Revised National Government-Local Government Unit (NG-LGU) Cost Sharing Policy

December 3, 2009 DOF DEPARTMENT ORDER NO. 040-09 FOR : All Heads of National Government Agencies; Government-Owned and Controlled Corporations (GOCCs); Government Financial Institutions (GFIs); and Local Government Units (LGUs) SUBJECT : Revised National Government-Local Government Unit (NG-LGU) Cost Sharing Policy 1. The Department of Finance (DOF), pursuant with its mandate based on the Local Government Code of 1991, is hereby enjoining the aforementioned government institutions and agencies to adopt the revised financing policy which particularly includes the newly-approved NG-LGU Cost Sharing Policy for Solid Waste Management (SWM) project under Cluster 3-brown environmental subprojects which provides higher grant to higher income class cities in consonance with the Ecological Solid Waste Management Act or RA No. 9003. EcDTIH 2. The abovecited Cost Sharing Policy for SWM project intends to provide LGUs access to financing in implementing SWM projects within a time-bound program of 5 years . Metro Manila LGUs are not included due to their special SWM requirements and management arrangements. 3. Concerned agencies should explore the feasibility of tapping private sector participation and set up a facility to address LGU financing requirements for SWM projects which includes pooling of relevant funds from various ODA-Projects geared towards supporting SWM activities to materialize the said cost sharing scheme. 4. The Revised Guiding Principles and NG-LGU Cost Sharing Policy shall cover only the construction cost of the civil works and shall exclude, but not limited to, the following: Pre-Implementation Costs a. Feasibility Studies b. Detailed Engineering Design (DED) Preparation c. Site Development and Right-of-Way d. Survey of Lots and Other Land Acquisition and Resettlement Costs cCaDSA e. Support Facilities for Subproject Implementation Units ( i.e., computers, vehicles, airconditioned units, office supplies and other furniture and fixtures) f. Clearances and Other Permits ( i.e., ECC, water permits, etc.) Post-Implementing Costs a. Operation and Maintenance Attached as Annex A is the Revised Guiding Principles and NG-LGU Cost Sharing Policy to be used in the evaluation and processing of projects involving devolved activities. This Order shall take effect immediately and accordingly amends DOF Memorandum dated 23 January 2007. HETDAC Please be guided accordingly. (SGD.) MARGARITO B. TEVES Secretary ANNEX A Guiding Principles and NG-LGU Cost-Sharing Policy in the Evaluation and Processing of Projects Involving Devolved Activities Approved by the Investment Coordinating Committee-Cabinet Committee (ICC-CC) on December 12, 2002 and NEDA Board on March 2003 Guiding Principles of the NG-LGU Cost Sharing Scheme: 1. The new financing mix shall adopt a separate Loan-Grant-Equity mix for Provinces/Municipalities and for Cities. 2. Expanded the activities that NG could cost share with LGUs to include revenue generating subprojects (under Cluster 1) and brown subprojects (under Cluster 3). 3. Maintain ICC policy that the maximum allowable grant should not be more than 50% of the total subproject cost to be applied accordingly to the following subprojects: a. Social and Environment Subprojects under Cluster 2 (for 5th and 6th income class LGUs) . b. Brown Environmental Subprojects particularly solid waste management facilities and projects under Cluster 3 (for 1st to 4th income class Cities). 4. Grant for the 1st to 4th income class cities implementing Brown Environment Subprojects for Solid Waste Management (SWM) under Cluster 3 shall be provided within a time-bound program of 5 years. 5. Of the total LGU equity requirements, the minimum cash component should be 10% of the total subproject cost. 6. The application of the cost sharing arrangement only covers the construction cost of the civil works, and shall exclude, but not limited to the following: AICTcE Pre-Implementation Cost a. Feasibility Studies b. Detailed Engineering Design (DED) Preparation c. Site Development and Right-of-Way d. Survey of Lots and Other Land Acquisition and Resettlement Cost e. Support Facilities for Subproject Implementation Units ( i.e., computers, vehicles, airconditioned units, office supplies and other furniture and fixtures) f. Clearances and Other Permits ( i.e., ECC, water permits, etc.) Post-Implementation Costs a. Operation and Maintenance 7. For multi-sectoral projects, the Loan-Grant-Equity mix will be based on the component unit with the largest investment share. 8. The revised cost-sharing arrangements shall apply only to devolved activities of LGUs, which are categorized as follows: Cluster 1 Subprojects that are generally considered as public economic enterprises which include but not limited to the following: Public Markets, Slaughterhouses, Bus and Jeepney Terminals, Municipal Wharves and Fish Ports, Post Harvest Facilities, Cold Storage Facilities, Ice Plants, Water Supply Level III, Public Memorial Parks cdll LGU Municipalities and Province Cities Income Loan Grant Equity Loan Grant Equity Class 1st & 2nd 0 0 0 0 0 0 3rd & 4th 70 20 10 0 0 0 5th & 6th 40 50 10 0 0 0 Cluster 2 Subprojects that are generally social and green/blue environment related which include but not limited to the following: a. Social Subprojects Health Centers, Lying-in Clinics and Hospitals, School Buildings, Water Supply Levels I and II, Communal Irrigation, Farm-to-Market Roads, Rural Roads or Local Roads, Bridges b. Green/Blue Subprojects Reforestation, Forest-Related Activities, Soil Conservation, Mangrove and Watershed Protection, River and Seashore Protection SaHcAC LGU Municipalities and Province Cities Income Loan Grant Equity Loan Grant Equity Class 1st & 2nd 50 30 20 80 0 20 3rd & 4th 45 40 15 80 0 20 5th & 6th 40 50 10 50 30 20 Cluster 3 Consist of brown environment-related subprojects which include but not limited to the following: a. Water Waste Facilities and Projects (Drainage, Sewerage and Sanitation Support) LGU Municipalities and Province Cities Income Loan Grant Equity Loan Grant Equity Class 1st & 2nd 60 20 20 80 0 20 3rd & 4th 45 40 15 80 0 20 5th & 6th 40 50 10 60 20 20 b. Solid Waste Management Facilities and Projects (Materials Recovery Facilities, Sanitary Landfill and Transport System) aDHCcE LGU Municipalities and Province Cities 1 , 2 , and 3 Income LGU Share LGU Share Class Grant (Loan/Equity) Grant (Loan/Equity) 1st & 2nd 20 60/20 40 60 3rd & 4th 40 45/15 25 75 5th & 6th 50 40/10 20 80 Footnotes 1. Does not include Metro Manila LGUs due to their special SWM requirements and management arrangements. 2. Effectivity: The revised "NG-LGU Cost Sharing Policy for SWM Projects" shall apply to prospective projects to be submitted to and approved by the ICC effective immediately upon the issuance of guidelines and policies defining the appropriate mechanisms and institutional arrangements among agencies involved in the implementation of SWM project and provision of SWM funds. 3. Approved by the NEDA-INFRACOM on 27 August 2008 and by the President on 11 February 2009. Published in The Philippine Star on December 11, 2009.