URBAN PLANNING INPHILIPPINE DEVELOPMENT SETTING Topic: EXTERNAL SOURCES OF LOCAL REVENUE Jeannifer B. Villanueva 11-MPMG-011 Dean C. Laurente
Funding Sources for the Local Government UnitsThe enactment of the Local Government Code in 1991 broadened the authority of Local Government Units (LGUs) to utilize available and potential sources of revenue and strengthen their fiscal position to enable them to provide adequate services to their constituents.Local government revenues are derived from two major sources: local, or internal, and external.
Financing alternatives for LGU’sA. Internal 1. Tax revenues a. RPT b. Business Tax 2. Non Tax Revenues a. Receipts from Economic Enterprises b. Fees and ChargesB. External 1. Internal Revenue Allotment (IRA) 2. Share in National Wealth 3. Local/ Foreign grants and Aid
C. Borrowings 1. Direct Loans a. MDFO (Municipal Development Fund Office) b. GFI’s (Govt Financial Institutions) c. PFI’s (Private Financial Institutions) 2. Bond IssuanceD. Private Sector Tie Up 1. Build-Operate-Transfer Schemes
External Sources of Revenue 1. Internal Revenue AllotmentPhilippine Constitution provides that local governments shall be entitled to a just share in national taxes (Sec 6, Art VI). At present, local governments are entitled to 40% of internal revenue taxes (Sec 284 Local Government Code) of 3 years ago. Of the current 40%, all provinces and all cities are entitled to 23% each; all municipalities, 34%, and all barangays, 20%. For particular local government units, the sharing is determined by applying this formula: 50% based on population, 25% on land area, and 25% on equal sharing (Sec 285 Local Government Code).
2. Shares of Local Government Units in the National WealthLGUs shall have equitable share in proceeds derived from utilization and development of national wealth within their respective areas, including sharing the same with inhabitants by way of direct benefits (Sec 289 LGC). Sharing is forty percent (40%) of gross collection derived by national government from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or charges, including related surcharges, interests, or fines, and from its share in any co- production, joint venture or production sharing agreement in utilization and development of the national wealth within their territorial jurisdiction (Sec. 290 LGC).
Share of the Local Governments from any Government Agency or -Owned and -Controlled CorporationIn Sec. 291, Local government units shall have a share based on the preceding fiscal year from the proceeds derived by any government agency or government-owned or -controlled corporation engaged in the utilization and development of the national wealth based on the following formula whichever will produce a higher share for the local government unit:(a) One percent (1%) of the gross sales or receipts of the preceding calendar year; or
(b) Forty percent (40%) of the mining taxes, royalties, forestry and fishery charges and such other taxes, fees or charges, including related surcharges, interests, or fines the government agency or government -owned or -controlled corporation would have paid if it were not otherwise exempt.The share shall be distributed in the following manner: province -20%, Component municipality / city -45; and barangay -35%.
Credit FinancingAs a general policy, any local governmentAs a general policy, any local government unit may create indebtedness, and avail of credit facilities to finance local infrastructure and other socio-economic development projects in accordance with the approved local development plan and public investment program. A local government unit may also avail of credit lines from government or private banks and lending institutions for the purpose of stabilizing local finances. (Section 296)
Sec 297. LGUs may contract loans, credits, and other forms of indebtedness w/ any government or domestic private bank and other lending institutions to finance the construction, installation, improvement, expansion, operation, or maintenance of public facilities, infrastructure facilities, housing projects, the acquisition of real property, and the implementation of other capital investment projects, subject to terms and conditions as may be agreed upon by LGU and the lender. Proceeds from such transactions shall accrue directly to the LGU concerned.
An LGU may secure from any government bank and lending institution short, medium and long-term loans and advances against security of real estate or other acceptable assets for establishment, development, or expansion of agricultural, industrial, commercial, house financing projects, livelihood projects, and other economic enterprises. Government financial and other lending institutions are authorized to grant loans, credits, and other forms of indebtedness out of their loanable funds to LGUs for purposes specified above.
SEC. 298. Deferred-Payment and other Financial Schemes. - Provincial, city and municipal governments may likewise acquire property, plant, machinery, equipment, and such necessary accessories under a suppliers credit, deferred payment plan, or other financial scheme.
Sec. 299. Bonds and Other Long-TermSecurities. Subject to the rules and regulations of the Central Bank and Securities and Exchange Commission, provinces, cities, and municipalities are hereby authorized to issue bonds, debentures, securities, collaterals, notes and other obligations to finance self-liquidating, income-producing development or livelihood projects pursuant to the priorities established in the approved local development plan or the public investment program. The sanggunian concerned shall, through an ordinance approved by a majority of all its members, declare and state the terms and conditions of the bonds and the purpose for which proposed indebtedness is to be incurred.
SEC. 300. Inter-Local Government Loans, Grants, and SubsidiesProvinces, cities and municipalities may, upon approval of the majority of all members of the sanggunian concerned and in amounts not exceeding their surplus funds, extend loans, grants, or subsidies to other local government units under such terms and conditions as may be agreed upon by the contracting parties. Local government units may, upon approval of their respective sanggunian, jointly or severally contract loans, credits, and other forms of indebtedness for purposes mutually beneficial to
SEC. 301. Loans from Funds Secured by the National Government from Foreign SourcesThe President, or his duly authorized representative, may, through any government financial or other lending institution, relend to any province, city, municipality, or barangay, the proceeds of loans contracted with foreign financial institutions or other international funding agencies for the purpose of financing construction, installation, improvement, expansion, operation, or maintenance of public utilities and facilities, infrastructure facilities, or housing projects, acquisition of real property, and implementation of other capital investment projects, subject to terms and conditions as may be agreed upon by the President and LGU.
Proceeds from such loans shall accrue directly to the local government concerned.(b) The President may likewise authorize the relending to local government units the proceeds of grants secured from foreign sources, subject to the provisions of existing laws and the applicable grant agreements