LGU Best Practices

1 Page 1-19 (Intro) 1 1/5/06, 5:50 PM 2 Page 1-19 (Intro) 2 1/5/06, 5:50 PM LOCAL GOVERNMENT FISCAL and FINANCIAL MANAGEMENT Best Practices Juanita D. Amatong Editor 3 Page 1-19 (Intro) 3 1/5/06, 5:50 PM Local Government Fiscal and Financial Management Best Practices Juanita D. Amatong, Editor Copyright © Department of Finance, 2005 DOF Bldg., BSP Complex, Roxas Blvd. 1004 Metro Manila, Philippines Tel: + 632 404-1774 or 76 Fax: + 632 521-9495 Web: http://www.dof.gov.ph Email: [email protected] First Printing, 2005. Cover design by Hoche M. Briones Photos by local governments of Santa Rosa, Malalag, San Jose de Buenavista, Quezon City, Gingoog City, and Rashel Yasmin Z. Pardo (Province of Bohol) and Niño Raymond B. Alvina (Province of Aklan). All rights reserved. No part of this book may be reproduced in any form or by any means without express permission of the copyright owners and the publisher. ISBN 971-93448-0-6 Printed in the Philippines. 4 Page 1-19 (Intro) 4 1/5/06, 5:50 PM CONTENTS About the Project ................................................................................... 8 Acknowledgements ................................................................................. 9 Message ................................................................................................ 11 Foreword .............................................................................................. 12 Introduction ......................................................................................... 15 Revenue Generation Charging User Fees for Health Services Malalag, Davao del Sur ......................................................................... 20 Implementing a Fiscal Management System Gingoog City ......................................................................................... 34 Tax Mapping, Computerization and GIS in Real Property Taxation Santa Rosa, Laguna ............................................................................... 48 Innovating Tax Administration Measures Quezon City .......................................................................................... 70 Financing Options Bond Flotation for Tourism Development The Boracay-Aklan Provincial Bonds ...................................................... 88 Privatization of Power and Water Utilities The Joint Venture Project of the Province of Bohol ................................. 108 Build, Lease, and Transfer Scheme San Jose de Buenavista, Antique ........................................................... 136 Concluding Statement ........................................................................ 151 List of Acronyms and Abbreviations ................................................... 155 Bibliography ....................................................................................... 158 5 Page 1-19 (Intro) 5 1/5/06, 5:50 PM LIST OF TABLES AND FIGURES Malalag, Davao del Sur Tables Table 1.1 Expenditures for Health Services Table 1.2 Payment Scheme for Health Services Table 1.3 Number of Paying Patients Figures Figure 1.1 Annual Revenue by Source Figure 1.2 Revenues from Local Taxes Figure 1.3 Non-Tax Revenues Figure 1.4 Revenues from Health Services Gingoog City Figures Figure 2.1 Income and Expenditures Figure 2.2 Tax Revenues Figure 2.3 Income Sources Santa Rosa, Laguna Tables Table 3.1 Local Income and IRA Table 3.2 Tax and Non-Tax Revenues Table 3.3 RPT and Business Tax Figures Figure 3.1 Income and Expenditures (1989-1993) Figure 3.2 Income and Expenditures (1994-2003) Figure 3.3 Local Income and IRA Figure 3.4 Tax and Non-Tax Revenues Figure 3.5 RPT and Business Tax Figure 3.6 Real Property Units (RPUs) Figure 3.7 Real Property Tax Collection Quezon City Tables Table 4.1 Income and Expenditures Table 4.2 Revised Business Tax Schedule Table 4.3 Presumptive Tax Levels for Private & Public Markets Figures Figure 4.1 Total Income Figure 4.2 Components of Local Income Figure 4.3 Real Property Tax Collections Figure 4.4 Business Tax Collections Figure 4.5 Non-Tax Revenues 6 Page 1-19 (Intro) 6 1/9/06, 3:21 PM Province of Aklan Tables Table 5.1 Income and Expenditures Table 5.2 Features of the Boracay-Aklan Provincial Bonds (BAPB) Table 5.3 Cash Flow Projections from Project Operations Table 5.4 Project Revenues Figures Figure 5.1 Tourist Arrivals in Boracay Island Figure 5.2 Profile of Total Income Figure 5.3 Profile of Local Income Figure 5.4 Bond Issuance Institutional Framework Figure 5.5 Financial Structure to Support Bonds Issuance Figure 5.6 Stages in the Issuance of Bonds Province of Bohol Tables Table 6.1 Profile of Local Source Income, 1995-2000 Table 6.2 Profile of Income by Source Table 6.3 Expenditures by Category, 1995-2000 Table 6.4 PWS Expenditures Table 6.5 PES Expenditures Table 6.6 Estimated Cost of Improvement Works Table 6.7 Advantages & Disadvantages of Options Considered Table 6.8 Selection Criteria for Evaluating Bids Table 6.9 Highlights of the Joint Venture Agreement Table 6.10 Responsibilities of the Consortium Table 6.11 Profile of Local Source Income, 2001-2004 Figures Figure 6.1 Income and Expenditures Figure 6.2 Income and Expenditures of PWS Figure 6.3 Income and Expenditures of PES Figure 6.4 Profile of Net Income of the Province Figure 6.5 Profile of Net Income of PWS & PES Figure 6.6 Daily Water Demand, Production, and System Capacity Figure 6.7 BLCI Systems Loss Figure 6.8 Profile of Net Income San Jose de Buenavista, Antique Figures Figure 7.1 Sources of Local Income in 1993 Figure 7.2 Revenues from Health Services Figure 7.3 Comparative Sources of Local Income Figure 7.4 Local Income 7 Page 1-19 (Intro) 7 1/5/06, 5:50 PM ABOUT THE PROJECT This book is a project of the Department of Finance funded by the Asia Europe Meeting 2 (ASEM 2) Trust Fund Grant (TF052163) Strengthening Institutions for Sustainable Poverty Reduction and Good Governance, “Strengthening Local Government Units’ Effectiveness in Poverty Alleviation and Service Delivery by Disseminating LGU Good Practices.” The Grant was administered by the World Bank, with the Department of Finance as implementing agency. THE PROJECT TEAM Project Coordinator and Case Writer Perla A. Segovia Case Researchers / Co-Writers Bernardita L. Briones Malalag, Davao del Sur Corazon H. Ignacio Quezon City Marylou G. Mariano Santa Rosa, Laguna Rashel Yasmin Z. Pardo Province of Bohol Laura Bella P. Salandanan San Jose de Buenavista, Antique Technical Assistant and Case Writer Jay Edward D. Amatong Gingoog City Project Assistant Niño Raymond B. Alvina 8 Page 1-19 (Intro) 8 1/5/06, 5:50 PM ACKNOWLEDGMENTS A literature of this kind had long been a felt need in the local government sector. The Philippine Government, through the Department of Finance (DOF), is grateful to the Asia Europe Meeting 2 (ASEM 2) for making this book possible. ASEM supported this Project with a grant for “Strengthening Local Government Units’ Effectiveness in Poverty Alleviation and Service Delivery by Disseminating LGUs Good Practices.” The Department also acknowledges the invaluable assistance of the World Bank which administered the Grant. The DOF officials who helped in making this project a reality are the following: Undersecretary Roberto B. Tan, Assistant Secretary Carlito P. Yu, Central Financial Management Office Director Ma. Lourdes Dedal, and ASEM Grant Implementation Coordinator Jose Robert Javier. We are particularly grateful to Corporate Affairs Group Division Chief Abigail Barbara Sanglay for providing imaginative solutions to many problems along the way, to BLGF Executive Director Presentacion R. Montesa, and Director Norberto Malvar and staff of the Research Division, who provided an effective network between the case researchers and the local government officials and vital information on the LGUs, as well as the staff of the BOT Center, under Executive Director Rafaelito Taruc. There are several other individuals who deserve special mention for their distinctive participation in the completion of this Project. First and foremost, we thank lawyer and former Dean of the UP School of Urban and Regional Planning, Asteya M. Santiago, who painstakingly helped review and improve the cases for substance, form, and style, working with us deep into several nights and giving up some precious weekends during the period of revision and editing. Jay Edward Amatong gave valuable inputs on the technical aspects of the production, particularly the graphs, layout and visual presentations. Our Project Assistant, Niño Raymond B. Alvina, has to be commended for his studious and persistent effort in data gathering, validation and encoding, and in attending to all the administrative and coordinative aspects of the Project. His wizardry in computer applications had been a great asset to the undertaking. We also thank former UP Vice President Raul P. de Guzman who unselfishly “lent” the services of Jillian R. Galpo during the frenzied days of final editing of the cases and getting them ready for the printer, and Cesar Silvestre E. Fabunan, who helped in validating data and encoding. Above all, we acknowledge the invaluable inputs and insights provided by the LGU officials who were interviewed for this Project. Their names are listed as Resource Persons in the Bibliography. 9 Page 1-19 (Intro) 9 1/5/06, 5:50 PM 10 Page 1-19 (Intro) 10 1/5/06, 5:50 PM MESSAGE Since the implementation of the Local Government Code (LGC), many Local Government Units (LGUs) had initiated financing innovations to meet their developmental requirements. Each of their experience involved the

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