Revised Local Water District Charter of 2026

Senate Office of the Stuerate TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES First Regular Session ) 26 MAR -4 P4:52 SENATE 1931 RECEIVED BY: S. No. Introduced by Senator Manuel "Lito" M. Lapid AN ACT MODERNIZING THE PROVINCIAL WATER UTILITIES ACT OF 1973, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF PRESIDENTIAL DECREE NO. 198, AS AMENDED, AND FOR OTHER PURPOSES EXPLANATORY NOTE Presidential Decree No. 198, otherwise known as the "Provincial Water Utilities Act of 1973," was a landmark legislation that successfully decentralized water service delivery, creating over 500 Local Water Districts (LWDs) nationwide. These water districts serve as the lifeblood of our provinces, municipalities, and cities outside Metro Manila. However, half a century later, the water sector faces new and complex challenges that the original 1973 charter is ill-equipped to handle. While many LWDs have provided excellent service to our kababayans, a significant number are constantly threatened by political interference, compromising their autonomy and disrupting essential public services. The recurring leadership crises at the Metropolitan Cebu Water District (MCWD) serve as a glaring example of the vulnerabilities in the current law. This cycle of political retaliation became evident in October 2019, when the sitting Cebu City Mayor, the late Edgardo C. Labella, unilaterally fired all five members of the MCWD Board of Directors. The dismissed directors were appointees of the mayor's political predecessor. Using "widespread consumer dissatisfaction" as a convenient justification, the local chief executive bypassed due process. The Local Water Utilities Administration (LWUA) subsequently backed the move and installed an interim board, plunging the utility into a protracted legal battle that reached the Supreme Court over the question: Does a Mayor have the power to dismiss a water district director?

Because the law's loopholes regarding the removal of directors were never explicitly closed, history repeated itself in late 2023 and early 2024. Another severe political tug-of-war paralyzed the MCWD when a new City Mayor, Michael V. Rama, attempted to unilaterally dismiss the sitting Chairman of the Board and its directors, replacing them with his own political allies. This resulted in a chaotic standoff where city officials and police forces attempted to forcibly enter and take over the water district's premises. The ensuing confusion targeted not only the Board but also the General Manager, disrupting the district's operations right in the middle of a severe El Niño water crisis. When local chief executives treat water districts as political fiefdoms rather than independent utilities, it is the ordinary consumer who suffers from dry taps and poor service. To protect our water utilities from hostile political takeovers and to modernize their operations, this bill seeks to introduce the following critical reforms to P.D. 198: a. Security of Tenure for Officers: It explicitly clarifies that the appointing authority (the Mayor or Governor) has no power to remove sitting members of the Board of Directors. Removal can only be done for valid cause, by a majority vote of the Board itself, subject to the approval of the Local Water Utilities Administration (LWUA). b. Protection for the General Manager: To ensure that the day- to-day operations of the water district remain professional and insulated from board-level politics, the General Manager is elevated to a career executive professional enjoying security of tenure and protecting them from partisan politics. C. Professionalization of the Board: It shifts the qualification of Directors to specific professional competencies (Engineering, Law, Finance). d. Mandatory Wastewater Management: It transitions the provision of sewerage and septage management from an optional power to a mandatory duty, addressing the country's looming wastewater crisis in our fast- growing provincial cities. e. Financial Autonomy: It liberates highly viable and creditworthy water districts from the bureaucratic bottlenecks of LWUA, allowing them to directly access faster commercial and government financing for immediate infrastructure upgrades, subject to appropriate debt-service safeguards.

For the welfare of our provincial communities, the protection of our water utilities professionals, and the continuous delivery of clean water to every Filipino household, the immediate passage of this bill is earnestly sought. MANUEL "LITO" M. LAPID Senator

Senate Office of the Scretary TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES ) First Regular Session ) 26 MAR -4 P4:52 SENATE S. No. 1931 RECEIVED BY: Introduced by Senator Manuel "Lito" M. Lapid AN ACT MODERNIZING THE PROVINCIAL WATER UTILITIES ACT OF 1973, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF PRESIDENTIAL DECREE NO. 198, AS AMENDED, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the "Revised Local Water

District Charter of 2026."

SEC. 2. Declaration of Policy. - Section 2 of Presidential Decree No. 198, as

4 amended, is hereby further amended to read as follows: "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. TOWARDS THIS END, THE STATE SHALL GUARANTEE THE OPERATIONAL AND FINANCIAL AUTONOMY OF LOCAL WATER DISTRICTS, SHIELDING THEIR OPERATIONS FROM UNWARRANTED POLITICAL INTERFERENCE AND PARTISAN CONFLICTS THAT DISRUPT THE DELIVERY OF BASIC SERVICES. IT IS HEREBY DECLARED THE POLICY OF THE STATE TO PROFESSIONALIZE THE GOVERNANCE OF LOCAL WATER UTILITIES, GUARANTEE THE SECURITY OF TENURE OF

ITS DIRECTORS AND MANAGEMENT BASED ON MERIT AND DUE PROCESS, PROMOTE THE FINANCIAL INDEPENDENCE OF VIABLE UTILITIES, AND MANDATE THE INTEGRATION OF COMPREHENSIVE WASTEWATER AND SANITATION SERVICES TO PROTECT PUBLIC HEALTH AND THE ENVIRONMENT."

SEC. 3. Professionalization of the Board. - Section 8 of Presidential Decree No.

198 is hereby amended to read as follows: "SEC. 8. [Number] COMPOSITION and Qualifications. - The Board of Directors of a district shall be composed of five (5) citizens of the Philippines who are of voting age and residents within the district. THE BOARD SHALL BE CONSTITUTED AS FOLLOWS: A. ONE MEMBER WHO IS A CERTIFIED PUBLIC ACCOUNTANT (CPA) OR A FINANCIAL MANAGEMENT EXPERT WITH AT LEAST FIVE (5) YEARS OF EXPERIENCE; B. ONE MEMBER WHO IS A LICENSED CIVIL OR SANITARY ENGINEER WITH AT LEAST FIVE (5) YEARS OF EXPERIENCE; C. ONE MEMBER WHO IS A MEMBER OF THE PHILIPPINE BAR; D. ONE MEMBER WITH A BACKGROUND IN MANAGEMENT, HUMAN RESOURCES, OR PUBLIC ADMINISTRATION; AND E. ONE MEMBER REPRESENTING THE CIVIC SECTOR OR CONSUMER ORGANIZATIONS. NO ELECTIVE OR APPOINTIVE PUBLIC OFFICIAL SHALL CONCURRENTLY SERVE AS DIRECTOR. THE QUALIFICATION AND THE COMPOSITION OF THE BOARD OF DIRECTORS SHALL BE STRICTLY VERIFIED AND APPROVED BY THE ADMINISTRATION."

SEC. 4. Security of Tenure and Removal of Directors. - Section 11 of the same

Decree is hereby amended to read as follows:

"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, shall expire on December 31 of each even numbered year. Regular terms of office after initial terms shall be for six years commencing on January 1 of odd-numbered years. Directors may be removed for cause only, subject to review and approval of the Administration. ALL MEMBERS OF THE BOARD OF DIRECTORS MAY BE REMOVED FOR CAUSE ONLY. TO GUARANTEE THE OPERATIONAL AUTONOMY OF THE WATER DISTRICT, THE APPOINTING AUTHORITY SHALL HAVE NO POWER OR JURISDICTION TO REMOVE, SUSPEND, OR DISCIPLINE ANY SITTING MEMBER OF THE BOARD OF DIRECTORS. A DIRECTOR MAY ONLY BE REMOVED BY A MAJORITY VOTE OF THE REMAINING MEMBERS OF THE BOARD OF DIRECTORS, STRICTLY FOR CAUSE, AND SUBJECT TO THE OBSERVANCE OF DUE PROCESS AND THE FINAL REVIEW AND APPROVAL OF THE ADMINISTRATION. PENDING SUCH REVIEW AND APPROVAL BY THE ADMINISTRATION, THE CHALLENGED DIRECTOR SHALL REMAIN IN OFFICE."

SEC. 5. Security of Tenure of the General Manager. - Section 23 of the same

Decree is hereby amended to read as follows: "SEC. 23. The General Manager. - At the first meeting of the board, or as soon thereafter as practicable, the board shall appoint, by a majority vote, a general manager and shall define his duties and fix his compensation.

THE GENERAL MANAGER SHALL BE A CAREER EXECUTIVE PROFESSIONAL. TO ENSURE THE CONTINUOUS AND EFFICIENT DELIVERY OF PUBLIC SERVICE AND TO INSULATE THE DAY-TO-DAY OPERATIONS OF THE DISTRICT FROM POLITICAL INTERFERENCE, THE GENERAL MANAGER SHALL ENJOY SECURITY OF TENURE. THE GENERAL MANAGER SHALL NOT BE SUSPENDED, DISMISSED, OR REMOVED FROM OFFICE EXCEPT FOR VALID CAUSE AS PROVIDED BY CIVIL SERVICE LAWS AND REGULATIONS, AND ONLY AFTER THE OBSERVANCE OF ADMINISTRATIVE DUE PROCESS. PROVIDED, THAT THE INCUMBENT GENERAL MANAGERS SERVING AT THE TIME OF THE EFFECTIVITY OF THIS ACT SHALL CONTINUE TO HOLD OFFICE AND SHALL IMMEDIATELY ENJOY THE SECURITY OF TENURE AND ALL OTHER RIGHTS AND PRIVILEGES GRANTED UNDER THIS ACT, WITHOUT THE NEED FOR A NEW APPOINTMENT. PROVIDED, FURTHER, THAT THE INCUMBENT GENERAL MANAGERS SHALL BE GIVEN A PERIOD OF FIVE (5) YEARS FROM THE EFFECTIVITY OF THIS ACT TO COMPLY WITH THE QUALIFICATIONS SET BY THE CIVIL SERVICE COMMISSION (CSC) IN COORDINATION WITH THE ADMINISTRATION; PROVIDED, FINALLY, THAT FAILURE TO COMPLY WITH THE REQUIRED QUALIFICATIONS WITHIN THE PRESCRIBED PERIOD SHALL RESULT IN THE AUTOMATIC VACANCY OF THE POSITION."

SECTION 6. Mandatory Wastewater Management. - Section 5 of the same

Decree is hereby amended to read as follows: "SEC. 5. Purpose. - Local water districts may be formed pursuant to this Title for the purpose 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,} 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, AND (B) PROVIDING, MAINTAINING, AND OPERATING WASTEWATER COLLECTION, TREATMENT, AND DISPOSAL FACILITIES. (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. PROVIDED, THAT WITHIN TEN (10) YEARS FROM THE EFFECTIVITY OF THIS ACT, IT SHALL BE MANDATORY FOR ALL LOCAL WATER DISTRICTS TO ESTABLISH AND OPERATE A SEPTAGE MANAGEMENT SYSTEM OR A SEWERAGE SYSTEM. FAILURE TO COMPLY SHALL BE A GROUND FOR THE TAKEOVER OF MANAGEMENT BY THE ADMINISTRATION." THE ADMINISTRATION SHALL ENSURE COMPLIANCE OF THIS PROVISION WITH ALL THE LOCAL WATER DISTRICTS AS SOON AS PRACTICABLE.

SEC. 7. Financial Deregulation. - A new paragraph is hereby inserted, Section

61-A to read as follows: "SEC. 61-A. DIRECT BORROWING AUTHORITY. - NOTWITHSTANDING THE FOREGOING, LOCAL WATER DISTRICTS CLASSIFIED AS CATEGORY A OR B BY THE ADMINISTRATION, AND WHICH HAVE POSTED POSITIVE NET INCOME FOR THE LAST THREE (3) CONSECUTIVE YEARS, SHALL HAVE THE AUTHORITY TO CONTRACT LOANS DIRECTLY

FROM GOVERNMENT OR PRIVATE FINANCIAL INSTITUTIONS WITHOUT THE NEED FOR PRIOR CONDITIONAL APPROVAL OR REVIEW BY THE ADMINISTRATION; PROVIDED, THAT TO ENSURE FISCAL RESPONSIBILITY, THE DISTRICT MUST MAINTAIN A DEBT SERVICE COVERAGE RATIO (DSCR) AND COMPLY WITH THE BORROWING CAPACITY LIMITS AS MAY BE PRESCRIBED BY THE DEPARTMENT OF FINANCE (DOF), IN CONSULTATION WITH THE BANGKO SENTRAL NG PILIPINAS (BSP), FOR GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS (GOCC). PROVIDED, FURTHER, THAT THE DISTRICT SHALL NOTIFY THE ADMINISTRATION OF SUCH LOANS STRICTLY FOR RECORDING AND MONITORING PURPOSES."

SEC. 8. Transitory Provision. - Incumbent Directors of Local Water Districts at

the time of the effectivity of this Act shall not be prejudiced and shall be allowed to serve the remainder of their unexpired terms. Incumbent General Managers serving at the time of the effectivity of this Act shall immediately enjoy the security of tenure provided under Section 5 of this Act.

SEC. 9. Separability Clause. - If any provision of this Act is declared

unconstitutional or invalid, the other provisions not affected thereby shall remain in full force and effect.

SEC. 10. Repealing Clause. - All laws, decrees, executive orders, rules, and

regulations inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

SEC. 11. Effectivity. - This Act shall take effect fifteen (15) days after its

publication in the Official Gazette or in a newspaper of general circulation. Approved,