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SOLVING THE WATER PROBLEMS OF ILIGAN THROUGH PUBLIC PRIVATE PARTNERSHIP OR PPP

AJI GARBANZOS
Iligan City, Philippines
November 1, 2015

First of a Series

Iligan needs to raise at least P 1 B to solve its current water problems. This is on top of the P 400 million +- loan that the City made from the WB and the LBP during the term of the previous administration. The P 400 million+- loan was made in order to take care of new primary lines (the “giant” blue pipes which you saw being laid underground during the previous City Administration) but it did not include the following ENHANCEMENTS OR IMPROVEMENTS:

1. Secondary lines to connect it to the homes of Iliganon residents - remember we can never tap new lines to old ones or else we will be bursting all over the City;

2. Reduction of our NRW or our non-revenue water or losses which is 65% per ICWS figures-which pertains mostly to leakages and illegal tappers;

3. Construction of new water reservoirs - since you do not build new lines without considering the needed reservoirs - specially in the Pala-o and Tipanoy areas;

4. Construction of an STP or a sewerage treatment plant which is a requirement for highly urbanized cities like Iligan City by the DPWH - this alone would cost no less than a billion to construct and can only be materialized when the City makes a loan (again!);

5. And the construction of water filtration systems to assure that the quality of water we are drinking is safe and potable - quantity is not enough we must also make sure our water quality is world class.

Question is how do we raise the money and achieve these enhancements? Well there are 4 viable options:

One, we can continue to SUBSIDIZE our ICWS and spend P 60 to 70 million a year out of our own City coffers (our Collection last year was only P 50 million) and earn negative - this definitely cannot raise for us the needed P 1 Billion in order to solve our water woes;

Two, we can let of go of the ICWS and have it converted into a WATER DISTRICT under the supervision of the LWUA effectively having the City relinquish control of its water assets and at the same time make a loan from the LWUA at rates higher than the bank-LWUA is mandated by law but raising our P 1 billion through this option would burden us more;

Three, we can go for a COOPERATIVE making all Iliganons own the water system. Question is how much contribution should each Iliganon make to raise a billion? And how professionally efficient would it be? Also to put up the needed infrastructures we still need to make a loan;

Or four we can all agree for a PPP arrangement-enter into a Joint Venture (JV) with the private sector under an ROT or Rehabilitate Operate and Transfer scheme-where the City continues to own the assets of the ICWS, avail of the professional expertise of the private sector, remove politics from the ICWS and save the City P 60 to 70 million a year for operational expenses and avail of our P 1 billion with no loan on the part of the City.

Please take note that cost per cubic meter today in Iligan is only P 2 but in order to break even on operations we need to collect P 6 per cubic meter (figure provided by ICWS) since the P 2 does not take into consideration the cost of power of bringing these waters into your house plus the payment of the loan which we made in Land Bank and the World Bank and the attendant hassle of sleepless nights, quarrel with your neighbors etc.

Effectively therefore the City government is subsidizing P 4 per cubic meter per household and we simply cannot afford to do that under a growing population!! In short our ICWS is operating at a loss and how long it will last and its attendant problems-is a question we must all answer in three to 5 years time down the road.

Take note that in the 4 options under consideration, whatever and however we look at it - THERE IS A NEED to increase water rates to a level of not less than P 6 per cubic meter. So whether we continue to self subsidize, go for a PPP, LWUA or go for a Cooperative arrangement - Iligan must still increase its water rates if it means to be a profit generating venture in order to ENHANCE AND IMPROVE our water system in the City.

Why do we need to profit? Simple, we have a growing population, our communities are expanding, we need new lines, we need new reservoirs, an STP, new filtration plants-and how do you think the City will spend for all of these? As a City we cannot afford to take it out of our annual budget which is only around P 1.4 to 1.7 billion.

Consider too that if we continue to government subsidize everything - every P 6 per cubic meter we collect from the public goes through the General Appropriations of the City-which means that all water revenues generated will be divided among the two or more dozen departments of our Local Government - not all will go to the ICWS!!

If we go for a PPP on the other hand the P 6 per cubic meter we collect is wholly used for our water system and its improvement-meaning everything is use for the ICWS and its operations - it is WHOLLY for the ICWS and will not be divided among the various departments of our local government..

By the way before I forget whatever option we choose among the 4- the price range would still be between P 7 to P 10 per cubic meter since water tariff is regulated and monitored by the NWRB and no one can go beyond that.

It is therefore wrong to surmise that since the one offering a solution to our water system is a foreign company they would be charging more - nothing can be further from the truth. Filipino or not the price range is regulated by Government since all of this is regulated by the Water Code of the Philippines.

Iligan must consider its options as early as now since we have a growing population and we have new infrastructures coming like Robinsons and possibly SM or Ayala and how do we expect them to all come when we cannot even solve a very basic problem like water?!

PPP or a JV arrangement with the Private sector has many advantages for the City:

First, we save P 60 to 70 million a year-money which the City can use for more important things for our City;

Second, it takes away the politics from water;

Third, collection efficiency could be address professionally;

Fourth, we can go for the 5 ENHANCEMENTS OR IMPROVEMENTS to our water system as mentioned above without the City spending a single centavo and with no loans to burden our Local Government;

Fifth, we can avail of the professional services of experts through the private sector especially when it comes to NRW reduction-something which the City does not have the expertise.

Sixth, national and local government does not spend a single centavo in a PPP arrangement since it is the money of the Private partner that is being use. Meaning no public funds is used for a PPP arrangement except for the periodic collections made-which is normally locked in for a number of years per agreement-normally 20 to 30 years.

And seventh, best of all our LGU does not need to make a loan-thereby saving for us a lot of money as a City.

(to be continued)
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