of nominees shall be transmitted by the secretary
of the district to the office of the appointing authority on or before
November 15 of such year and he shall make his appointment from the list
submitted on or before December 15. In the event the appointing
authority fails to make his appointments on or before December 15,
selection shall be made from said list of nominees by majority vote of
the seated directors of the district constituting a quorum. Initial
nominations for all five seats of the board shall be solicited by the
legislative body or bodies at the time of adoption of the resolution
forming the district. Thirty days thereafter, a list of nominees shall
be submitted to the provincial governor in the event the resolution
forming the district is by a provincial board, or the mayor of the city
or municipality in the event the resolution forming the adoption of the
district is by the city or municipal board of councilors, who shall
select the initial directors therefrom within 15 days after receipt of
such nominations.

SEC. 11. Term of Office. — Of the five initial
directors of each newly-formed district, two shall be appointed for a
maximum term of two years, two for a maximum term of four years, and one
for a maximum term of six years. Terms of office of all directors in a
given district shall be such that the term of at least one director, but
not more than two directors, shall expire on December 31 of each
even-numbered year. Regular terms of office after the initial terms
shall be for six years commencing on January 1 of odd-numbered years
Directors may be removed for cause only.

SEC. 12. Vacancies. — In the event of a vacancy in
the board of directors occurring more than six months before expiration
of any director’s term, the remaining directors shall within 30 days,
serve notice or request the secretary of the district for nominations
and within 30 days thereafter a list of nominees shall be submitted to
the appointing authority for his appointment of a replacement director
from the list of nominees. In the absence of any such nominations, the
appointing authority shall make such appointment. Vacancies occurring
within the last six months of an unexpired term may be filled by a vote
of a majority of the remaining members of the board of directors
constituting a quorum. The director thus appointed shall serve the
unexpired term only.

SEC. 13. Compensation. — Each director shall
receive compensation in an amount, for each meeting of the board
actually attended by him, equivalent to one percent (1%) of the mayor’s
monthly salary for a first class city. No director shall receive other
compensations for services to the district.

SEC. 14. Personal Liability. — No director may be
held to be personally liable for any action of the district.

Chapter IV — The Board

SEC. 15. Organizational Meeting. — The board shall
hold its first meeting as soon as practicable after appointment of the
first directors, and not later than 45 days after formation of the
district. At said first meeting of the district board, and thereafter at
the first meeting of each odd-numbered year, the board shall elect a
chairman, a vice-chairman, a secretary and a treasurer. Such secretary
and treasurer may, but need not be members of the board, and the offices
of secretary and treasurer may be held by the same person.

SEC. 16. Quorum. — A majority of the board
present in person shall constitute a quorum for the transaction of
business: Provided, however, That no resolution or motion shall
be adopted or become effective without the affirmative vote of a
majority of the authorized number of members of the board.

Chapter V — Powers and Duties of Board

SEC. 17. Performance of District Powers. — All
powers, privileges, and duties of the district shall be exercised and
performed by and through the board: Provided, however, That any
executive, administrative or ministerial power shall be delegated and
redelegated by the board to officers or agents designated for such
purpose by the board.

SEC. 18. Functions Limited to Policy-Making. — The
function of the board shall be to establish policy. The board shall not
engage in the detailed management of the district.

SEC. 19. By-Laws. — At its first meeting, the
board shall adopt, and may thereafter from time to time amend by-laws
for the operation of business and affairs of the board and the district.
By-laws may not be amended without 30 days public notice to that
effect, and a public hearing held.

SEC. 20. System of Business Administration. — The
board shall, as soon as practicable, prescribe and define by resolution a
system of business administration and accounting for the district,
which shall be patterned upon and conform to the standards established
by the Administration. Auditing shall be performed by a certified public
accountant not in the government office.

SEC. 21. Depository. — The district’s depository
shall be the Philippine National Bank, unless use of such bank is
impractical: Provided, however, That any and all reserves
accumulated for capital improvements may be deposited with the
Administration.

SEC. 22. Contracts. — All contracts of the district
shall be entered into by or pursuant to authority of the board: Provided,
however, That the board may by resolution delegate and redelegate
to officers or agents of the district, under such conditions and
restrictions as shall be affixed by the board, the power to bind the
district by contract.

Chapter VI — Officers and Employees

SEC. 23. Additional Officers. — At the first
meeting of the board, or as soon thereafter as practicable, the board
shall appoint, by a majority vote, a general manager, an auditor, and an
attorney, and shall define their duties and fix their compensation.
Said officers shall serve at the pleasure of the board.

SEC. 24. Duties. — The duties of the officer shall
be those customary to the office held and as determined and specified
from time to time by the board. The general manager, who shall not be a
director, shall, subject to approval of the board, have full supervision
and control of the maintenance, operation and construction of water
supply and wastewater disposal and administrative facilities of the
district, with full power and authority to exercise management
prerogatives as set forth in the district’s personnel rules and
regulations.

SEC. 25. Exemption from Civil Service. — The
district and its employees, being engaged in a proprietary function, are
hereby exempt from the provisions of the Civil Service Law. Collective
bargaining shall be available only to personnel below supervisory
levels: Provided, however, That the total of all salaries,
wages, emoluments, benefits or other compensation paid to all employees
in any month shall not exceed fifty percent (50%) of average net monthly
revenue, said net revenue representing income from water sales and
sewerage service charges, less pro rata share of debt service and
expenses for fuel or energy for pumping during the preceding fiscal
year.

Chapter VII — Powers of District

SEC. 26. Authorization. — The district may exercise
all the powers which are expressly granted by this Title or which are
necessarily implied from, or incidental to the powers and purposes
herein stated.

SEC. 27. Acquisition of Waterworks. — A district
may purchase, construct, or otherwise acquire works, water, water
rights, land, rights and privileges useful or necessary to convey,
supply, store, collect, treat, dispose of or make other use of water for
any purpose authorized by this Title. In the acquisition of water or
water rights the district shall cooperate with existing agencies of the
Government of the Philippines.

SEC. 28. Sale of Water. — The district shall have
the power to sell water, pursuant to generally applicable rules and
regulations, to any person for use within the district. As a condition
of such sale, the district may require the filing of a written
application for service, payment of established charges or deposits and
execution of water service contract.

A district may provide service to public faucets or hydrants
provided that it shall first have executed an application and service
contract with the government entity to establish or maintain such
faucets or hydrants within the district. The district will be paid for
such service in the same manner as regular domestic service and pursuant
to the adopted rules and regulations of the district.

Any
district holding a valid Certificate of Conformance or a Conditional
Certificate of Conformance from the Administration shall be exempt from
regulation by the Public Service Commission or its successors.

SEC.
29. Sewerage. — A district may require, construct, operate
and furnish facilities and services, within or without the district, for
the collection, treatment and disposal of sewerage, waste, and storm
water. The district may only furnish such services outside the district
by means of facilities designed primarily to serve inside the district.
Upon providing a sewer system in any area of the district, the district
may require all buildings used by human beings to be connected to the
sewer system within such reasonable time as may be prescribed by the
district, provided that the property upon which such building to be
connected stands is located within 35 meters of an existing main of the
district’s sewer system. After due notice thereof and refusal on the
part of the property owner to so connect with the district’s sewer
system, the district may declare the further maintenance or use of
cesspools, septic tanks, or other local means of sewerage disposal in
such area to be a public nuisance and, after notice in writing of at
least 10 days, deprive said property owner of any and all services
provided by the district, which sanction may be co-extensive with the
period during which the property owner persists in refusing to connect
with the district’s sewer system.

SEC. 30. Rights of Way. — The right is hereby
granted to locate, construct and maintain works of the district on any
land which is now, or hereafter may be, owned by the Government of the
Philippines or by any of its political subdivisions, and/or
instrumentalities. A district may construct any works along, under or
across any street, watercourse, railway, or conduit in a manner which
will afford security for life and property: Provided, That in
planning any such works, the environmental aspects shall also be
considered.

SEC. 31. Contracts. — A district shall have
the power to enter into contracts with any person for the purpose of
performing any functions of the district: Provided, That the
Board of Directors may not by contract delegate any of the discretionary
powers vested in the board by this Title. Specifically, but without
limiting said general power, a district may enter into the following
contracts:

(a) Cooperation. — Agreement with the Government of
the Philippines or any of its agencies or political subdivisions for
the cooperative or joint performance of any function of the district.

(b) In-Lieu Share. — As an incident to the acquisition
of the existing water system of a city, municipality, or province, a
district may enter into a contract to pay in lieu of taxes on such
utility plant, an annual amount not exceeding three percent (3%) of the
district’s gross receipts from water sales in any year.

(c) MWSS Agreement. — In the event that the city,
municipality or province has not reached agreement with the Metropolitan
Waterworks and Sewerage System pursuant to Sections 15 and 17 of
Republic Act 6234, a district may, with the consent of the local
government, act for and in behalf of the local interests in negotiating
and executing such contract for final settlement of the consequences of
MWSS involvement in the operation of the water system.

SEC. 32. Protection of Waters of District. — A
district may commence, maintain intervene in, defend and compromise
actions and proceedings to prevent interference with or deterioration of
water quality or the natural flow of any surface, stream or ground
water supply which may be used or useful for any purpose of the district
or be a common benefit to the lands or its inhabitants. The ground
water within a district is necessary to the performance of the
district’s powers and such district is hereby authorized to adopt rules
and regulations governing the drilling, maintenance and operation of
wells within its boundaries for purposes other than single family
domestic use on overlying land. Any well operated in violation of such
regulations shall be deemed an interference with the waters of the
district.

SEC. 33. Fire Protection Capacity. — The
district may install and maintain pipeline capacity and additional
hydrants for fire protection purposes: Provided, That prior
agreement has been executed with the public entity having principal fire
protection responsibility within the district whereby the district will
be reimbursed over the reasonable life of said facilities for the cost
of installation and operation of such fire protection capacity and
facilities.

Chapter VIII — Financial Provisions

SEC. 34. Receipt, Deposit and Payment of District
Funds. — The treasurer shall receive, to the credit of the district
and in trust for its use and benefit, all monies belonging to the
district. Any monies belonging to the district shall, where practicable,
be deposited by the treasurer in the Philippine National Bank, except
for the payment of bonds and interest thereon, district money shall be
paid out only upon a warrant therefor drawn and executed by authorized
officers of the district.

SEC. 35. Negotiable Promissory Notes. — A
district may issue negotiable promissory notes with a maturity of not
later than two years from the date thereof. The total aggregate amount
of such notes outstanding at any one time shall not exceed twenty
percent (20%) of the annual gross revenues of the district payable from
all revenue sources thereof.

SEC. 36. Revenue Bonds. — A district may borrow
money to raise funds to pay all costs of any public improvements
authorized by this Title and may issue revenue bonds to evidence the
indebtedness created by such borrowing. Such revenue bonds shall
constitute special obligations and evidence of special indebtedness of
the district and shall be a charge upon, and payable, as to the
principal thereof, any part thereof, solely from such revenues and funds
as are specified therein in the proceedings for their issuance. Said
bonds may be issued pursuant to the following procedures:

(a) Estimate of Expenses. — If a revenue bond
issue is contemplated, the hoard of the district shall adopt by
resolution a plan describing the works to be acquired or constructed
together with an estimate of all costs thereof, including payment of
interest on any bonds of the district, which will become payable before
the expiration of one year from completion or acquisition of such works,
for which the general funds of the district then in the treasury are
inadequate.

(b) Issuance in the District Name: Limitation of
Obligations — Revenue bonds shall be issued in the name of the
district and shall be obligations of the district; limited, however, to
the payment or redemption of the revenue bonds and the payment of
interest thereon from the revenue of the district.

(c) Call, Price and Redemption. — The Board, by
resolution authorizing the issuance of revenue bonds, shall fix the
method of giving notice of redemption. Such bonds shall be issued
subject to call and redemption prior to maturity and a statement to that
effect shall appear on the face of the revenue bonds. No such bond
shall be subject to call or redemption prior to its fixed maturity date
unless it contains such recital.

(d) Form of Bonds. — The face of revenue bonds shall
contain a statement that: (1) the payment of redemption of the bond and
payment of interest therein is secured solely by a first and direct
charge and lien upon all of the revenues received from the sale of
water, (2) neither the payment of all or any part of the principal or
interest thereon is a general debt, liability or obligation of the
district, and (3) the bong is subject to call and redemption prior to
maturity, if the board so provides. Each issue of revenue bonds shall be
numbered consecutively from lower to higher as they mature and shall
bear such dates as may be prescribed by the board. The date appearing
upon the face of a revenue bond shall be deemed the date of issuance
irrespective of subsequent delivery of the bong. Each bond shall be
signed by the chairman and attested by the secretary: Provided,
That interest coupons appertaining thereto may be signed by the
secretary only. The seal of the district shall be affixed to each
revenue bond.

(e) Payment of Maturity. – Revenue bonds shall be paid in
cash and in full at such time and place as may be designated by the
board and shown on the face of each bond, but in no case shall the
maturity of any bond be more than 40 years from its date.

(f) Default. — In the event of default by the district in
the payment of principal or interest on its outstanding revenue bonds,
any bondholder shall have the power to brine an action in any court of
competent jurisdiction to compel the payment of said amount, and in
connection therewith, to require the appointment of a receiver of the
property and operations of the district and to assume full jurisdiction
over its affairs including the power to increase rates, if necessary,
until such time as the default is cured.

Chapter IX — Revenues

SEC. 37. Rates and Charges — Water. — A district
may sell water under its control, without preference, under uniform
schedules of rates and charges to any all water users within the
district. Said schedule may provide for differential rates for different
categories of use and different quantity blocks. The district, so far
as practicable, shall fix such rates and charges for water as will
result in revenues which will:

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

(b) Provide for revenue from all water deliveries and
services performed by the district;

(c) Pay the operating expenses of the district;

(d) Provide for the maintenance and repairs of the works;

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

(f) Pay the interest and provide a sinking or other fund
for the payment of debts of the district as they become due.

SEC. 38. Service and Stand-By Charges — Sewer.
— A district may prescribe and collect rates and other charges for
sewer services furnished. A district may also fix, levy and collect a
sewerage and wastewater service stand-by or availability charge in the
event sewer service is available and no connection is made. Such rates
and charges may be collected with the water charges of the district. In
the event of failure to pay the whole or any part thereof, district may
discontinue any and all services for which such bill is rendered,
including water, sewer, and other district services: Provided,
That this provision shall not be construed to prohibit the district from
collecting rates and other charges in any other lawful manner.

SEC. 39. Production Assessment. — In the
event the board of a district finds, after notice and hearing, that
production of ground water by other entities within the district for
commercial or industrial uses is injuring or reducing the district’s
financial condition, the board may adopt and levy a ground water
production assessment to compensate for such loss. In connection
therewith, the district may require necessary reports by the operator of
any commercial or industrial well. Failure to pay said assessment shall
constitute an invasion of the waters of the district and shall entitle
this district to an injunction and damages pursuant to Section 32 of
this Title.

SEC. 40. Assessment and Stand-By Charges. —
In order to obtain capital to finance installation of sanitary
sewerage, a district shall have the power to establish by resolution of
the board of directors the area to be benefited from such facilities.
After a hearing and upon notice to all parties affected, the district
may levy and collect assessment, or stand-by charges based upon
available capacities or upon Selected Characteristics of property
benefited by said improvements, as determined by the board. Said
characteristics may include, but not limited to, the effective length of
property fronting upon the proposed improvement or in terms of the area
contained within the boundary of said property. Said assessment, if
unpaid, shall be and constitute a lien on the land assessed.

Chapter X — Changes in Organization

SEC. 41. Exclusion of a Territory. — Any
territory within the boundary of a district may be excluded by
resolution of the board of directors after notice to land owners within
the territory proposed to be excluded, and upon a finding that said
lands do not and will not benefit by reason of their inclusion within
the district. A certified copy of said resolution of exclusion shall be
filed in the same manner and become effective in accordance with the
provisions applicable to the resolution forming the district.

SEC. 42. Annexations and Deannexation. — The
Administration may, after notice to property owners within the territory
proposed for annexation or deannexation and following a hearing, make
findings of benefit or potential benefit, and thereafter, require
annexation or deannexation shall be accomplished by adoption and filing
of an appropriate resolution in the same manner as the filing of the
resolution forming a district or of exclusion, as the case may be.

SEC. 43. Consolidation and Joint Operation. —
The Administration may require the merger or consolidation of the
facilities or operations of two or more districts formed pursuant to the
levy, in the event that the Administration shall have determined,
following a hearing, that such merger or consolidation is in the best
interest of the residents in the districts involved.

SEC. 44. Dissolution, — A district may be
dissolved by resolution of its board of directors filed in the manner of
filing the resolution forming the district: Provided, however,
That the following procedures have bee-n accomplished prior to the
adoption of any such resolution: (1) another public entity has acquired
the assets of the district and has assumed all obligations and
liabilities attached thereto; (2) all bondholders have been notified and
they consent to said transfer and dissolution; and (3) a court of
competent jurisdiction has found that said transfer and dissolution are
in the best interest of the public.

Chapter XI — Protection to Districts

SEC. 45. Exemption from Taxes. — A district
shall (1) be exempt from paying income taxes, and (2) shall be exempt
from the payment of (a) all National Government, local government 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 or administrative proceeding in which it may be a party and
(b) all duties or imposts on imported machinery, equipment and
materials required for its operations.

SEC. 46. Exclusive Franchise. — No franchise
shall be granted to any other person or agency for domestic water
service within the district or any portion thereof unless and except to
the extent that the board of directors of said district consents thereto
by resolution duly adopted.

TITLE III — LOCAL WATER UTILITIES

ADMINISTRATION LAW
Chapter I — Title

SEC. 47. Title. — The Title of the Provincial
Water Utilities Act of 1973 shall be known and referred to as the
“Local Water Utilities Administration Law.”

Chapter 2 — Charter and Purpose

SEC. 48. Charter. — There is hereby
chartered, created and formed a national agency to be known as the
“Local Water Utilities Administration” which is hereby attached to the
National Economic and Development Authority (NEDA). The provisions of
this Title shall be and constitute the charter of the Administration.

SEC. 49. Purposes. — The purposes for which
the Administration is created are: (1) to establish minimum standards
and regulations in order to assure acceptable standards of construction
materials and supplies, maintenance, operation, personnel, training,
accounting and fiscal practices for local water utilities; (2) to
furnish technical assistance and personnel training programs for local
water utilities; (3) to monitor and evaluate local water standards; (4)
to effect system integration, joint investment and operations, district
annexation and deannexation whenever economically warranted; and (5) to
provide a specialized lending institution with peculiar expertise in the
financing of local water utilities.

Chapter 3 — Board of Trustees

SEC. 50. Number of Qualifications. — The
Board of Trustees of the Administration shall be composed of five
members all of whom shall be citizens of the Philippines. Two trustees
at any time shall each have at least ten (10) years experience in
banking or finance and employed by the National Government. Two trustees
at any time shall be a manager, an engineer, an accountant or an
attorney employed by a local water utility, each with at least four
years experience related to water supply or wastewater operations. One
trustee at any time shall be a civil or sanitary engineer employed by
the National Government. Not more than one trustee may represent a
private, investor-owned utility. No elected official shall be entitled
to act as a trustee.

SEC. 51. Appointment and Term of Office. —
The trustees shall be appointed by the President of the Philippines.
They shall serve a term of five years each: Provided, That of
the first five appointed, one shall serve a term of five years, another
for four years, the third for three years, the fourth for two years, and
the last for one year. Trustees may be removed for cause only.

SEC. 52. Vacancies. — Vacancies in the Board
of Trustees for any reason whatsoever shall be filled by the President
of the Philippines in like manner as in the case of new appointments,
but the trustees so appointed shall serve only the unexpired portion of
the term of the trustee substituted for.

SEC. 53. Powers. — All of the business and
affairs of the Administration shall be carried on and its powers shall
be exercised by and through the Board of Trustees. The functions of the
trustees, however, shall be to establish policy, not to engage in the
detailed management of the Administration.

SEC. 54. Compensation. — The members of the
Board of Trustees shall each receive a per diem equivalent to four (4%)
percent of the mayor’s monthly salary for a first class city for
everyday of actual attendance at board meetings which meetings shall not
exceed twelve in one year.

Chapter 4 — By-Laws

SEC. 55. Adoption. — The Board of Trustees
shall adopt a code of by-laws for the conduct of the affairs of the
Administration, subject to approval by the NEDA.

SEC. 56. Amendment. — The by-laws may be
amended from time to time by affirmative vote of four trustees, subject
to approval by the NEDA.

Chapter 5 — Officers and Employees

SEC. 57. Officers. — The Board shall elect a
chairman and a vice-chairman, each of whom shall be a trustee. In
addition there shall be selected by the Board, a secretary, treasurer,
an auditor and a general counsel.

SEC. 58. Employees. — The trustees
shall select a general manager, who shall not be a trustee. The general
manager shall employ all additional personnel, pursuant to guidelines
established by and subject to review of the trustees. There shall be
established at least three basic divisions, to wit: (1) loan fund, (2)
technical, and (3) regulatory, each of which shall be under the
supervision of a director responsible to the general manager.

The regular professional and technical personnel of the
Administration shall be exempt from WAPCO and Civil Service rules and
regulations: Provided, That the personnel shall be entitled to
the benefits and privileges normally accorded to government employees,
such as retirement, GSIS insurance, leave and similar matters.

Chapter 6 — Powers

SEC. 59. General Corporate Powers. — The
Administration shall have all the powers which are expressly granted to
it under this Title, or which are necessary, implied from or incidental
to the powers and purposes herein stated.

SEC. 60. Borrowing and Security Therefor.
— Administration may borrow funds as authorized in Section 71 of this
Title, and issue as security therefor debentures constituting a lien on
any and all securities, covenants and obligations of local water
utilities held by Administration as security for loans made to such
local water utilities.

SEC. 61. Loans. — Administration may make
loans from its Revolving Loan Fund to qualified local water utilities,
upon the following conditions and pursuant to the following procedures:

(a) Qualification of Borrower. — Before any
loan may be granted, the local water utility shall (1) hold a valid
certificate of Conformance or a Condition Certificate of Compliance from
the Administration, and (2) meet such other and further loan
qualification requirements as the trustees may establish;

(b) Feasibility Study. — A feasibility study of
any proposed project for which loan funds are sought shall be made by a
consultant prequalified by the Administration;

(c) Security. — The Administration may take as
security for such loans the authorized revenue bonds or other evidence
of debt by the local water utility;

(d) Loan Document and Procedures. — The trustees
shall adopt uniform rules, loan documents and procedures to be used in
the granting of loans. Such rules shall include provisions for security,
payment and default, and shall authorize the Administration to act as
receiver in the event of court proceedings for enforcement.

(e) Funding of Loan. — When a loan is made to a
local water utility, the entire amount of such loan shall be funded and
set aside to assure completion of the project for which such loan was
granted.

SEC. 62. Regulations. — The Administration
shall have the power and duty to establish standards for local water
utilities, and adopt rules and regulations for the enforcement hereof
The Administration shall vigorously consult and coordinate its actions
with all governmental agencies active in the areas of public works and
all other concerned agencies in the promulgation of these standards.
Said standards and regulations shall include the following:

(a) Water Quality. — Minimum drinking water
standards including a uniform testing and reporting system. Said
standards shall include bacteriological, chemical and physical
parameters;

(b) Design and Construction. — Minimum criteria for
the design and construction of new or additional facilities for water
supply, treatment, transmission and distribution, and for wastewater
collection, treatment and disposal;

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

(d) Operations and Maintenance. — Standardized
procedures for operating and maintaining equipment and facilities;

(e) Personnel. — The training of personnel who
operate or manage local water utilities;

(f) Organization. — Organizational and
institutional criteria to assure independent operation and funding of
local water utilities;

(g) Accounting. — A uniform accounting system with
uniform chart of accounts. Said standards and regulations also shall
include stipulated levels of internal reporting to local water utility
management.

SEC. 63. Rate Review. — Any publicly-owned
local utility holding a Certificate of Conformance or a Conditional
Certificate of Conformance from the Administration is hereby declared
exempt from the jurisdiction of the Public Service Commission or its
successor. Any rates or charges established by such a local water
utility shall be adequate to provide for:

(a) Reimbursement from all new water customers for
the cost of installing new services and meters;

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

(c) Annual operating expense of the district;

(d) The maintenance and repairs of the works;

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

(f) Payment of the interest and provide a sinking or
other fund for the payment of debts of the district as they become due.

The rates or charges established by such a local water
utility shall be subject to review by the Administration to establish
compliance with the above-stated provisions. Said review of rates or any
charges therein shall be by the trustees, and in writing. Any party
aggrieved by such review may within 30 days appeal in writing to the
Public Service Commission or its successor which shall decide such
appeal within 60 days thereafter. Failure of the Public Service
Commission or its successor to promulgate its decision on such appeal
within such period shall be deemed an affirmation of Administration’s
review.

SEC. 64. Technical Assistance. —
Administration shall provide technical assistance to local water
utilities; their boards, management and operating personnel, to aid in
meeting the standards and criteria established by the Administration,
and to encourage the upgrading of the operations and management of such
local water utilities. Said technical assistance should consist of those
matters which are practical to finance or develop on a national basis
but are beyond the capability of the individual local water utility, as
such.

SEC. 65. Training Programs. —
Administration shall establish training programs and seminars for
personnel of local water utilities. Programs shall include the areas of
utility management, operations, maintenance and customer service.
Administration shall have the power to issue Certificate of Completion
for the satisfactory completion of a specified course of instruction. In
the case of operational personnel, Administration may conduct
appropriate examinations and issue corresponding Certificates of
Competence to assist local water utilities to meet the personnel
standards set pursuant to Section 63 (d) of this Title.

SEC. 66. Certificate of Conformance. —
Administration may require report from all water utilities, conduct
field investigations and review all available information to determine
whether there has been conformance to its standards and procedures
established pursuant to Section 63 of this Title. Upon a finding that
said standards are met, the Administration shall issue a Certificate of
Conformance to any such local water utility. Said Certificate maybe
revoked after due notice and hearing as to any local water utility which
thereafter fails to continue conformance with such standards. A
Conditional Certificate of Conformance may be issued where procedures
and practices have been adopted to assure conformances and a reasonable
time schedule has been adopted. Failure to reach conformance as
contemplated shall be cause for revocation of such Conditional
Certificate, without hearing or other cause.

Chapter 7 — Financial Provisions

SEC. 67. Operating Budget and Expenses. —
The annual general operating budget and all expenses of the
Administration shall be provided for in the General Appropriations Act
from year to year.

SEC. 68. Charges. — To the extent that
the Administration performs services, gives technical assistance, or
reviews feasibility studies for the benefit and at the request of any
particular local water utility, Administration shall establish charges
therefore designed (within the reasonable capability of such local water
utility to pay) to recover the costs of such services.

SEC. 69. Revolving Loan Fund. — There
is hereby created and established a Revolving Loan Fund, under the
administration, control and supervision of the Board of Trustees,
initially to consist of twenty million pesos; which is hereby
appropriated out of any funds of the National Treasury, not otherwise
appropriated, for such purpose. The sum of twenty million pesos is
likewise authorized to be appropriated in the General Appropriations Act
every fiscal year for the next nine years, beginning with the Fiscal
Year 1973-1974, to augment and form part of said fund. All funds
acquired by the Administration by grant, appropriation, borrowing or
otherwise, for purposes of making loans to local water utilities shall
be deposited in said Revolving Loan Fund, and may be used only for such
purpose. As principal on said loans is repaid, the same including all
earnings thereof shall inure to and become a part of the Loan Fund for
use solely as part thereof and for no other purpose except for debt
services of the Administration.

SEC. 70. Appropriations. — There is
hereby appropriated for the organization of the Administration and its
initial operations the sum of one million pesos from the general funds
of the National Government, not otherwise appropriated. Thereafter, the
annual general operating budget and all expenses of the Administration
shall be included in the General Appropriations Act as provided for in
Section 67 thereof.

SEC. 71. Borrowing Authority. —
Subject to prior approval by the President of the Philippines, the
Administration shall have the right and power to borrow additional sums:
Provided, That the loans outstanding at any one time shall not
exceed the principal sum of five hundred million pesos to domestic
sources both Government and private and the principal sum of one hundred
million dollars in United States currency or its equivalent in other
currencies, to supplement said Revolving Loan Fund from:

(a) Agencies of the Government of the Philippines,
including, but not limited, to the Social Security System, Government
Service Insurance System and Development Bank of the Philippines.

(b) International Loan Sources, both public and
private. The Secretary of Finance is authorized to assist with and
underwrite such loans, with the approval of the President of the
Philippines. Said underwriting shall include the increase obligation
that may accrue to the Administration relative to foreign borrowing
based upon unfavorable changes in the rate of currency exchange.

Any and all loan obligations incurred by the
Administration in virtue of this Section shall be fully and
unconditionally guaranteed both as to principal and interest by the
Government of the Republic of the Philippines which guaranty shall be
expressed on the face of any document, note, bond, debenture, or other
securities evidencing said loan obligations. Such guaranty shall be
without compensation in any form whatsoever to the Government.

SEC.
72. Depository for Reserves. — Any local water utility which
is accumulating reserves for capital improvements may make specified
time deposits of the same to the Administration in the manner authorized
for banks in handling trust funds. Such funds shall not become a part
of the Revolving Loan Fund, nor shall they be used for operating
purposes by the Administration.

GENERAL PROVISIONS

SEC. 73. Separability of Provisions. —
If any provision of this Decree, or the application of such provision to
any person or circumstances, is declared invalid, the remainder of the
Decree or the application of such provisions to other persons or
circumstances shall not be affected by such declaration.

SEC. 74. Effect on Other Acts. — All acts or
parts of acts, decrees, general orders, executive orders,
proclamations, or rules and regulations inconsistent herewith are
repealed or modified accordingly.

SEC. 75. Effectivity. — This Decree shall
take effect immediately.

Done in the City of Manila, this 25th day of May, in the
year of Our Lord, nineteen hundred and seventy-three.