Cebu income up

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Sunday, April 20, 2014

CEBU - Nearly all cities in Cebu Province spent less than the prescribed 20 percent of their Internal Revenue Allotment (IRA) share for local development projects, the Department of Finance (DOF) reported.

However, the DOF lauded cities in Cebu for improved collections of locally sourced income.

The steady increase of local income in the cities of Lapu-Lapu, Mandaue, Danao, Talisay, Toledo and the Province of Cebu, particularly from tax and non-tax revenues, indicates that they are self-sufficient and becoming less dependent on the IRA and other shares from the national tax collection.


These are just some of the findings of the DOF’s Bureau of Local Government Finance (BLGF) in its preliminary assessment of the fiscal performance of all local government units (LGUs) through the LGU Fiscal Sustainability Scorecard. (The results will be considered preliminary until the local treasurer and assessor validate them.)

How did your LGUs fare
Infographic by Sun.Star Cebu

The BLGF has assessed the LGUs in the areas of revenue generation capacity, local collection growth, expenditure management and reportorial compliance from 2010 to 2012.

It used the LGUs’ Statement of Receipts and Expenditures (SRE), Quarterly Report on Real Property Assessment (QRRPA) and the Schedule of Market Values (SMV), which were submitted by the local treasurers and assessors, in the evaluation.

Outdated market values

For Cebu, the BLGF pointed out that four cities—Mandaue, Cebu, Danao and Toledo—have SMVs that are outdated for at least 11 years. The SMV indicates the real property tax that landowners have to pay the City Government.

Under the law, LGUs are required to regularly update the property values and to conduct a general revision of property assessments and classification once every three years.

Among all the LGUs in Cebu that were assessed, only the Province of Cebu got an exceptional rating during the three-year assessment period. (Rep. Gwendolyn Garcia was still governor of Cebu during the assessment period; Gov. Hilario Davide III’s term began on June 30, 2013.)

“The Province, among First Income Class provinces, consistently performed well in terms of revenue generation capacity from fiscal year 2010 to 2012, due to the high regular income level, strong contribution of locally sourced income to total revenues, as well as the moderate dependence on IRA,” the Province’s scorecard read.

Development spending

Capitol’s 88-percent IRA dependence in 2010 went down to 85 percent in 2011 and 2012.

In 2012, revenues from tax source grew substantially by 19 percent due to the 18 percent growth in the real property taxes and the 43 percent growth in tax on business.

“In determining compliance with statutory limitations on expenditures and budget management, we noted that the Province reported more than 20 percent utilization of the IRA for local development projects for 2010, 2011, and 2012, which is a good indication of priority spending, as required by law,” the BLGF said.

Capitol’s IRA utilization for local development projects in 2010 was 34.2 percent. It decreased to 22.6 percent in 2011 then went up to 30.8 percent in 2012.

The Local Government Code mandates that each LGU shall appropriate in its annual budget no less than 20 percent of the annual IRA for development projects.

Paying for debts

It also noted Capitol’s compliance with the 20 percent limitation on debt servicing as a percentage of the regular income, as well as with the limitations on expenditures for Personal Services.

The Capitol had a total debt service of P3.637 million in 2010. It reported “no debt service” in 2011 and 2012.

Among the cities that did not comply with the limitation on personal services at one point of the evaluation are Danao and Lapu-Lapu.

The scorecards of Talisay, Cebu, Lapu-Lapu, Mandaue, Danao and Toledo and the Province of Cebu were posted on the website

The BLGF has yet to upload the scorecards of the cities of Bogo and Carcar, and those of the newly created cities and municipalities.

Among the findings were that Danao City showed continuous growth in its local revenue from 2010 to 2012 and less dependence on its IRA.

Needs improvement

Toledo also earned the same comment as Danao.

“However, the overall regular income and local income levels of the City (Danao) still need improvement (among Third-Income Class cities),” the BLGF’s preliminary assessment read.

Toledo’s revenue generation capacity consistently improved from “good” in 2010 to “very good” in the next two years.

Its regular income in 2012 was six percent higher than the P615 million recorded the year before.

For Cebu City, DOF rated as “average” the City’s overall performance for 2010. This improved to “good” for 2011 but dropped to “poor” for 2012.

Based on their preliminary assessment, DOF said the City has failed in the area of expenditure management in 2010 and 2011, as it spent more to pay for debts than the limit of 20 percent of the City’s regular income.

This resulted in the City’s low overall rating.

Cebu City’s debt

The City, according to the BLGF, reported a debt service of P1.12 billion in 2010, which was 45 percent of its income that year of P3.1 billion.

For 2011, DOF said, the City’s debt service totaled P596.39 million, which was 22 percent of the income of P3.5 billion.

Both covered the City’s payments for its loan for the 300-hectare South Road Properties. This violated Section 324 (b) of Republic Act 7160, otherwise known as the Local Government Code.

It provides that “the amount of appropriations for debt servicing shall not exceed 20 percent of the regular income of the local government unit concerned.”

Aside from this, DOF said that for 2010 and 2011, the City underused its 20 percent Internal Revenue Allotment for local development projects. Every year, the City gets at least P1 billion in IRA share from the National Government.

Mayor’s against it

In 2010, the City was only able to use 11.9 percent of its IRA and only 6.2 percent in 2011.

In the area of reportorial compliance, DOF said the City failed to regularly update the schedule of market values and conduct the general revision of real properties.

The City Assessor’s Office, though, has wanted to conduct a general revision and raise the rates of tax assessment levels of real property units.

However, Mayor Michael Rama is against it, saying there is a need for the City to be sensitive to property owners. Also, he said that increasing taxes is easier said than done.

Acting City Treasurer Diwa Cuevas said yesterday she knows the City was not able to submit a report. She has yet to find out why because she was not the treasurer at that time.

Cuevas assumed office in September last year. “But I will check why we were not able to submit,” she said.

How Talisay fared

In the case of Talisay City, it received a “very good” rating during the fiscal year 2011-2012 because of the growth in local revenue collections.

But in 2010 and 2011, it reportedly failed to provide a year-end Statement of Receipts and Expenditures (SRE) report. Talisay City Treasurer Emma Macuto said the City did submit the year-end SRE reports on time. However, these were rejected because the BLGF required some corrections.

Based on the BLGF’s preliminary assessment, the Talisay City Government reduced its dependence on the IRA, with almost all tax and non-tax revenue sources posting double-digit growth in 2012.

The BLGF also noted that Talisay City’s total expenditure per capita—or the amount it spends on each constituent—declined from 2011 (P2,517) to 2012 (P2,188).

Talisay did spend more than 20 percent of its IRA for local development projects in 2011. This is considered a good indication of priority spending.


But for year 2012, BLGF noted, Talisay City has no report on the 20 percent IRA utilization for local development projects. This was also the same case for fiscal year 2010.

Based on the LGU Fiscal Sustainability Scorecard for 2012, the Talisay City Government scored 63 out of 100 points based on three categories: revenue generation, local collection growth and expenditure management.

Talisay’s regular income back in 2011 was P451.6 million but it decreased to P447 million the next year.

In terms of local revenue, Talisay City had P116.2 million in 2011, but this increased to P151 million the next year. (Sun.Star Cebu)

Published in the Sun.Star Cebu newspaper on April 21, 2014.

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