Republic of the Philippines Fe re eS
HOUSE OF REPRESENTATIVES h> REG FLY {f ht
Quezon City DATE 15
te
SIXTEENTH (16") CONGRESS \ os PA

HOUSE BILL NO.

Introduced by HON. GWENDOLYN F. GARCIA

EXPLANATORY NOTE

Section 450 of Republic Act No. 7160, otherwise known as The Local
Government Code of 1991, as amended by Republic Act No. 9009, requires
that the average annual income requirement for a municipality or cluster of
barangays to be converted into a component city should be at least One
hundred million pesos (P 100,000,000) for the last two (2) consecutive years
based on 2000 constant prices

This bill seeks to further amend Section 450 of Republic Act No. 7160
by changing the basis or computation of the average annual income
requirement for a municipality or cluster of barangays to be converted into a
component city; — that is from 2000 constant prices" to ‘current year
consumer price index” as certified by the Philippine Statistics Authority (PSA).

Constant prices refer to the value of the current money expressed in its
buying power in a particular year. They reflect the value of the currency in a
given year, expressed in a base year. They are often referred to as inflation-
corrected

The consumer price index (CPI), on the other hand, is an indicator of
the change in the average retail prices of a fixed basket of goods and services.
commonly purchased by households relative to a base year, The CPI is most
widely used in the calculation of the inflation rate and purchasing power of the
peso. It Is a major statistical series used for economic analysis and as a
monitoring indicator of government economic policy. CPI is
a measure of changes in the purchasing-power of a currency and the rate of
inflation. The consumer price index expresses the current prices of a basket
of goods and services in terms of the prices during the same period in a
previous year, to show the effect of inflation on purchasing power.”

‘Please see

htlps://psa.gov ph/sites/defaultfiles/attachmentssitsd/article/Primer%200n%20Consumer%20
Price%20Index_0.pdf

? hutp:/\www:businessdietionary.com/definition/consumer-price-index-CPI him

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Third Regular Session XS, Hp /
6027 NC ‘



Adopting the "2000 constant prices” as static base in determining the
average annual requirement would unduly confine the parameters and
conditions to the base year. It will ignore the dynamics of the present
economic contexts especially the factors influencing the price indices and
purchasing power that have materially and irreversibly changed over time. It
will also restrict the law from evolving and keeping attuned to the changes of
times

Using a static base year as the determinant of compliance with the
income requirement gradually renders the parameters unrealistic and
obliterates the relevance of the law over the years. In the end, the law
becomes a handicap for change rather than a vehicle for greater local
autonomy and economic advancement

This is the anomaly sought to be corrected. Employing the current
consumer price index as criteria for satisfying the income requirement depicts
a financial condition that is measured on current prices and reflective of the
inflationary impact on purchasing power.

The current CP! as determined by the PSA should be the parameter
used in determining compliance with the average annual income requirement.
The PSA is after all, the major statistical agency responsible for collecting,
compiling, classifying, producing, publishing, and disseminating general-
purpose statistics.

‘Support for this bill is, thus, earnestly sought.

Bilin

ic) F. GARCIA

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH (16) CONGRESS
Third Regular Session

6027

HOUSE BILL NO,

Introduced by HON. GWENDOLYN F. GARCIA

AN ACT
AMENDING THE AVERAGE ANNUAL INCOME REQUIREMENT FOR A
MUNICIPALITY OR CLUSTER OF BARANGAYS TO BE CONVERTED
INTO A COMPONENT CITY, AMENDING FOR THE PURPOSE REPUBLIC
ACT NO. 9009 AND SECTION 450 OF REPUBLIC ACT NO. 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991

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

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

“Section 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} THE CURRENT CONSUMER PRICE INDEX (CPI)
CERTIFIED BY THE PHILIPPINE STATISTICS AUTHORITY,
and if it has either of the following requisites:

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

(i) a population of not less than one hundred fifty
thousand (150,000) inhabitants, as certified by the
Philippine Statistics Authority:

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

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creation to less than the minimum requirements
prescribed herein

(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.

(©) The average annual income shall include the income
accruing to the general fund, exclusive of special funds,
transfers, and non-recurring income."

Section 2. Repealing Clause. - All laws, decrees, orders, rules and
regulations, and other issuances or parts ‘thereof, which are inconsistent with
this Act, are hereby repealed or modified accordingly,

Section 3. Effectivity Clause. - This Act shall take effect fifteen (15)

days after publication in the Official Gazette or in two (2) national newspapers
of general circulation.

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