Maynilad issues; homeowners raise alarms.

Congress to investigate.
REPUBLIC OF THE PHI.,IPPINES
HOUSE OF REPRESENTATIVES
QUEZON LCITY

SUBJECT: HOUSE RESO NO. 1672

DIRECTING THE COMMITTEE ON GOVERNMENT ENTERPRISES AND PRIVATIZATION TO

CONDUCT AN INQUIRY, IN AID OF LEGISLATION, INTO THE PROPOSED MEMORANDUM OF
AGREEMENT TO BE ENTERED INTO BETWEEN THE METROPOLITAN WAERWORKS AND
SEWERAGE SYSTEM (MWSS) THRU THE MAYUNILAD WATER RESOURCES, AND THE
RESIDENTS OF SUBDIVISIONS OF BF RESORT, BF PILAR, AND BF ALMANZA, WHICH WOULD
LEAD TO EXORBITANT WATER RATES.

(Filed by Cong. Maximo B. Rodriguez, Jr. and Cong. Rufus Rodriguez)

POSITION PAPER
[On the Memorandum of Agreement (MOA) Among
Maynilad Water Resources (Maynilad Water, As a Concessionnaire
of the Metropolitan Waterworks and Sewerage System (MWSS), BF Resort Village Homeowners
Association Inc. [“BFRVHAI” or “Association”), BF Homes Inc. and Philippine Waterworks and
Construction Corporation (PWCC)]

By: Atty. Myrna C. Mercader

Immediate Past President and
Incumbent Director, BFRVHAI
BF Resort Homeowner/Resident

I. Background

The background facts are as follows:

1. BF Resort Village (“BFRV” or “Subdivision”) is a subdivision located in Talon Dos, Las Pinas City.

2. BF Resort Village Homeowners Association Inc. (BFRVHAI) is the homeowners association among the
homeowners within BFRV.

3. BFRV was developed by BF Homes Inc. with the lots almost fully sold out, despite which BF Homes
has not turned or donated the BFRV open spaces to the City Government of Las Pinas or the BFRVHAI.

4. As admitted by BF Homes, the BRFV water system is operated by PWCC, a sister company of BF
Homes.

5. In the deeds of sale of the lots inside the BFRV, sold by BF Homes to BFRV homeowners, BF Homes
expressly undertook to provide water to the lot buyers.

6. Maynilad Water is the concessionaire of MWSS in Las Pinas City.

7. The financial package stated in the questioned Memorandum of Agreement (MOA) that applies to
BFRV homeowners consists of the following:

7.1. The homeowners, thru the Association, will pay BF Homes/PWCC the amount of FORTY THREE
MILLION PESOS (Php43,000,000.00) for the use of the old water facilities of the latter located inside the
subdivision, payable as follows:

7.1.1. EIGHT MILLION PESOS (Php8,000,000.00), payable at P1,000.00 per homeowner, approximated
at 8,000 homeowners (subject to upward or downward adjustment depending on the actual number of
homeowners applying for Maynilad water connection);

7.1.2. TWENTY FIVE MILLION PESOS (Php25,000,000.00), to be advanced by Maynilad Water to BF

Homes, subject to reimbursement by the homeowners in 60 monthly amortizations; and

7.1.3. TEN MILLION PESOS (Php10,000,000.00), consisting of application of the paid water and water
meter deposits of homeowners with the PWCC.

7.2. Maynilad Water will advance the pipe laying costs of TWO HUNDRED EIGHTY-SIX MILLION PESOS
(Php286,000,000.00) for the account of the homeowners, payable within five (5) years at a monthly
amortization of about P648.00 per month, subject to adjustment depending on how many homeowners
will apply for water connection with Maynilad Water.

8. Maynilad will advance the total amount of P311 Million as follows:

8.1. P25 M as payment to BF Homes for the use of the old water pipes; and

8.2. P286 M as costs of pipe laying for the new water system.

9. The certificate of public convenience in favor of BF Homes already expired in August 2011.

10. As early as 2006, the capex of BF Homes for the water facilities inside the subdivision was already
reported at “0” book value.

II. Major Issues

The major issues raised herein are:

A. Whether or not BF Homes/PWCC are entitled to the compensation in the amount of FORTY THREE
MILLION THOUSAND PESOS (Php 43,000,000.00) for the use of their more than 30 years old water
pipes?

B. Whether or not the pipe laying costs of TWO HUNDRED EIGHTY-SIX MILLION PESOS
(Php286,000,000.00) may be charged by Maynilad Water to the homeowners of the BF Resort Village,
represented by the BF Resort Village Homeowners Association?

C. Whether or not the compulsory donation of the new water system to be paid by the homeowners in
favor of Maynilad Water/MWSS is valid and binding?

D. Whether or not the water and water meter deposits of Ten Million Pesos (P10,000,000.00) of one (1)
set of homeowners may be legally applied as payment for the use of the old water facilities of BF
Homes/PWCC?

III. DISCUSSION

The above issues are discussed in the following paragraphs.

A. Whether or not BF Homes/PWCC

are entitled to the compensation
in the amount of FORTY THREE
MILLION THOUSAND PESOS
(Php 43,000,000.00) for the use
of their more than 30 years old
water pipes?

Position: BF Homes/PWCC are not entitled to compensation of P43 M

for the use by Maynilad Water of the more than 30 years old
water pipes.

Reasons: 1. The costs of the pipe laying, including the open spaces
on which the water system stands were already
inputted as part of the development costs that
composed the selling prices of the lots sold.

2. BF Homes/PWCC operated the water facilities for more

than 30 years, selling water to the homeowners for the
same period of time, thereby making huge profits
therefrom already.

3. The certificate of public convenience of BF

Homes/PWCC has already expired in August 2011.

4. The capex of BF Homes/PWCC inside BF Resort Village

had been reported as “0” book value as early as 2006.

5. Contrarywise, BF Homes, thru PWCC, even has the legal

obligation under P. D. 1345 to pay the rehabilitation or
restoration of the water system upon the turnover
thereof to MWSS (represented by Maynilad Water).

B. Whether or not the pipe laying costs

of TWO HUNDRED EIGHTY-SIX
MILLION PESOS (Php286,000,000.00)
may be charged by Maynilad Water to the
homeowners of the BF Resort Village,
represented by the BF Resort Village
Homeowners Association?

Position: The pipe laying costs of Maynilad Water ought to be

shouldered by it and not to be passed on to the
homeowners.
Reasons: 1. Any and all business entities ought to shoulder all
capital expenditures connected with their line of business. Maynilad Water must not be excluded from
this basic business precept.

Parallel examples are Meralco and PLDT. Even these two (2) huge utility companies are known to be
shouldering their own capex. They do not pass to the consusmers their capex.

2. During the operation of the new water system, Maynilad

water will be allowed to charge water rates
commensurate to the capex invested.

Will Maynilad Water be allowed rates of return on

capex that were put up by the homeowners. This is
very unfair and unjust.

C. Whether or not the compulsory donation

of the new water system to be paid by the
homeowners in favor of Maynilad Water/MWSS
is valid and binding?

Position: The Board of Directors of the BF Resort Village

Homeowners Association has no power to sign the
MOA that provides for the compulsory donation of
the new water system amounting to P311 million that
comprise all or substantially all of the assets of the
homeowners that the Association represent.

Reasons: 1. The Board of Directors is only allowed to make

reasonable donation under Section 36 of the
Corporation Code.

2. To make such donation valid and binding, the

donation ought to be approved by at two-thirds
(2/3) of the members of the Association as
provided under Section 40 of the Corporation
Code.

There was no such approval of the donation by at

least 2/3 of the members of the Association.

D. Whether or not the water and water meter

deposits of Ten Million Pesos (P10,000,000.00)
of one (1) set of homeowners may be legally
applied as payment for the use of the old water
facilities of BF Homes/PWCC?

Position: The water and water meter deposits of one (1) set of
homeowners cannot be applied as part of the
compensation to BF Homes/PWCC.

Reasons: 1. The Association is not the owner of the those water and
 water meter deposits;

2. There will be owners of those water and water meter

deposits agreed to be applied who will not apply for
Maynilad Water connection.

3. The owners of those water and water meter deposits

have not agreed to the application of their water and
water meter deposits as payment for BF Homes/PWCC.

Las Pinas City, September 8, 2011.

ATTY. MYRNA C. MERCADER

Immediate Past President and Incumbent Director, BF
Resort Village Homeowners Association
BF Resort Village Homeowner/Resident

Attachments:

1. Copy of the MOA with BF Resort Village Homeowners Assn

2. Copy of Financial Statements of BF Homes
3. Copy of Deed of Sale of BF Homes covering the sale of lots in BF Resort Village
4. Copy of the CPC renewal of BF Homes