Urban planning in Philippine development setting, local revenues

1. URBAN PLANNING INURBAN PLANNING IN
PHILIPPINE DEVELOPMENTPHILIPPINE DEVELOPMENT
SETTINGSETTING
Topic:Topic:
EXTERNAL SOURCES OFEXTERNAL SOURCES OF
LOCAL REVENUELOCAL REVENUE
Jeannifer B. VillanuevaJeannifer B. Villanueva
11-MPMG-01111-MPMG-011
Dean C. LaurenteDean C. Laurente

2. Funding Sources for the LocalFunding Sources for the Local
Government UnitsGovernment Units
The enactment of the Local GovernmentThe enactment of the Local Government
Code in 1991 broadened the authority ofCode in 1991 broadened the authority of
Local Government Units (LGUs) to utilizeLocal Government Units (LGUs) to utilize
available and potential sources of revenueavailable and potential sources of revenue
and strengthen their fiscal position toand strengthen their fiscal position to
enable them to provide adequate servicesenable them to provide adequate services
to their constituents.to their constituents.
Local government revenues are derivedLocal government revenues are derived
from two major sources: local, or internal,from two major sources: local, or internal,
and external.and external.

3. Financing alternatives for LGU’sFinancing alternatives for LGU’s
A. InternalA. Internal
1. Tax revenues1. Tax revenues
a. RPTa. RPT
b. Business Taxb. Business Tax
2. Non Tax Revenues2. Non Tax Revenues
a. Receipts from Economic Enterprisesa. Receipts from Economic Enterprises
b. Fees and Chargesb. Fees and Charges
B. ExternalB. External
1. Internal Revenue Allotment (IRA)1. Internal Revenue Allotment (IRA)
2. Share in National Wealth2. Share in National Wealth
3. Local/ Foreign grants and Aid3. Local/ Foreign grants and Aid

4. C. BorrowingsC. Borrowings
1. Direct Loans1. Direct Loans
a. MDFO (Municipal Developmenta. MDFO (Municipal Development
Fund Office)Fund Office)
b. GFI’s (Govt Financial Institutions)b. GFI’s (Govt Financial Institutions)
c. PFI’s (Private Financialc. PFI’s (Private Financial
Institutions)Institutions)
2. Bond Issuance2. Bond Issuance
D.D. Private Sector Tie UpPrivate Sector Tie Up
1. Build-Operate-Transfer Schemes1. Build-Operate-Transfer Schemes

5. External Sources of RevenueExternal Sources of Revenue
1. Internal Revenue Allotment1. Internal Revenue Allotment
Philippine Constitution provides that localPhilippine Constitution provides that local
governments shall be entitled to a just share ingovernments shall be entitled to a just share in
national taxes (Sec 6, Art VI). At present, localnational taxes (Sec 6, Art VI). At present, local
governments are entitled to 40% of internalgovernments are entitled to 40% of internal
revenue taxes (Sec 284 Local Government Code)revenue taxes (Sec 284 Local Government Code)
of 3 years ago. Of the current 40%, all provincesof 3 years ago. Of the current 40%, all provinces
and all cities are entitled to 23% each; alland all cities are entitled to 23% each; all
municipalities, 34%, and all barangays, 20%. Formunicipalities, 34%, and all barangays, 20%. For
particular local government units, the sharing isparticular local government units, the sharing is
determined by applying this formula: 50% baseddetermined by applying this formula: 50% based
on population, 25% on land area, and 25% onon population, 25% on land area, and 25% on
equal sharing (Sec 285 Local Government Code).equal sharing (Sec 285 Local Government Code).

6. 2. Shares of Local Government Units2. Shares of Local Government Units
in the National Wealthin the National Wealth
LGUs shall have equitable share in proceeds derivedLGUs shall have equitable share in proceeds derived
from utilization and development of national wealthfrom utilization and development of national wealth
within their respective areas, including sharing thewithin their respective areas, including sharing the
same with inhabitants by way of direct benefits (Secsame with inhabitants by way of direct benefits (Sec
289 LGC). Sharing is forty percent (40%) of gross289 LGC). Sharing is forty percent (40%) of gross
collection derived by national government from thecollection derived by national government from the
preceding fiscal year from mining taxes, royalties,preceding fiscal year from mining taxes, royalties,
forestry and fishery charges, and such other taxes,forestry and fishery charges, and such other taxes,
fees, or charges, including related surcharges,fees, or charges, including related surcharges,
interests, or fines, and from its share in any co-interests, or fines, and from its share in any co-
production, joint venture or production sharingproduction, joint venture or production sharing
agreement in utilization and development of theagreement in utilization and development of the
national wealth within their territorial jurisdictionnational wealth within their territorial jurisdiction
(Sec. 290 LGC).(Sec. 290 LGC).

7. Share of the Local Governments from anyShare of the Local Governments from any
Government Agency or -Owned andGovernment Agency or -Owned and
-Controlled Corporation-Controlled Corporation
In Sec. 291, Local government units shall have aIn Sec. 291, Local government units shall have a
share based on the preceding fiscal year fromshare based on the preceding fiscal year from
the proceeds derived by any governmentthe proceeds derived by any government
agency or government-owned or -controlledagency or government-owned or -controlled
corporation engaged in the utilization andcorporation engaged in the utilization and
development of the national wealth based on thedevelopment of the national wealth based on the
following formula whichever will produce afollowing formula whichever will produce a
higher share for the local government unit:higher share for the local government unit:
(a) One percent (1%) of the gross sales or receipts(a) One percent (1%) of the gross sales or receipts
of the preceding calendar year; orof the preceding calendar year; or

8. (b) Forty percent (40%) of the mining taxes,(b) Forty percent (40%) of the mining taxes,
royalties, forestry and fishery charges and suchroyalties, forestry and fishery charges and such
other taxes, fees or charges, including relatedother taxes, fees or charges, including related
surcharges, interests, or fines the governmentsurcharges, interests, or fines the government
agency or government -owned or -controlledagency or government -owned or -controlled
corporation would have paid if it were notcorporation would have paid if it were not
otherwise exempt.otherwise exempt.
The share shall be distributed in the followingThe share shall be distributed in the following
manner:manner:
province -20%, Component municipality / city -45;province -20%, Component municipality / city -45;
and barangay -35%.and barangay -35%.

9. Credit FinancingCredit Financing
As a general policy, any local governmentAs a general policy, any local government
unit may create indebtedness, and avail ofunit may create indebtedness, and avail of
credit facilities to finance localcredit facilities to finance local
infrastructure and other socio-economicinfrastructure and other socio-economic
development projects in accordance withdevelopment projects in accordance with
the approved local development plan andthe approved local development plan and
public investment program. A localpublic investment program. A local
government unit may also avail of creditgovernment unit may also avail of credit
lines from government or private bankslines from government or private banks
and lending institutions for the purpose ofand lending institutions for the purpose of
stabilizing local finances. (Section 296)stabilizing local finances. (Section 296)

10. Sec 297. LGUs may contract loans, credits, andSec 297. LGUs may contract loans, credits, and
other forms of indebtedness w/ any governmentother forms of indebtedness w/ any government
or domestic private bank and other lendingor domestic private bank and other lending
institutions to finance the construction,institutions to finance the construction,
installation, improvement, expansion, operation,installation, improvement, expansion, operation,
or maintenance of public facilities, infrastructureor maintenance of public facilities, infrastructure
facilities, housing projects, the acquisition of realfacilities, housing projects, the acquisition of real
property, and the implementation of other capitalproperty, and the implementation of other capital
investment projects, subject to terms andinvestment projects, subject to terms and
conditions as may be agreed upon by LGU andconditions as may be agreed upon by LGU and
the lender. Proceeds from such transactionsthe lender. Proceeds from such transactions
shall accrue directly to the LGU concerned.shall accrue directly to the LGU concerned.

11. An LGU may secure from any governmentAn LGU may secure from any government
bank and lending institution short, mediumbank and lending institution short, medium
and long-term loans and advances againstand long-term loans and advances against
security of real estate or other acceptablesecurity of real estate or other acceptable
assets for establishment, development, orassets for establishment, development, or
expansion of agricultural, industrial,expansion of agricultural, industrial,
commercial, house financing projects,commercial, house financing projects,
livelihood projects, and other economiclivelihood projects, and other economic
enterprises.enterprises.
Government financial and other lendingGovernment financial and other lending
institutions are authorized to grant loans,institutions are authorized to grant loans,
credits, and other forms of indebtednesscredits, and other forms of indebtedness
out of their loanable funds to LGUs forout of their loanable funds to LGUs for
purposes specified above.purposes specified above.

12.  SEC. 298. SEC. 298. Deferred-Payment and otherDeferred-Payment and other
Financial Schemes.Financial Schemes. - Provincial, city and - Provincial, city and
municipal governments may likewisemunicipal governments may likewise
acquire property, plant, machinery,acquire property, plant, machinery,
equipment, and such necessaryequipment, and such necessary
accessories under a supplier's credit,accessories under a supplier's credit,
deferred payment plan, or other financialdeferred payment plan, or other financial
scheme.scheme.

13. Sec. 299. Sec. 299. Bonds and Other Long-TermBonds and Other Long-Term
Securities.Securities.
Subject to the rules and regulations of the CentralSubject to the rules and regulations of the Central
Bank and Securities and Exchange Commission,Bank and Securities and Exchange Commission,
provinces, cities, and municipalities are herebyprovinces, cities, and municipalities are hereby
authorized to issue bonds, debentures, securities,authorized to issue bonds, debentures, securities,
collaterals, notes and other obligations to financecollaterals, notes and other obligations to finance
self-liquidating, income-producing development orself-liquidating, income-producing development or
livelihood projects pursuant to the prioritieslivelihood projects pursuant to the priorities
established in the approved local development planestablished in the approved local development plan
or the public investment program. The or the public investment program. The sangguniansanggunian
concerned shall, through an ordinance approved byconcerned shall, through an ordinance approved by
a majority of all its members, declare and state thea majority of all its members, declare and state the
terms and conditions of the bonds and the purposeterms and conditions of the bonds and the purpose
for which proposed indebtedness is to be incurred.for which proposed indebtedness is to be incurred.

14. SEC. 300. SEC. 300. Inter-Local GovernmentInter-Local Government
Loans, Grants, and SubsidiesLoans, Grants, and Subsidies
Provinces, cities and municipalities may, uponProvinces, cities and municipalities may, upon
approval of the majority of all members ofapproval of the majority of all members of
the the sangguniansanggunian concerned and in amounts not concerned and in amounts not
exceeding their surplus funds, extend loans,exceeding their surplus funds, extend loans,
grants, or subsidies to other local governmentgrants, or subsidies to other local government
units under such terms and conditions as mayunits under such terms and conditions as may
be agreed upon by the contracting parties. Localbe agreed upon by the contracting parties. Local
government units may, upon approval of theirgovernment units may, upon approval of their
respective respective sangguniansanggunian, jointly or severally, jointly or severally
contract loans, credits, and other forms ofcontract loans, credits, and other forms of
indebtedness for purposes mutually beneficial toindebtedness for purposes mutually beneficial to

15. SEC. 301. SEC. 301. Loans from Funds Secured by theLoans from Funds Secured by the
National Government from Foreign SourcesNational Government from Foreign Sources
The President, or his duly authorized representative,The President, or his duly authorized representative,
may, through any government financial or othermay, through any government financial or other
lending institution, relend to any province, city,lending institution, relend to any province, city,
municipality, or barangay, the proceeds of loansmunicipality, or barangay, the proceeds of loans
contracted with foreign financial institutions or othercontracted with foreign financial institutions or other
international funding agencies for the purpose ofinternational funding agencies for the purpose of
financing construction, installation, improvement,financing construction, installation, improvement,
expansion, operation, or maintenance of publicexpansion, operation, or maintenance of public
utilities and facilities, infrastructure facilities, orutilities and facilities, infrastructure facilities, or
housing projects, acquisition of real property, andhousing projects, acquisition of real property, and
implementation of other capital investment projects,implementation of other capital investment projects,
subject to terms and conditions as may be agreedsubject to terms and conditions as may be agreed
upon by the President and LGU.upon by the President and LGU.

16. Proceeds from such loans shall accrueProceeds from such loans shall accrue
directly to the local governmentdirectly to the local government
concerned.concerned.
(b) The President may likewise authorize the(b) The President may likewise authorize the
relending to local government units therelending to local government units the
proceeds of grants secured from foreignproceeds of grants secured from foreign
sources, subject to the provisions ofsources, subject to the provisions of
existing laws and the applicable grantexisting laws and the applicable grant
agreementsagreements