LCP seeks 2-year moratorium on creation of new cities
The League of Cities of the Philippines (LCP) is alarmed over the continued conversion of towns into cities that have drastically reduced their Internal Revenue Allotment (IRA) share.
LCP President and Mandaluyong City Mayor Benjamin "Benhur" Abalos said they are concerned with a House bill that will allow the conversion of capital towns of provinces into cities even if they do not meet income requirements.
House Bill 24 authored by Zamboanga Sibugay Rep. Ann Hofer seeks to amend Republic Act 9009 or the Local Government Code by exempting the capital towns of provinces from the income requirements of cityhood.
Under the Local Government Code, a town should have a locally generated income of at least P100 million annually before it could be classified into a city. It should also either have a land area of at least 100 square kilometers or a population of 150,000.
Hofer said in her explanatory note to the bill that the income requirement "has unduly restricted the economic, political and socio-cultural development of the municipalities which serve as capital towns of provinces which have no cities."
But Abalos said creating cities which do no meet the income requirements will further reduce the income of existing cities.
"We are facing a serious problem that will affect the delivery of services and operations of cities dependent on the IRA," Abalos said in a telephone interview.
Budget Secretary Rolando Andaya said in an earlier interview said that existing cities will lose an average of P2 million from their IRA share for every new city that is added.
The IRA is the tax share of local government units, which get 40 centavos of every peso in taxes collected by the government.
Abalos said that if House Bill 24 is passed, 28 capital towns will be converted into cities and would mean a reduction of their IRA share by P56 million.
Last year, 16 towns were converted into cities which resulted to an average decrease of IRA share per city by P32 million.
"If the bill is approved, the cities will lose a total of P88 million since last year," said Abalos.
He said the conversion of 16 towns into cities last year have already drastically reduced the projected IRA share of cities especially in the provinces, which depend from 80 to 90 percent of their income from the IRA.
The LCP members were supposed to receive a total of P6 billion additional IRA this year but will be getting only P4.7 billion, or some P1.3 billion less than expected, because of the additional 16 cities.
An LCP study showed that Davao City was the worst affected by the conversion.
Davao had projected an increase in their IRA share by P263,560,636 before the new cities were formed. But after the conversion of towns into cities, the increase only reached P69,481,545 or lower by P194 million.
Puerto Princesa City in Palawan projected an IRA share increase of P146.1 million but only received an increase of P1.7 million because of the conversion of towns.
Abalos said Metro Manila cities incurred an average reduction of IRA share increase by P30 million.
The LCP has a pending petition before the Supreme Court to nullify the cityhood of 16 towns because they do meet the income requirements of cityhood. The 12 towns have annual locally generated incomes ranging from P62 million to P82 million.
Abalos said the lesser increase in IRA share of cities will have an impact on availability of funds because of the increasing population of each city.
"More and more people are living in the cities and we need more funds for devolved services and for increase in salaries of our employees," he said.
The LCP is asking Congress to pass a law that would impose a two-year moratorium on the creation of new cities.
Abalos said this will give time to review the IRA distribution scheme which is still based on the 2000 population census.
He cited an LCP study that showed that from 1996 to 2005 the average increase in IRA share of cities reached 49 percent compared with 161 percent for provinces and 168 percent for municipalities.
The study also showed that in 2005, the average per capita IRA share of cities amounted to P1,650 which is lower than the P2,153 for provinces and municipalities.
In a meeting in Malacañang on Monday, the LCP asked the help of President Macapagal-Arroyo to cushion the impact of the reduced IRA share for cities.
Abalos said the President assured them that the P3-billion "Kilos-Asenso" fund in the 2008 budget shall be used to help out old cities whose IRA share will be greatly reduced by the conversion of 16 town into cities last year.