Se-cetary
SEVENTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES ) .

Second Regular Session ) 18 APR-3 P1 56

SENATE mee ——+—

$.B.No.1773

Introduced by Senator SONNY ANGARA

AN ACT
TO RATIONALIZE CREDIT FINANCING FOR LOCAL GOVERNMENT UNITS BY
AMENDING CERTAIN PROVISIONS IN BOOK II OF REPUBLIC ACT 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991

EXPLANATORY NOTE

One of the key objectives of the Local Government Code (R.A. 7160) of 1991
was to provide LGUs greater access to financing in order to carry out their expanded
responsibilities. These include credit financing, debt issuance and public private
partnerships or PPPs, to name a few.

While several LGUs have benefited from these alternative sources financing to
improve local service delivery, others have encountered significant hindrances in
accessing them. In particular, the Code expresses a preference for government
financial institutions to be a source of credit financing, effectively hindering LGU
access to private financing. This preference must be relaxed to afford LGUs access
to more abundant private capital markets.

There is also a need to ensure that LGUs do not abuse this right by using the
increased access to private financing to finance shortfalls in regular expenditures.
This will lead to a lack of discipline in public financial and budget management which
could be a source of graft and corruption.

These proposed amendments will strengthen and further empower LGUs. In view
of the foregoing, approval of this bill is earnestly requested

SONNY ANGARA



SEVENTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
Second Regular Session )
SENATE
S$.B.No.1773

Introduced by Senator SONNY ANGARA

AN ACT

TO RATIONALIZE CREDIT FINANCING FOR LOCAL GOVERNMENT UNITS BY

AMENDING CERTAIN PROVISIONS IN BOOK II OF REPUBLIC ACT 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 296 of Republic Act No. 7160, otherwise known as the

Local Government Code of 1991, hereinafter referred to as the “Code”, is hereby
amended to read as follows:

“SEC. 296. General Policy. — {{a}} It shall be the basic policy that any local
government unit may create indebtedness, and avail of credit facilities to
finance local infrastructure and other socio-economic development projects in
accordance with the approved local development plan and public investment
program

fe) _/Hoeal-g {-unit-may_avail_of creditines-from-g a

SEC. 2. Section 311 of the Code is hereby amended to read as follows:

“SEC. 311. Depository Accounts. - Local treasurers shall maintain
depository accounts in the name of their respective local government units



with banks[—preferably-goveramentowned] located in or near to their

respective areas of jurisdiction. Earnings of each account shall accrue

exclusively thereto.”

SEC. 3. Repealing Clause. - All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or
parts thereof which are inconsistent with any of the provisions of this Act are hereby
repealed or modified accordingly.

SEC. 4. Separability Clause. — If, for any reason or reasons, any part of
provision of this Act shall be held unconstitutional or invalid, other parts or provisions

hereof which not affected thereby shall continue to be in full force and effect.

SEC. 5. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,