The difficulties of establishing a jeepney cooperative

Everything you wanted to know about the jeepney modernization program but were afraid to ask

This is the traditional jeepney previously owned by Raul Padrigo, who is currently president of a Pasig City transport cooperative that was able to upgrade its vehicles even before the deadline in 2020.

(The piece below was written in mid-2021 and was supposed to be submitted as part of a writing grant that was cut short during the same year. As a result, some information may already have changed. This piece was updated a month after original publication to reflect corrections found in another blog post.)

Establishing a jeepney cooperative requires at least 15 persons who have at least 15 individual jeepney franchises for the same route. This is based on regulations issued by two agencies: the Land Transportation and Franchising Regulatory Board (LTFRB), the sole agency authorized to issue permits for land-based vehicles (except for tricycles which are under local government units (LGUs)) and the Cooperative Development Authority (CDA), which promotes and regulates cooperatives in the country.

Before being considered as a full-fledged jeepney cooperative, the 15-member group needs to register with the CDA.

To do this, the prospective coop will be asked to file articles of cooperation and draft the coop's by-laws, which indicate requirements and qualifications for membership, among others.

They will then be required to attend a half-day Pre-Registration Seminar (PRS) which will be about the principles and values of cooperatives, Abad Santos, CDA Assistant Secretary and Public Utilities Cluster Head, said in a phone interview.

After attending the seminar, the 15-member group will then apply for accreditation from the Office of Transport Cooperatives (OTC), an attached agency of the Department of Transportation (DoTr).

To secure OTC accreditation, the attendees are required to prove their financial capability by submitting a certificate showing they have at least P300,000 in the bank. The funds will then be part of the share capital contributions of its initial 15 founders/members in the cooperative to be established.

The group is also required to attend the Cooperative Education and Transport Operations Seminar (CETOS) organized by the OTC. The seminar is about eight hours long and covers more specific information about the proper management of a transport cooperative, an official said in an interview conducted in February 2, a month after this piece was originally published. [See: We Regret the Error]

After taking the CETOS, members of jeepney cooperatives are also enjoined to take a fleet management seminar — also offered by the OTC — which covers subjects such as dispatching, and preventive maintenance (which involve oil change and tire replacement schedules of vehicles, among others).

Only after being accredited by the OTC will the prospective coop be able go back to the CDA to finally apply for registration as a jeepney cooperative.

In 2020, the Cubao Rosario Sta. Lucia Transport Service Cooperative (CURODA) was already prepared to deploy a contactless smart-card based payment system but it was interrupted by the pandemic. Besides making payment convenient for commuters and drivers, the system was also linked to the coop’s bank account with its lender, the Development Bank of the Philippines, so that it could automatically remit monthly payments for its modern vehicles.

Lockdown delays jeepney coop registration

Before the pandemic, it took about a month for a jeepney cooperative to secure registration at the CDA.

However, since early 2020, as the jeepney consolidation deadline approached (which would be extended seven times until December 2023) and as the lockdown temporarily shuttered government offices, schedules for CETOS became tighter.

The pandemic complicated this further because it disallowed face to face meetings, which had been how the OTC conducted the education seminar.

To make it easier for coops applying for consolidation, the CDA and the OTC in November 2020 signed an agreement temporarily foregoing the CETOS requirement owing to scheduling difficulties.

Prospective jeepney coops were asked "to submit affidavits indicating that they will attend the CETOS within a three-month period," CDA's Santos said.

The move allowed more groups to comply the jeepney consolidation deadline, the official added.

Meanwhile, once its secures CDA accreditation, the jeepney cooperative will then be allowed to apply for franchise consolidation at the LTFRB.

To secure approval for consolidation, the cooperative will need to show original receipts and certificates of registration of all the vehicles of its members. They also need to show proof that they have paid proper taxes to the Bureau of Internal Revenue and that premiums of their vehicle insurance are updated. All these are based on the LTFRB's Memorandum Circular 2019-066 (Simplified Process for Consolidation of Individual and Existing Franchise Holders in Compliance with the Public Utility Vehicle Modernization Program and Department [of Transportation] Order 2017-11).

Upon surrendering the coop members' individual franchises to the LTFRB, the cooperative will then be issued one franchise that will cover all its jeepneys that ply the route. In turn, previous permits issued to individual traditional jeepneys will be cancelled or "dropped" and these units will then be sent to a scrapping facility where they will be dismantled and sold for scrap.

Once the collective franchise is issued, the cooperative can then proceed to the next phase of the jeepney modernization program, which is the acquisition of new vehicles.

To prove that the cooperative is financially capable of upgrading its fleet, it is required to show proof that it has a separate P50,000 in the bank for every modern jeep that it is planning to purchase, based on LTFRB's modernization rules.

The cooperative can then apply for special jeepney modernization loans made available by two government-led banks, the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP).

Upon filing its loan application, jeepney cooperatives will be required to prove the viability of their routes by submitting a separate business proposal.

The proposal indicates arrival and departure times of its traditional jeeps, the number of trips these vehicles have taken, and the amount of fares the jeeps have collected, all recorded daily for a one-week period, according to Raul Padrigo, president of the Cubao Rosario Sta. Lucia Transport Service Cooperative (CURODA-TSC). The group, which used to be an association of drivers and operators, was already able to consolidate and modernize a year before the pandemic took place.

The loan, if granted, will need a five percent equity downpayment, charge a six-percent annual interest, and will require a seven-year payment period.

In turn, the borrower will receive an equity subsidy by virtue of a Department of Transportation order.

Worth P160,000 (previously set at P80,000 in 2018 but was doubled in 2020, thanks to negotiations between the government and transport groups), the amount is larger than the five percent downpayment required by the banks.

As a result, if a loan for a P2.2 million modern jeepney [at least for 2021] is approved, the cooperative may no longer need to pay the five percent-downpayment (P110,000) and may even get the remaining P50,000 incentive in cash, according to Vic Balao, general manager of the Pandacan Multi-Purpose Cooperative, which bought 30 modern jeepneys in 2019.

Laminated cards produced by a Pasig City jeepney cooperative indicate instructions for drivers handling modern jeepneys.

Benefits of a jeepney cooperative

Once a jeepney cooperative is established, it can already accept members, including former jeepney operators and drivers.

Those who are able to pay P20,000 as their share capital contribution to the coop will be immediately considered as full members. They are entitled to receive daily payouts (as operators) or salaries (as drivers), run for a leadership position in the cooperative, and earn dividends from their share capital at the end of the year.

Those unable to pay the P20,000 in full can choose to make partial payments, becoming associate members until they meet the required minimum share capital. As associate members, they will not have voting rights nor will they be allowed to run for office in the organization. However, they will continue to receive daily payouts and will be entitled to their share of the dividends.

"Under a cooperative, jeepney drivers are co-owners of the enterprise," said Jaime Aguilar, secretary general of the National Confederation of Transport Workers' Union (NCTU). "They will be provided jobs, income, benefits, and dividends as long as the coop is managed well. That's why they should take care of the assets of the coop because they will lose money and their jobs if they don't."

For his part, CDA Assistant Secretary Santos emphasized that the concept of a cooperative "is a business that is members-owned."

"But organizing a transport cooperative is a very long and tedious process," he said.