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CAGAYAN DE ORO, Philippines – The Commission on Audit (COA) has urged the Malaybalay City Water District (MCWD) to take back control of its operations and step back from a 2020 joint venture agreement with a company owned by the powerful and influential Villar family.
In several letters last May, state auditors questioned the validity of the agreement based on a presidential decree governing provincial water utilities and the anti-graft law.
The deal has been widely blamed in Malaybalay, Bukidnon province’s capital city, for poor water distribution services, weak water pressure, and frequent interruptions that could last for days.
On November 1, 2020, the nearly half-a-century-old MCWD entered into the deal with PrimeWater Infrastructure Corporation, a company headed by Paolo Villar, one of the sons of former Senate president and real estate tycoon Manuel Villar Jr.
State auditors said the venture resulted in massive organizational change in the MCWD, reducing the water district’s workforce to just nine people who compose a group tasked with merely monitoring contract compliance.
The 2020 deal gave PrimeWater the exclusive right to use MCWD’s facilities for 25 years in exchange for an initial fixed revenue of P15 million per year during the first five years, according to Cecilia Pontillas, supervising auditor at COA in Northern Mindanao.
In a previous report, the COA said the agreement provides that MCWD would receive an additional P1 million every five years.
Despite the new arrangement, MCWD maintained its status as a government-owned and -controlled corporation (GOCC) with a general manager and board members.
No local control
State auditors said the MCWD relinquished its control and management to PrimeWater whose personnel replaced the majority of the water district’s workers.
They said official receipts for water bill payments were also issued in the name of PrimeWater, showing that the water distribution in Malaybalay lacked local control, contrary to laws.
COA-Northern Mindanao director Mathew Rey Magno said the Provincial Water Utilities Act was clear that “local water utilities should be locally controlled and managed, as well as have support on the national level in the area of technical advisory services and financing.”
In its 2022 audit report, COA reiterated its recommendation for the MCWD to “reassume discharging all its functions and retract from any involvement in the implementation of the JVA (joint venture agreement) premised on its patent nullity in the purview of P.D. [Presidential Decree] 198 and R.A. [Republic Act] 3019.”
The laws, COA cited, refer to the amended 1973 presidential decree on water utilities in the provinces and the Anti-Graft and Corrupt Practices Act.
At the losing end
In a letter dated May 15, Magno pointed out to MCWD chairman Timoteo Baliquig and general manager Nolito Binahon that water sales revenues that were meant to be accrued to MCWD were instead collected by PrimeWater.
Magno attributed MCWD’s losses to the joint venture agreement implemented in 2020, adding that the water district was “grossly disadvantaged” as a result of the deal.
Based on COA’s report, PrimeWater collected a total of P111.703 million from water consumers in Malaybalay City from January to December 2022 alone.
“In view of the patent defects of the JVA under the cited provisions of P.D. 198 and R.A. 3019, PrimeWater is not clothed with any proper and legal authority, thus the District was utterly deprived in its collections on water sales,” read part of the COA report.
Aggravating the problem was the discovery of several discrepancies in the financial statement submitted by PrimeWater as of December 31, 2021, and its failure to respond and act on it, making the MCWD unable to evaluate the financial status of the joint venture.
The COA said not all MCWD transactions were audited due to the non-submission of certain documents related to the 2020 agreement.
Firms assert deal is valid
In a statement on Monday, July 17, PrimeWater maintained that the joint venture agreement “is valid and legal,” adding that it went through a public competitive challenge in line with the 2013 revised guidelines of the National Economic Development Authority (NEDA).
PrimeWater also said the 2020 agreement was reviewed by the Office of the Government Corporate Counsel (OGCC) prior to execution.
“We also affirm that joint venture agreements between local water districts and private sector partners are allowed by law as confirmed by the Department of Justice,” the company said.
The MCWD also asserted that its 2020 agreement with PrimeWater is valid, and it would proceed with the venture unless a court voided the deal.
Responding to the state auditors’ findings and recommendations, the MCWD said the agreement was authorized by its board through a resolution after the OGCC found it eligible to enter into a joint venture agreement with PrimeWater, and following the review of the 2020 draft contract. It referred to OGCC Opinion No. 142-2020 and OGCC Contract Review 773-2020, all dated June 23, 2020.
It asserted, “Without any court order declaring the Joint Venture Agreement as null and void, under the principle of the presumption of regularity of the official act of the Board of Directors backed by the OGCC opinion, Management can only consider the JVA as a valid agreement and hence will perform the functions of management and operational control of the joint venture…”
Incidentally, a group of water consumers, which questioned the 2020 agreement, has filed a petition seeking the issuance of a writ of preliminary injunction and a temporary restraining order against the MCWD by a regional court in Malaybalay. The petition is pending court resolution.
No study, no consultation
An earlier audit report showed the COA calling out the MCWD for signing the agreement with PrimeWater without assessing the viability of the joint venture.
“There was no feasibility study or a business case/pre-feasibility study of the project conducted by the District [MCWD] as required… there was no basis on the determination whether the JVA was necessary and advantageous on the part of the government,” read part of a COA report for 2021.
Neither was there a clear public consultation, and Malaybalay residents were taken aback when they found out that PrimeWater was already in-charge, said Juanito Aroa, a former MCWD general manager.
Aroa said Malaybalay City, where thousands of consumers are now suffering from a water crisis blamed on the MCWD-PrimeWater deal, “is just the tip of the iceberg.”
“The Villars and PrimeWater are doing the same thing all over the country,” Aroa said.
Supply disruptions
In a separate statement, PrimeWater said disruptions in its bulk water supply have recently caused interruptions in the overall supply in Malaybalay.
It said the company heavily relies on the bulk water supply provided by the local government.
PrimeWater said daily water supply interruptions were occurring between 11 pm and 1 am, resulting in an estimated undelivered volume of 1.5 million liters per day during these periods.
This month, it said, the bulk water supply system in Malaybalay experienced several downtimes, averaging six hours each time, due to repairs on transmission lines.
Aside from these, PrimeWater said unforeseen weather conditions, including heavy rain and flooding, have resulted in constant emergency repairs, leading to disturbances and turbidity in the city’s water supply. – Rappler.com
2 comments
How does this make you feel?
What happened to the “… writ of preliminary injunction and a temporary restraining order against the MCWD by a regional court in Malaybalay. The petition is pending court resolution”? Who is the Judge involved? What took him or her too long to decide? Did he or she took sleeping medication (with matching “financial” sleeping music) from the Villars?
If what Juanito Aroa stated that “The Villars and PrimeWater are doing the same thing all over the country” is true, then the Villars would add the Philippine Water Industry to their existing Real Estate Empire. Is this Good or Bad to the Filipino People?