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

16" Congress

House Bill No, __ 2020

Introduced by: HON. OSCAR S, RODRIGUEZ

EXPLANATORY NOTE

In 1996, the IRA per capita for Philippine cities is 20% higher than that of provinces and
municipalities. Nine years later, the situation is reversed. Today, the IRA per capita of Philippine
cities is 40% lower than the IRA per capita of provinces and municipalities. This is the situation
even without taking into account the daytime population in cities. Most cities serve as regional
centres or business hubs attracting an influx of non-city residents during the day. ‘These non-
residents also demand certain services. For instance, there are more traffic enforcers manning the
cities’ major thoroughfares during the day than at night. Also, more people means increased
wastes generated in the cities. More wastes mean more dump trucks and more trips to the
landfill. All these demand resources in order to be addressed effectively. With an IRA share
Jower than 40% compared to provinces and municipalities, cities’ capacity to address traf
garbage, or other urban problems is diminished

On the average, for every municipality converted into city, existing cities lose around two
million to 5 million pesos at the minimum. The effects of this cut vary from one city to another.
A highly-urbanized city with other sources of income is cushioned from the impact of IRA lost
due to conversion but lower-income cities will take the brunt of any cut on their IRA.
Interestingly, in absolute amounts, the bigger cities are the ones with huge IRA cuts as a result of
conversion. This is very evident in the case of 16 municipalities that were converted very
recently, Out of the 122 cities, Davao, Makati, Quezon, Manila, and Puerto Princesa topped the
list of cities with huge cuts because of the 16 municipalities or the “wholesale conversion.”

In order to address the inverse effect of conversion to the existing cities, a policy to balance the
negative effect of conversion is highly needed.

This bill aims to introduce the concept of IRA portability, in order to minimize or at least cut to
half the adverse effect of conversion.

In IRA portability, converted municipalities will have to bring their IRA when they are
converted into cities. This will lessen the impact of conversion on existing cities by minimizing
the financial burden brought about by conversion. ‘The table below illustrates the dynamics of
IRA portability.

Qualified TRAas | IRA if'a city in 2012
Municipalities | municipality | (IRA cut on existing cities
without portability)

Cainta 199,116,186 392,250,578 193,134,392
Gen. Tri 160,484,847 337,551,361 177,066,514
Carmona 63,540,435 182,429,581

Total IRA loss of cities 12, 331,58T [489,090,052

Assuming that Cainta, General Trias, and Carmona become cities in 2012, the IRA cut of
existing cities will be P912 million pesos and all things equal each city will sufffer a deduction of



P6 million each on their IRA. If IRA portability becomes a policy, the IRA cut will be
minimized to P489 million pesos and the IRA of each city (assuming all things equal) will be
P3.5 million less than expected. Clearly, existing cities will still suffer from any conversion of
es to cities. All that the IRA portability is accomplishing is lessening the IRA cut by

The situation in Philippine cities will continue to deteriorate if conversion of municipalities to
cities will remain unabated. As the number of cities continues to rise and the number of people
ing in cities continues to increase, inhabitants in cities will continue to feel the debilitating
effects of conversion and population growth. Cities as engines of growth will be a “thing of the
past” rather than a goal that cities pursue. We don’t want this scenario that is why at this early,
this bill aims to offer immediate and long-term solutions on the issue of conversion

In view of the foregoing, the approval of this bill is earnestly sought.

HON. OSCAR S. RODRIGUEZ


v

earn

Cars

12

13
14

15
16
17
18

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

House Bill No,_2020

Introduced by: HON OSCAR S, RODRIGUEZ

AN ACT
ADOPTING IRA PORTABILITY FOR EVERY CONVERSION OF
MUNICIPALITY INTO CITY AMENDING FOR THAT PURPOSE SECTION
285 OF R.A. 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 I. Section 285 of Republic Act 7160 is hereby amended to read as
follows:

“SEC. 285. Allocation to Local Government Units. - The share of local
government units in the internal revenue allotment shall be allocated in the following
manner:

(a) Provinces - Twenty-three percent (23%);
(b) Cities - Twenty-three percent (23%):

(c) Municipalities - Thirty-four percent (34%); and
(d) barangays - Twenty percent (20%)

Provided, however, That the share of each province, city, and municipality shall be
determined on the basis of the following formula:

(a) Population - Fifty percent (50%);
(b) Land Area - Twenty-five percent (25%); and
(c) Equal sharing - Twenty-five percent (25%)

PROVIDED, FURTHER, THAT THE SHARE OF THE NEWLY CONVERTED
RA

CITIES FROM THE ENACTMENT OF THIS ACT SHALL BRING THEIR
SHARE AS MUNICIPALITIES TO THE IRA SHARE OF CITIES TO MINIMIZE
THE EFFECT OF CONVERSION.

Provided, further, That the share of each barangay with a population of not less than one
hundred (100) inhabitants shall not be less than Eighty thousand pesos (P=80,000.00) per
annum chargeable against the twenty percent (20%) share of the barangay from the
internal revenue allotment, and the balance to be allocated on the basis of the following
formula:

(a) On the first year of the effectivity of this Code:


10
ll

12
13

14
15

(1) Population -
(2) Equal Shar
(b) On the second year:
(1) Population - Fifty percent (50%); and
(2) Equal Sharing - Fifty percent (50%)
(c) On the third year and thereafter:

ty percent (40%); and
1g - Sixty percent (60%)

(1) Population - Sixty percent (60%); and

(2) Equal Sharing - Forty percent (40%).
Provided, finally, That the financial requirements of barangays created by local
government units after the effectivity of this Code shall be the responsibility of the local

government unit concerned,

SEC. 2. All laws, issuances, rules and regulations inconsistent with the provision
of this act is hereby amended, repealed or modified accordingly.

SEC. 3. This Act shall take effect fifteen (15) days after its publication in at least
‘two (2) newspaper of national circulation.

Approved,