The Aquino (Part II) administration does not seem to mind the turmoil over water service in this metropolis of some 15 million people, featuring the government outfit MWSS and its two concessionaires, Manila Water and Maynilad.
The MWSS board, headed by Gerardo Esquivel as MWSS administrator, recently ordered huge cuts in water rates, accusing the two companies of passing to the public supposedly questionable charges. The concessionaires, on the other hand, argued that their contracts with the MWSS have allowed those “questionable charges” all along—or ever since the government privatized the water distribution service almost 20 years ago.
In various reports in media, however, the boys of our leader Benigno Simeon (aka BS) said that the MWSS should honor the terms of its contracts with those two firms, floating in effect the position of the Palace—i.e. the MWSS-ordered cut was wrong. The position of the Palace over the issue, nevertheless, hardly seems to matter now. The business sector is expecting the issue to go to tedious and expensive arbitration, which of course is expected only to be bad for the public.
In the meantime, while the issue on the water rates is hanging, as the MWSS does not want to budge, word goes around that the concessionaires are holding off new investments that this country needed since the last century. Moreover, the MWSS board—no less—faces some embarrassing issues of graft and corruption that may drag down the Aquino (Part II) administration, busy as the Palace seems to be in deflecting the pork barrel scandal away from our leader BS.
In the House of Representatives, for instance, Rep. Jonathan dela Cruz (partylist Abakada), who is also a newsman, already called for an investigation into the reported “irregularities” at the MWSS, involving the members of its board of trustees. Dela Cruz noted that the board members gave themselves “excessive bonuses.” Not only that, they also called for more board meetings, in some cases four meetings in just a single day, thus collecting additional per diem for every meeting. Not only that, the MWSS Labor Association (or MLA) also filed graft charges against Esquivel and the board members, accusing them of going around the law to collect P58,000 each in daily allowances by holding four board meetings a day.
Not only that, the MLA noted that under the law, the per diem of each board member was only limited to P14,500—compared to the per diem received by the members at P58,000 each for holding, supposedly, four board meetings a day. Not only that, the MLA members said that the MWSS board members actually received P136,000 each in monthly allowances for holding “four” meetings a day, four times each month at their “honorarium” of P8,500 per meeting. Not only that, reports said that MWSS board also reduced the meal allowance of the rank-and-file, from P150 to only P3 a day per employee, and I am not sure what kind of fit-only-for-animal meal that your P3 can buy nowadays.
Not only that, the MLA accused the board members of giving themselves bonuses, of hiring highly paid consultants that only duplicated the work of regular employees, even allegedly faking the date of the hiring of those consultants, receiving P50,000 a month each. How many consultants did the MWSS board hire? Well, only 46 in all! By the way, the MLA seems to have gotten their information on the hanky-panky in the board from the Commission on Audit, or the COA, which noted that the MWSS violated government rules in hiring those consultants. How much in compensation did the MWSS spend for those consultants? Well, according to the COA, for the year 2012, for just one year, MWSS paid its consultants close to P90 million.
The COA audit report for instance noted that, last year, in just a year, the MWSS board actually released P74 million in “unauthorized allowances” for those consultants. Those allowances thus added to the ballooning expenditure of the MWSS, which in fact the MWSS overshot by some P120 million last year, as against its yearly budget. On top of their monthly pay of P50,000 each, those consultants also received a total of P17 million in so-called representation and transportation allowances (or Rata), although the allowable amount for the Rata was less than P4 million a year.
The thing is, according to recent reports, under Esquivel in the past three years the MWSS already hired more than 400 consultants, despite the government ban on the hiring of contractual and casual workers. Reports also said that among those Esquivel-hired MWSS consultants were the top honchos in the supposed NGOs that attacked the very same concessionaires of the MWSS, namely, Manila Water and Maynilad.
And so with his well-compensated board members and his highly paid consultants probably cheering, Esquivel ordered Manila Water and Maynilad to reduce their rates by 30 percent (Manila Water) and by 5 percent (Maynilad). Reason: Both concessionaires included their income tax payments as expenses in their computation of the rates.
Now, former economic planning secretary Felipe Medalla, an economics professor at the University of the Philippines, who was a consultant of the government in the water service privatization in the 1990s, already explained the income tax issue. Well, for one, their contracts clearly stated a guaranteed rate of return, called the “appropriate discount rate (ADR),” which should be computed after taxes are deducted. In effect, the income tax payments would actually have no effect on the water rates.
Here are Medalla’s exact words: “The effect on the tariff is neutral. You removed income taxes (from the recoverable expenses) but you increased the rate of return, so the tariff is the same.”
According to Medalla, the ADR of those two concessionaires stood at 9 percent in the past five years, even lower than the ADR from 2003 to 2007 of more than 10 percent. For that matter, the rate proposal of the two concessionaires (the one rejected by the MWSS board and consultants) would hit an ADR of only less than 9 percent.