Bureau of Local Government Finance Opinion

October 30, 2014 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Hon. Alfredo G. Germar Municipal Mayor Norzagaray, Bulacan Sir : This pertains to your letter dated September 30, 2014 seeking enlightenment on the applicability, among others, of Section 291 of R.A. No. 7160, otherwise known as the Local Government Code (LGC) of 1991 which categorically specified that "[ L ] ocal government units shall have a share based on the preceding fiscal year from the proceeds derived by " any government agency or government owned or controlled corporations (GOCCs) " engaged in the utilization and development of the national wealth, . . . . " ( Emphasis ours ) aICcHA In view hereof, you would like to be enlightened on the following issues: 1. Whether the provision of Section 291 of the LGC is applicable on Manila Water Company, Inc. (MWCI) and Maynilad Water Services, Inc. (Maynilad), both private corporations that took over the operations, management and distribution of water from the Metropolitan Waterworks Sewerage System (MWSS) by virtue of the provisions of R.A. 8041 or the Water Crisis Act of 1995, and later to the Angat Hydro Power Corporation which managed and operated the Angat Hydro Electric Power Plant sold by PSALM to a Korean firm which are not GOCCs. 2. Whether the provision of paragraph (c) of Sec. 194 of the same Code is also applicable to the case of MWCI and Maynilad. The prescriptive period of five (5) years in the assessment of back taxes, fees or charges as the issue is specified as "share from the utilization and development of national wealth in relation to Sections 289 and 291". Representations are made that the aforementioned corporations are utilizing water from the Angat Dam Reservoir for hydroelectric power generation, domestic used and irrigation. However, only the National Power Corporation (NPC) remitted its share religiously to the Province of Bulacan, the component Municipalities of Doa Remedios Trinidad and Norzagaray and their barangays where the Angat Dam is located. Moreover, it is alleged that MWSS did not remit the corresponding shares of LGU concerned, but instead brought the case to the Supreme Court for final decision. Also, the National Irrigation Administration (NIA) which owns the Bustos Dam where the water from Angat Dam is deposited to irrigate 33,000 hectares of riceland in Bulacan and Pampanga does not remit the shares of LGUs for irrigation fees collected from farmers. At the outset, it may be worth clarifying that Section 291 of the LGC is only applicable to Government-owned or Controlled Corporations (GOCCs). The provision specifically provides that local government units (LGUs) shall have a share based on the preceding fiscal year from the proceeds derived by any GOCC engaged in the utilization and development of the national wealth. The terms national wealth is defined in Article 386 of the Implementing Rules and Regulations (IRR), implementing Section 289 of the LGC as follows: ". . . shall mean all natural resources situated within the Philippine territorial jurisdiction including lands of public domain, waters , minerals, coal, petroleum, mineral oils, potential energy forces, gas and oil deposits, forest products, wildlife, flora and fauna, fishery and aquatic resources, and all quarry products." ( Emphasis ours ) Referring to Section 291 of the LGC, it will only be applicable in case of NPC and NIA both of which are officially listed as Government-owned and Controlled Corporations in the National Government website: http://www.gov.ph/directory/government-owned-and/or-controlled-corporations/ . EHaASD In the case of MWCI and Maynilad Water Services, Inc. ("Maynilad") the applicable provision of law is Section 289, which provides: "Section 289. Share in the Proceeds from the Development and Utilization of the National Wealth. Local government units shall have an equitable share in the proceeds derived from the utilization and development of the national wealth within their respective areas, including sharing the same with the inhabitants by way of direct benefits." On the basis of the aforementioned provisions law, it is clear that the Municipality of Norzagaray is entitled to a corresponding equitable share in the proceeds derived from the utilization and development of national wealth (water) by both MWCI and Maynilad on the basis of the given formula that yields a higher share for the LGU as provided under Section 291, LGC. As to the manner and procedures in the release of LGUs shares from such activity, Section 286 of the LGC, provides: "Section 286. Automatic Release of Shares. (a) The share of each local government unit shall be released, without need of any further action , directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose." In this connection, your Office may inquire with the Department of Budget and Management (DBM) for the information regarding the shares of the Municipality of Norzagaray from the utilization and development of national wealth by MWCI and Maynilad. SICDAa With regard to GOCCs like NPC and NIA, such shares shall be directly remitted to the local treasurer concerned within five (5) days after the end of each quarter. ( Section 293, LGC ) On the issue of the applicability of Section 194 (c) of the LGC, it is the view of this Bureau that the same has no bearing with the issues submitted for clarification, LGU shares from the utilization and development of national wealth, considering that said provision of law concerns local taxes, fees and charges which are entirely different from the subject of Section 289. Distinctively, paragraph (c) of Section 194 speaks of assessments of local taxes, fees, or charges made by a local government unit pursuant to Section 174 of the same Code and therefore outside of the scope of Section 289, the assessment and collection of which is by the National Government through the Bureau of Internal Revenue (BIR). We hoped that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director