Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

TWENTIETH CONGRESS
First Regular Session

405

HOUSE BILL Nt

Introduced by Representative JESUS R. MARQUEZ

EXPLANATORY NOTE

This bill seeks to strengthen and provide support to local government units (LGUs)
which have difficulty in coping with the developed and urbanized counterparts.

Republic Act No. 7160, or the Local Government Code of 1991, ushered in the era
of devolution by empowering LGUs to deliver basic social services to their constituents.
These responsibilities are funded through national taxes, allocated via the National Tax
Allocation (NTA), formerly known as the Internal Revenue Allotment (IRA). However,
the current fiscal structure reveals both vertical and horizontal imbalances among LGUs.
The allocation formula disproportionately favors LGUs with larger populations and more
substantial local tax bases.

Cities—categorized as Highly Urbanized Cities, Independent Component Cities, or
Component Cities—hold a significant economic advantage over municipalities. Although
cities collectively receive 23% of the NTA, each individual city often receives a higher
share than each of the 1,493 municipalities dividing the 34% allocation. This creates a
stark disparity, compelling many municipalities to seek alternative funding sources to
sustain their devolved functions.

In their pursuit of economic viability and sustainability, many municipalities,
especially capital towns, strive to meet the stringent requirements for cityhood. These
municipalities often serve as service centers not only for their own residents but also for
neighboring localities, yet they lack the fiscal and administrative capacities that city status
would afford. According to the 2021 Provincial Summary of the Philippine Statistics
Authority, 28 out of 81 provinces have no cities within their jurisdictions. Their historic,
cultural, and economic capitals remain as municipalities, despite bearing provincial-level

responsibilities.

REGION PROVINCE CAPITAL TOWN
Cordillera Administrative Region ‘Abra Bangued
Apayao Kabugao
Ifugao Lagawe
Mountain Province __| Bontoc



Cagayan Valley (Region II) Batanes Basco
Nueva Vizcaya Bayombong
Quirino Cabarroguis
Central Luzon (Region 111) ‘Aurora Baler
MIMAROPA (Region IV-B) Marinduque Boac
Occidental Mindoro | Mamburao
Romblon Romblon
Bicol Region (Region V) Camarines Norte | Daet
Catanduanes Virac
Western Visayas (Region VI) “Aklan Kalibo
Antique San Jose
—_ Guimaras Jordan
Central Visayas (Region VII) Siquijor Siquijor
Eastern Visayas (Region VII) Biliran Naval
Northern Samar Catarman
‘Zamboanga Peninsula (Region IX) ‘Zamboanga Sibugay _| Ipil
Northern Mindanao (Region X) Camiguin Mambajao
Davao Region (Region X1) ‘Compostela Valley | Nabunturan
Davao Occidental__| Malita
SOCCSKSARGEN (Region XII) ‘Sarangani [Alabel
Caraga (Region XIII) Dinagat Islands {| San Jose
Bangsamoro Autonomous Region in | Maguindanao Buluan
Muslim Mindanao Sulu Jolo
Tawi-Tawi | Bongao

Accordingly, these capital towns often serve as vital centers of trade, tourism, and
governance within their provinces. Despite these crucial roles, their corresponding NTA
shares remain inadequate to fully support the provision of essential services and the
implementation of devolved functions.

In this regard, there is a compelling need to revisit the provisions of Republic Act
No. 9009, which amended the cityhood requirements under the Local Government Code.
Specifically, an exemption should be granted to capital towns in provinces that do not
have any component, independent component, or highly urbanized cities within their
territorial jurisdiction. These capital towns should be allowed to convert into component
cities even if they do not meet the current thresholds for income, land area, and

population,

Such an exemption would provide these localities with enhanced access to fiscal
resources and institutional support, enabling them to fulfill their roles more effectively
and catalyze inclusive growth and development across the province.

Immediate approval of this bill is earnestly sought.

LEE

HON> IS “Jess” KCMARQUEZ


evaus

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

TWENTIETH CONGRESS
First Regular Session

HOUSE BILL NO. 405

Introduced by Representative JESUS R. MARQUEZ

AN ACT
AMENDING SECTION 450 OF REPUBLIC ACT NO. 7160, OTHERWISE
KNOWN AS THE LOCAL GOVERNMENT CODE, BY AUTOMATICALLY
CONVERTING CAPITAL TOWNS OF PROVINCES WITHOUT CITIES
CLASSIFIED EITHER HIGHLY URBANIZED CITIES, INDEPENDENT
COMPONENT CITIES, OR COMPONENT CITIES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Section 450 of Republic Act No. 7160 as amended, otherwise known
as the “Local Government Code of 1991”, as amended by Republic Act No. 9009 is hereby
further amended to read as follows:

“Sec 450. Requisites for Creation. -(a) A municipality or a cluster of barangays
may be converted into a component city if it has a locally generated average
annual income, as certified by the Department of Finance, of at least One
hundred million pesos (P100,000,000) for the last two (2) consecutive years
based on 2000 constant prices, and if it has either of the following requisites:

(i) a contiguous territory of at least one hundred (100) square kilometers,
as certified by the Land Management Bureau; or

(ii) a population of not less than one hundred fifty-thousand (150,000)
inhabitants, as certified by the National Statistics Office.

Provided, That the creation thereof shall not reduce the land area,
population, and income of the original unit or units at the time of said
creation to less than the minimum requirements prescribed therein.

PROVIDED, FURTHER, THAT THE MINIMUM REQUIREMENTS
PRESCRIBED HEREIN SHALL NOT APPLY IF A MUNICIPALITY
TO BE CONVERTED INTO A CITY IS THE CAPITAL TOWN OF A


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PROVINCE HAVING NO CLASSIFIED CITIES WITHIN ITS
TERRITORIAL JURISDICTION.

(b) The territorial jurisdiction of a newly-created city shall be properly identified

by metes and bounds. The requirement on land area shall not apply where the
city proposed to be created is composed of one (1) or more islands. The territory
need not be contiguous if it comprises two (2) or more islands.

(c) The average annual income shall include the income accruing to the general
fund, exclusive of s requisites for Creation."

Sec. 2. Repealing Clause. — All laws, decrees, executive orders and regulations,
issuances or parts thereof inconsistent with his Act are hereby repealed or amended
accordingly.

See. 3. Effectivity. This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,