1. Philippines
  2. Local government PPP landscape

Local government PPP landscape

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  • Overview

    local gov fig

    Number of SNGs

    • Barangays
      42,004
    • Municipalities
      1493
    • Cities
      149
    • Provinces
      82
    • Total Number of SNGs
      43,728

    SNG Expenditure (% of GDP)

    • Total SNG Expenditure
      4.8
    • SNG Current Expenditure
      4.3
    • SNG Staff Expenditure
      1.2
    • SNG Investment
      0.5

    SNG Expenditure (% of govt. expenditure)

    • SNG Expenditure
      15.7
    • SNG Current Expenditure
      16.5
    • SNG Staff Expenditure
      15.7
    • SNG Investment
      11.1

    SNG Expenditure

    • Current expenditure of SNG as % of total SNG expenditure
      89.7
    • Staff expenditure of SNG as % of total SNG expenditure
      26
    • Investments of SNG as % of total SNG expenditure
      10.3

    SNG Expenditure (as % of total SNG expenditure)

    • General public services
      60.69
    • Defense
      ----
    • Security and public order
      ----
    • Economic affairs/transports
      16.03
    • Environmental protection
      ----
    • Housing and community amenities
      ----
    • Health
      ----
    • Recreation, culture, and religion
      ----
    • Education
      ----
    • Social services/protection
      23.28

    SNG Revenue (% of GDP)

    • SNG Revenue
      4.8
    • SNG Tax Revenue
      1.1
    • SNG Grants
      3.2
    • Other SNG Revenue
      0.2

    SNG Revenue (% of govt. revenue)

    • SNG Revenue (% of govt. revenue)
      19.4
    • SNG Tax Revenue (% of govt. tax revenue)
      7.1
    • SNG Grants (% of govt. grants)
      UA
    • Other SNG Revenue (% of other govt. evenue)
      UA

    SNG Revenue

    • SNG tax revenue as % of total SNG revenue
      22
    • SNG grants and subsidies as % of total SNG revenue
      67
    • SNG other revenues as % to total SNG revenue
      3.1

    SNG Debt Profile

    • SNG Debt (% of GDP)
      0.63
    • SNG Debt (% of govt. debt)
      1.2

    Transfers to SNGs from National Government

    • SNG Transfers Score
      UA
    • Score for Transfer Allocation System
      UA
    • Score for Info Transfer Timeliness
      UA
    • Score for Collection and Reporting of Fiscal Data
      NA
    • Value of central government transfers to SNGs
      UA
    • Value of actual budgetary allocation to SNGs from national government
      UA
    • Value of deviation of actual against budgeted transfers to SNGs
      UA

    GDP = gross domestic product, SNG = subnational government.

    Sources: DILG. 2024. Regional and Provincial Summary – Number of Provinces, Cities, Municipalities and Barangays as of June 30, 2024; OECD. 2022. 2022 Synthesis Report World Observatory on Subnational Government Finance and Investment; OECD/ADB. 2023. Multi-Level Governance and Subnational Finance in Asia and the Pacific; PSA. 2024. Philippine Standard Geographic Code; World Observatory on Subnational Government Finance and Investment. Philippines.

  • Local Governance System in Philippines

    Local government units (LGUs) are the territorial and political subdivisions of the Philippines, consisting of the provinces, cities, municipalities, and barangays.1 Each LGU is a body politic and corporate endowed with powers it exercises in conformity with law as a political subdivision of the national government and as a corporate entity representing the inhabitants of its territory.2 LGUs enjoy local autonomy pursuant to the Philippine Constitution.3 In 1991, the Philippine Congress enacted the Local Government Code, Republic Act No. 7160 (LGC), as the enabling law for local autonomy.

    The LGC implements two facets of local autonomy—administrative and fiscal. Administrative autonomy refers to the decentralization of administration when the national government delegates administrative powers to the LGUs to broaden the base of governmental powers, making the LGUs more responsive and accountable in the process. This ensures their fullest development as self-reliant communities and more effective partners in the pursuit of national development goals and social progress, and enables the national government to concentrate on national concerns. Meanwhile, fiscal autonomy of LGUs refers to (i) their power to create their own sources of revenues and to levy taxes, fees, and charges, (ii) their just share in the national taxes, and (iii) their equitable share in the proceeds of the utilization and development of the national wealth within their respective areas. Fiscal autonomy also refers to their power to allocate their resources in accordance with their own priorities.4

    The President of the Philippines exercises general supervision over LGUs to ensure their acts are within the scope of their prescribed powers and functions. This means the President cannot control the affairs and activities of an LGU and can interfere only if its actions are contrary to law and the Philippine Constitution.5 The President exercises supervisory authority directly over provinces, highly urbanized cities, and independent component cities. However, with respect to component cities and municipalities, the President exercises supervisory authority indirectly through the province; with respect to barangays, it is through the city and municipality as shown in figure below.6

    Local Government Structure in the Philippines

    Local Government Structure

    Notes: The province is composed of a cluster of municipalities, or municipalities and component cities. Cities are classified into highly urbanized cities, component cities, and independent component cities. Highly urbanized cities are those with a population of at least 200,000 and with latest annual income of at least ₱50 million based on 1991 constant prices. Cities that do not meet these requirements are considered component cities of the province in which they are geographically located. Component cities whose charters prohibit their voters from voting for provincial elective officials are regarded as independent component cities. Highly urbanized cities and independent component cities are independent of the province. The barangay is the smallest local government unit (LGU) and these are within cities and municipalities. LGUs are grouped into regions based on their location. For purposes of investment programming and formulation and implementation of development programs, each LGU has a local development council and each region has a regional development council.

    Source: Based on Government of the Philippines. 1991. Local Government Code of the Philippines.

    The national government supports and coordinates with LGUs on project implementation. National agencies and offices that have project implementation functions are required to coordinate with one another and with the LGUs concerned and to ensure the participation of those LGUs in both the planning and the implementation of national projects.7

    As of 30 April 2024, the Philippines has 43,728 LGUs, consisting of 42,004 barangays, 1,493 municipalities, 149 cities, and 82 provinces across 18 regions.

    The Philippines has 18 geographic regions: National Capital Region; Cordillera Autonomous Region; I (Ilocos Region); II (Cagayan Valley); III (Central Luzon); IV-A (Calabarzon); Mimaropa; V (Bicol Region); VI (Western Visayas); VII (Central Visayas); VIII (Eastern Visayas); IX (Zamboanga Peninsula); X (Northern Mindanao); XI (Davao Region); XII (Soccsksargen); XIII (Caraga); Bangsamoro Autonomous Region in Muslim Mindanao; and the newly created Negros Island Region.8 The regions are not LGUs as they are not political subdivisions of the Philippine government. Bangsamoro Autonomous Region in Muslim Mindanao and Cordillera Autonomous Region are considered autonomous regions but are not considered LGUs under the LGC. However, the provinces, cities, municipalities, and barangays within their territories are LGUs.

  • Infrastructure Development Plan of Local Governments

    In the Philippines, development planning and investment programming follow a dynamic and iterative process whereby the national, regional, and local levels of governance work together to support and reaffirm each other’s priority development thrusts and objectives.1

    At the planning stage, the national government provides guidance and directions for the preparation of sector- and lower-level plans in terms of policies and macroeconomic targets, taking into account prevailing development issues and concerns affecting national, regional, and local conditions. From these national planning guidelines, regional and local development plans and investment programs are then prepared with consideration of local development needs and service delivery gaps. These documents serve as bases for the preparation of sector plans and investment programs, which become components of the national medium-term development plan and investment program (Footnote 1).

    LGU development plans contain programs, projects, and activities responding to their development needs and gaps, while LGU investment programs outline a set of prioritized programs, projects, and activities, their specific time frames of implementation, and their budget requirements. LGUs likewise propose fund sourcing alternatives and resource mobilization strategies to ensure these identified and prioritized programs, projects, and activities are implemented (Footnote 1).

    The local development councils (LDCs) and regional development councils (RDCs) likewise play an important role in supporting infrastructure development and in particular PPP projects at the local government level. The LGC requires each LGU to have a comprehensive multisectoral development plan to be initiated by its development council and approved by its legislative council, known as a sanggunian. For this purpose, the LDC at the provincial, city, municipal, or barangay level assists the corresponding sanggunian in setting the direction of economic and social development, and coordinating development efforts within its territorial jurisdiction.

    Policies, programs, and projects proposed by LDCs are submitted to the sanggunian of the LGU concerned, for appropriate action.2 Approved development plans of provinces, highly urbanized cities, and independent component cities are further submitted to the RDC, to be integrated into the regional development plan for submission to NEDA.

    In July 2024, the DILG, DHSUD, NEDA, DBM, and DOF issued Joint Memorandum Circular No. 1, Series of 2024, entitled, “Updated Guidelines on the Harmonization of Local Development Planning, Land Use Planning, Investment Programming, Resource Mobilization, Budgeting, Expenditure Management, and Performance Monitoring and Coordination in Fiscal Oversight for Enhanced Local Service Delivery in line with the Supreme Court Ruling on the Mandanas-Garcia Petitions.” This synchronizes national and local planning and budgeting calendars to ensure timely cascading of national priorities and targets for integration in local development plans and investment programs, and so that local priority programs, projects, and activities can be appropriately channeled into national programming and budgeting.

  • PPP-Enabling Framework for Local Government Projects

    Public–Private Partnership Legal Framework for Local Government Projects

    The LGC empowers LGUs to exercise powers for its efficient and effective governance, and those that are essential to the promotion of the general welfare. They also have the authority to discharge functions and responsibilities for the efficient and effective provision to their constituents of basic services and facilities, as provided in the tables below.1 The delivery of these basic services and facilities is now in the process of being fully devolved from the national government to the LGUs in accordance with Executive Order No. 138 (2021), following the ruling of the Philippine Supreme Court in the Mandanas-Garcia case.2

    As corporate entities, LGUs may enter into contracts and may be implementing agencies for the purposes of PPPs. In the exercise of their proprietary functions, LGUs enjoy full autonomy, subject to the limitations provided in the LGC and other laws (as discussed below). For a contract entered into by the LGU’s local chief executive to be valid, it must have the prior authorization of the legislative body of the LGU, the sanggunian. A legible copy of such contract must also be posted in a conspicuous place in the provincial capital or the city, municipal, or barangay hall.3

    In undertaking projects, LGUs may group themselves, consolidate, or coordinate their efforts, services, and resources for purposes commonly beneficial to them. In doing so, LGUs are required to conduct a public hearing for the specific undertaking; seek the approval of the sanggunian concerned; contribute funds, real estate, equipment, and other kinds of property; appoint or assign personnel under the agreed upon terms and conditions; and draft and sign a memorandum of agreement for the purpose. The local development council of each LGU assists the sanggunian in coordinating development efforts within its territorial jurisdiction.4

    Devolution of Services to Local Government Units

    In 2019, the Supreme Court ruled with finality in the Mandanas-Garcia case that all collections of national taxes (not just national internal revenue taxes as stated in the LGC), except those accruing to special purpose funds and special allotments for the utilization and development of the national wealth, should be included in the computation of the base of the just share of LGUs.

    In line with the Mandanas-Garcia ruling, President Rodrigo Duterte issued Executive Order No. 138 in 2021, ordering the full devolution from the national government to the LGUs, no later than the end of fiscal year 2024, of functions indicated under the LGC and other existing laws, which subsequently devolved functions of the national government to the LGUs. The following tables enumerate these devolved functions per LGU and the national agencies performing them. Executive Order No. 138 notes that the substantial increase in the shares of the LGUs in the national taxes will empower them in providing basic services and facilities to their constituents and aid them in effectively discharging other duties and functions devolved to them. It recognizes that, with the full devolution of the provision of basic services and facilities to the LGUs, national government agencies (NGAs) can assume more strategic and steering functions to address persistent development issues.

    Executive Order No. 138 directs all department secretaries and agency heads concerned to conduct a functional and organizational review of their respective mandates guided by the following principles:

    • The role of the national government is to set the national policy, development strategy, and service delivery standards, and to assist, oversee, and supervise the LGUs, complementary to the stronger implementing role that the LGUs shall assume by reason of devolution.
    • The devolution of the provision of basic services and facilities to the LGUs and the determination of the functional assignments between and among the different levels of government will be guided by the following:
      • Public services with little or no benefit spillover are best administered and financed by lower-level governments, while public services with significant inter-jurisdictional externalities or benefit and cost spillovers are best assigned to higher levels of government.
      • The provision of public goods and services that involve economies of scale is best assigned to higher levels of government.
      • Functions related to the redistributive role of government are best assigned to the national government.
    • The national government, in close collaboration with the LGUs, shall formulate and pursue an institutional development program to support the LGUs in order to strengthen their capacities and capabilities to fully assume the devolved functions based on the LGC and other relevant laws.

    Under Executive Order No. 138, except for those functions that the national government will continue to share with the LGU, LGUs are now primarily and ultimately responsible and accountable for the provision of all basic services and facilities fully devolved to them. Local programs and policies must be integrated and coordinated toward a common national goal and must align with the national government’s policies, standards, and strategies.5

    Executive Order No. 138 created a Committee on Devolution (ComDev) headed by the secretary of the DBM, to oversee and monitor the implementation of the administrative and fiscal decentralization goals of Executive Order No. 138 consistent with the LGC. The ComDev is also tasked to evaluate the status and monitor the implementation of the devolution transition plans (DTPs) of both NGAs and LGUs.

    All NGAs and LGUs have been required to prepare their respective DTPs in accordance with the joint guidelines of the DBM and the DILG. The DTPs of NGAs should (i) identify and clarify the functions and services devolved to the LGUs, by LGU level, and the strategy for and phasing of devolution to the LGUs; and (ii) include the definition of standards for the delivery of devolved services, the strategy for the capacity development of the LGUs, the framework for monitoring and performance assessment of the LGUs, and an organizational effectiveness proposal to strengthen the department/agency in assuming steering functions as part of the devolution efforts. The LGUs are to prepare their respective DTPs in close coordination with the NGAs concerned, especially with regard to devolved functions and services critical to them. The DTPs of LGUs will be used as guides in the monitoring and performance assessment of the LGUs by the DBM, the DILG, and the NGA concerned.6 The DTP of each LGU must be approved by its sanggunian through a resolution while the DTP of each NGA must be approved by the DBM.7

    Executive Order No. 138 further gives the following directives to effect its full devolution agenda, which are crucial to the implementation of PPP projects for the provision of basic services and facilities by the LGUs, and include implementing capacity development programs for LGUs.

    National Government Directives to Support Full Devolution

    Government EntityDirective
    Capacity Development
    LGUsFormulate their respective Capacity Development Agenda based on the assessment framework and guidelines to be issued by the DILG–Local Government Academy (DILG–LGA), and guided by, among others, the strategy for capacity development of the LGUs as contained in the NGA DTPs, local development thrusts, and performance goals and objectives
    DILG
    • Through its DILG–LGA:
      • oversees the provision of capacity development interventions for LGUs and develops the appropriate mechanisms to ensure efficient utilization of government resources on this effort
      • harmonizes all capacity development interventions by the DBM, NEDA, DOF, other NGAs, DAP, and third-party service providers for the LGUs and
      • optimizes the potential of the Local Governance National and Regional Resource Centers as the convergence platform for capacity developmenta
    • Develops other capacity development strategies, facilitates institutionalization of performance standards, and develops performance incentive mechanisms under the Seal of Good Local Governance to promote excellence in local governance
    DILG, DBM, and BLGFInclude public financial management processes, such as local planning, investment programming, resource mobilization, and budgeting, in the capacity development of LGUs to ensure the allocation of the revenue allotment for basic services and facilities is in accordance with Section 17 of the LGC and other relevant laws
    Strengthening Planning, Investment Programming, and Budgeting Linkage
    Regional development councils
    • Set the strategic direction for the faster development of the regions, especially in lagging areas
    • Facilitate the alignment of local development and land use plans with the goals, objectives, and targets in the updated Philippine Development Plan and the respective regional development plans

    The regional development investment programs shall contain the proposed intra and interregional programs, projects, and activities of regional line agencies to be funded by the national government, while the P/LDIPs of provinces, cities, and municipalities shall contain their prioritized list of PPAs for funding by the LGUs. The annual investment program of the LGUs to be funded through local funds, borrowings, and PPPs shall be sourced from their respective P/LDIPs

    LGUs
    • Improve coordination, synchronization, and joint execution of programs and projects between and among them to strengthen horizontal linkages
    • Provincial governments perform their oversight and coordination functions in the provision of services and implementation of projects within their provinces that cut across city/municipal borders
    DILG, DOF, NEDA, and DBMUpdate existing circulars and recalibrate the synchronized local and regional planning and budgeting calendars accordingly
    Strengthening M&E Systems
    DILG, DBM, DOF, and other NGAsPut in place results-based M&E systems to ensure the purposive conduct of evaluations by the agencies concerned and to guarantee the LGUs have assumed the devolved functions and services effectively in support of good governance, transparency, accountability, and evidence-based decision making
    • aLocal Governance Resource Centers were established in select DILG regional offices in 2005 with support from the Canadian International Development Agency. To date, there are 17 Regional Centers nationwide (DILG. Local Governance Resource Center. Brief History).

    BLGF = Bureau of Local Government Finance, DAP = Development Academy of the Philippines, DBM = Department of Budget and Management, DILG = Department of Interior and Local Government, DILG-LGA = DILG-Local Government Academy, DOF = Department of Finance, DTP = devolution transition plan, LGC = Local Government Code, LGU = local government unit, M&E = monitoring and evaluation, NEDA = National Economic and Development Authority, NGA = national government agency, P/LDIP = provincial/local development investment program.

    Source: Government of the Philippines. 2021. Executive Order No. 138, S. 2021.

    Review and Approval of Local Public–Private Partnership Projects

    All local PPP projects, regardless of project cost, must be approved by the local Sanggunian in the case of LGUs and by the board in the case of a LUC. Prior to such approval, confirmation by the concerned LDC must be obtained. Local PPP projects with proposed government undertakings using national government funds (which also require ICC approval) and/or those that may affect national or sectoral development plans and national projects further require review and endorsement by the respective RDC. 

    Local Development Councils and Regional Development Councils

    Development CouncilFunctions
    Local development councils of provinces, cities, and municipalities
    • Formulate long- and medium-term and annual socioeconomic development plans and policies, and medium-term and annual public investment programs
    • Appraise and prioritize socioeconomic development programs and projects
    • Formulate local investment incentives to promote the inflow and direction of private investment capital
    • Coordinate, monitor, and evaluate the implementation of development programs and projects (including PPP projects)
    • Confirm local PPP projects of LGUs and LUCs prior to approval by the Sanggunian, in case of LGUs, and the respective boards, in the case of LUCs
    • Have two representatives as non-voting members of the PBAC of the local implementing agency
    Local development councils of barangays
    • Mobilize people’s participation in local development efforts
    • Prepare barangay development plans based on local requirements
    • Monitor and evaluate the implementation of national or local programs and projects (including PPP projects)
    • Confirm local PPP projects
    Regional development councils
    • Highest planning and policymaking body in the region and serve as counterpart of the NEDA Board at the subnational level
    • Review (for endorsement) local PPP projects affecting national or sectoral development plans, as well as national projects, prior to endorsement by the LDC, particularly their alignment with the CLIPs and the list of PPP projects of the relevant implementing agency
    • Review (for endorsement) local PPP projects that involve government undertakings and/or availability payments using national government funds prior to endorsement by the LDC
    • May assist in the coordination of LGUs in the approval by the approving bodies of a local project to be implemented by two or more LGUs
    • May assist in the coordination of LGUs in the approval by the approving bodies of a local project covering two or more LGUs

    CLIPs = Consolidated List of Investment Programs, LDC = local development council, LGU = local government unit, LUCs = local universities and colleges, NEDA = National Economic and Development Authority, PPP = public–private partnership.

    Source: Government of the Philippines. 1991. Local Government Code of the Philippines; 2023. Public–Private Partnership Code of the Philippines; 2024. Implementing Rules and Regulations of the PPP Code; NEDA. About RDC.

    Approval Process for a Local Public–Private Partnership Project

    Approval Process

    ICC-CC = Investment Coordination Committee-Cabinet Committee, LDC = local development council, LUC = local university and college, RDC = regional development council.

    Source: Government of the Philippines. 2023. Public–Private Partnership Code of the Philippines; 2024. Implementing Rules and Regulations of the PPP Code; NEDA. 2024. NEDA Board-ICC Guidelines on the Review and Approval of Public–Private Partnership Proposals Requiring ICC and/or NEDA Board Approval.

    Procurement Processes for Local Public–Private Partnership Projects

    After securing the approval of the approving body, the local implementing agency commences the procurement process by publishing the invitation to qualify/prequalify and bid/for comparative proposals on its website/ official digital platform and the website of the PPP Center. The PBAC created by the local implementing agency is responsible for all aspects of pre-bidding and bidding, including, among others:

    • preparation and issuance of the tender documents;
    • publication of the invitation to qualify/prequalify and bid/for comparative proposals;
    • assessment of qualification/prequalification of prospective bidders/challengers;
    • conduct of pre-bid conferences and issuance of bid bulletins and supplemental notices;
    • interpretation of bidding rules;
    • conduct of bidding;
    • evaluation of bids;
    • resolution of protests; and
    • recommendation for the acceptance of the bid and/or for the award of the PPP contract.8

    The requirements for the PPP procurement processes of local implementing agencies follow the requirements discussed in section PPP Procurement Process in the Philippines. Similarly, the local implementing agency must secure the initial comments and clearance for the draft PPP contract of the reviewing bodies for local PPP projects, consisting of its statutory counsel and, if the project involves a national government undertaking or availability payments, the DOF.

    The PPP approval and procurement processes for solicited and unsolicited local PPP projects, as presented by the PPP Center on its website, are shown in the figures below.

    Submission of a Solicited Local Public–Private Partnership Project

    Solicited Local PPP

    AB = approval body, IA = implementing agency, NOA = notice of award, PBAC = Prequalification, Bids, and Awards Committee, PPP = public–private partnership.

    Source: PPP Center. Submission of a Solicited Local PPP Project.

    Submission of an Unsolicited Local Public–Private Partnership Project

    AB = approval body, IA = implementing agency, ICC = Investment Coordination Committee of the NEDA Board, NEDA = National Economic and Development Authority, OPS = original proponent status, PPP = public–private partnership, PTCs = parameters, terms, and conditions, USP = unsolicited proposal.

    Source: PPP Center. Submission of an Unsolicited Local PPP Project.

    Submission of an Unsolicited Local Public–Private Partnership Project (Comparative Challenge)

    Comparative Challenge

    AB = approval body, IA = implementing agency, NOA = notice of award, PBAC = Prequalification, Bids, and Awards Committee, PPP = public–private partnership.

    Source: PPP Center. Submission of an Unsolicited Local PPP Project.

    Public–Private Partnership Institutional Framework for Local Government Projects

    Along with various institutions responsible for PPPs and the government’s devolution agenda at the national level, specific institutions responsible for PPPs at the local government level include (i) the local legislative councils or Sanggunian of LGUs or Boards of LUCs, (ii) PPP units established by LGUs or LUCs, (iii) contract monitoring units and PPP regulatory units established by LGUs, (iv) LDCs, and (v) RDCs.

    The PPPGB is the overall policymaking body for all PPP-related matters. It is responsible for setting the strategic direction of the PPP program and PPP projects and creating an enabling policy and institutional environment for PPPs.

    In July 2024, the PPPGB approved the final “Guidelines and Procedures for the Review and Approval of Local PPP Projects by the Appropriate Approving Body under the PPP Code of the Philippines and Its Implementing Rules and Regulations.”1 These supersede the interim guidelines and cover the following actions of appropriate approving bodies for local PPP projects:

    • confirmation by the respective LDC Executive Committee;
    • review and approval by the local Sanggunian or LUC Board;
    • endorsement by the Regional PPP Committee of the RDC for local PPP projects affecting national or sectoral development plans and national projects, and/or involving government undertakings and/or availability payments using national government funds;
    • approval by the ICC of proposed government undertakings and/or availability payments using national government funds for local PPP projects;
    • review and approval of proposed changes in the approved PTCs for local solicited PPP projects prior to submission of bids;
    • determination of the reasonable rate of return in case of single complying solicited bids;
    • review and approval of proposed variation, expansion, or extension of an existing local PPP project requiring the approval of the appropriate approving body; and
    • approval of changes in and withdrawals or substitutions of private partners or member firms of a consortium.2

    The PPP Center is tasked, among others, to assist local implementing agencies in identifying, prioritizing, developing, and maintaining a pipeline of PPP projects. Pursuant to the PPP Code, the PPP Center issued in April 2024, the procedures for the submission of USPs to the PPP Center for determination of completeness and appropriate approving body pursuant to Section 10(a) of the PPP Code and Sections 52 and 53 of its IRR, which apply to both national and local unsolicited PPP projects.

    The Bureau of Local Government Finance (BLGF) under the DOF plays a crucial role in the credit financing of LGUs. Some of the BLGF’s functions are as follows:

    • assist in the formulation and implementation of policies on local government revenue administration and fund management;
    • exercise administrative and technical supervision and coordination over the treasury and assessment operations of local governments; and
    • develop and promote plans and programs for the improvement of resource management systems, collection enforcement mechanisms, and credit utilization schemes at the local level.3

    The head of the local implementing agency (local chief executive or head of the LUC) has the discretion to decide on the composition of the local implementing agency’s PPP unit, provided the PPP unit is headed by a senior official and includes as members, among others, technical, finance, and legal personnel who are knowledgeable on PPPs. Such personnel may be outsourced by the local implementing agency.4

    Public–Private Partnership Financing Institutions for Local Government Public–Private Partnership Projects

    LGU credit financing

    In 2019, the BLGF and the DOF signed a memorandum of agreement with eight state-owned and private domestic banks on the exchange of information on indebtedness, payments, and balances of LGUs. The agreement seeks to establish mechanisms for more timely and accurate monitoring of the credit transactions of LGUs, which will serve as inputs to policy and system improvements in overseeing LGU loans.1

    Project Development and Monitoring Facility

    The PDMF is a revolving fund managed and administered by the PPP Center. It is a funding mechanism available to implementing agencies, including LGUs, for the procurement of advisory and support services related to the preparation, structuring, evaluation, procurement, probity management, financial close, and monitoring of implementation of PPP projects. These services may include preparation and conduct of business cases, prefeasibility and feasibility studies, preparation of tender documents, appointment of probity advisors, procurement of independent consultants and third-party appraisers who will conduct valuation of government assets, and other activities in the preparation, procurement, and implementation of local PPP projects.

    PPP Risk Management Fund

    The PPP Code created the PPP Risk Management Fund of the national government to be used for the payment of contingent liabilities arising from PPPs in accordance with contract terms. It will be managed by the PPP Center. In the case of local projects, a similar PPP Risk Management Fund may be established by the LGU subject to the guidelines to be issued by the PPPGB. The local fund may be funded from the budget of the LGU and its income from PPP projects. LGUs may also access the PPP Risk Management Fund of the national government, subject to payment by LGUs of contributions in accordance with the guidelines to be issued by the DBCC.

    Cities Development Initiative for Asia

    The CDIA is a multi-donor trust fund managed by ADB. It works closely with secondary cities in Asia and the Pacific to prepare bankable and sustainable infrastructure investments.2 In 2016, the PPP Center renewed its partnership through a memorandum of understanding with the CDIA. In 2021, the CDIA granted project development support for the Tri-City Ferry System Project, which is a joint project of the city governments of Alaminos and Dagupan, Pangasinan, and San Fernando, La Union. The CDIA support will include the preparation of a feasibility study for the project and the PPP call for proposals.3

    Asia Pacific Project Preparation Facility

    The Asia Pacific Project Preparation Facility is a multi-donor trust fund aiming to increase the level of infrastructure development and enhance the quality of infrastructure in Asia and the Pacific. Its primary objective is to assist ADB developing member country (DMC) governments and their public sector agencies to prepare and structure infrastructure projects with private sector participation, including privatization through to PPP modalities, and bring them to the global market. The The Asia Pacific Project Preparation Facility also provides capacity-related assistance, including for the reform and improvement of policy, legislative, regulatory, and institutional practices in DMCs; and ongoing project performance assistance, including project monitoring and project restructuring.4

    ASEAN Infrastructure Centre of Excellence

    The ASEAN Infrastructure Centre of Excellence (AICOE) assists ASEAN countries in building capacity to identify, screen, and prioritize projects for private sector participation and to develop a pipeline of financeable PPP projects; and in funding project structuring support to prepare PPP transactions for financing.5

  • Sectors for Potential PPPs with Local Government Projects

    The tables below set out the devolved functions and services of the national government to the LGUs pursuant to the LGC. All the services and facilities of the municipality and province; adequate communication and transportation facilities; and support for education, police, and fire services and facilities are devolved to cities.1

    Basic Services and Facilities Devolved to Provinces Under the Local Government Code

    Functions/Services (National Agencies)aProvinces
    Agriculture services (Department of Agriculture)Agricultural extension and on-site research services and facilities, which include the prevention and control of plant and animal pests and diseases; dairy farms, livestock markets, animal breeding stations, and artificial insemination centers; and assistance in the organization of farmers and fishers’ cooperatives, and other collective organizations, as well as the transfer of appropriate technology

    Natural resource management services

    Environmental services (DENR)

    Enforcement of forestry laws limited to community-based forestry projects, pollution control law, small-scale mining law, and other laws on environment protection

    Enforcement of pollution control law

    Energy-related services (DOE)Mini-hydroelectric projects for local purposes
    Other services: revenue mobilization services (DOF)Upgrading and modernization of tax information and collection services through the use of computer hardware and software and other means
    Health services (DOH, DOST-FNRI, NEDA-CPD)Health services, which include hospitals and other tertiary health services
    Telecommunications services (DICT-NTC)Inter-municipal telecommunications services

    Other services: local infrastructure services

    Local development and supervision services Maintenance of peace and order (DPWH, DILG)

    Provincial buildings, freedom parks, and other public assembly areas and similar facilities

    Provincial jails

    Local infrastructure services (DPWH, DENR)Provincial roads and bridges, inter-municipal waterworks, drainage and sewerage, flood control, reclamation projects
    Social welfare services (DSWD, OPPP, NYC, NEDA-CPD)Social welfare services, including programs for rebel returnees, relief operations, and population development services
    DTIInvestment support services, including access to credit financing
    Tourism services (DOT)Tourism development and promotion programs
    Housing services (NHA, SHFC)Programs and projects for low-cost housing and other mass dwelling
    Local infrastructure services (NIA)Irrigation systems
    • aThese are the national agencies performing the devolved functions/services.

    DENR = Department of Environment and Natural Resources, DICT-NTC = Department of Information and Communications Technology-National Telecommunications Commission, DILG = Department of Interior and Local Government, DOE = Department of Energy, DOF = Department of Finance, DOH = Department of Health, DOST-FNRI = Department of Science and Technology-Food and Nutrition Research Institute, DOT = Department of Tourism, DPWH = Department of Public Works and Highways, DSWD = Department of Social Welfare and Development, DTI = Department of Trade and Industry, NEDA-CPD = National Economic and Development Authority-Commission on Population and Development, NHA = National Housing Authority, NIA = National Irrigation Administration, NYC = National Youth Commission, OPPP = Office of Presidential Adviser on the Peace Process, SHFC = Social Housing Finance Corporation.

    Source: Government of the Philippines. 1991. Local Government Code of the Philippines; 2021. Implementing Rules and Regulations of Executive Order No. 138, S. 2021, Annex A.

    Basic Services and Facilities Devolved to Municipalities Under the Local Government Code

    Functions/Services (National Agencies)aMunicipalities
    Agriculture services (Department of Agriculture)
    • Agriculture extension on-site research services and facilities related to agriculture and fishery activities related to dispersal of livestock, poultry, fingerlings, and seedlings; operation of demonstration farms; improvement of local distribution channels and inter-barangay irrigation systems; enforcement of fishery laws
    • Fish ports
    Local infrastructure services (DepEd)
    • School buildings and other facilities for public elementary and secondary schools
    • Information services, which include maintenance of public library

    Natural resource management services

    Environmental services (DENR)

    Implementation of community-based forestry projects, which include integrated social forestry programs and similar projects; management and control of communal forests with an area below 50 square kilometers; establishment of tree parks, greenbelts, and similar forest development projects

    Solid waste disposal system or environmental management system

    Other services: revenue mobilization services (DOF)Information services, which include tax and marketing information systems
    Health services (DOH, DOST-FNRI, NEDA-CPD)
    • Health services, which include the implementation of programs and projects on:
      • primary health care,
      • maternal and childcare, and
      • communicable and non-communicable disease control services
    • Access to secondary and tertiary health services
    • Purchase of medicines, medical supplies, and equipment needed to carry out the services herein enumerated
    • Rehabilitation programs for victims of drug abuse
    • Nutrition services and family planning services
    • Clinics, health centers, and other health facilities necessary to carry out health services

    Other services: local infrastructure services

    Local development and supervision services

    Maintenance of peace and order (DILG, DPWH)

    		Municipal buildings, cultural centers, public parks, including freedom parks, playgrounds and other sports facilities and equipment, and other similar facilities
    Sites for police and fire stations and substations and municipal jails
    Public markets, slaughterhouses, and other municipal enterprises
    Public cemeteries
    Other services: employment facilitation (DOLE)Information services, which include job placement information systems
    Local infrastructure services (DPWH, DENR)
    • Municipal roads and bridges, small water impounding projects, and other similar projects; rainwater collectors and water supply systems; seawalls, dikes, drainage and sewerage, and flood control
    • Facilities related to general hygiene and sanitation
    Social welfare services (DSWD, OPPP, NYC, NEDA-CPD)
    • Social welfare services, including child and youth programs, family and community programs, welfare programs for women, older people and people with disabilities, community-based rehabilitation programs for vagrants, beggars, street children, and juvenile delinquents
    • Livelihood and other pro-poor projects
    DTIInformation services on investments information systems
    Transportation services (DOTr)Infrastructure facilities such as traffic signals and road signs, and similar facilities
    Tourism services (DOT)Tourism facilities and other tourist attractions, including the acquisition of equipment, regulation and supervision of business concessions, and security services for such facilities
    Local infrastructure services (NIA)Communal irrigation
    • aThese are the national agencies performing the devolved functions/services.

    DENR = Department of Environment and Natural Resources, DepEd = Department of Education, DILG = Department of Interior and Local Government, DOF = Department of Finance, DOH = Department of Health, DOLE = Department of Labor and Employment, DOST-FNRI = Department of Science and Technology-Food and Nutrition Research Institute, DOT = Department of Tourism, DOTr = Department of Transportation, DPWH = Department of Public Works and Highways, DSWD = Department of Social Welfare and Development, DTI = Department of Trade and Industry, NEDA-CPD = National Economic and Development Authority-Commission on Population and Development, NIA = National Irrigation Administration, NYC = National Youth Commission, OPPP = Office of Presidential Adviser on the Peace Process.

    Sources: Government of the Philippines. 1991. Local Government Code of the Philippines; 2021. Implementing Rules and Regulations of Executive Order No. 138, S. 2021, Annex A.

    Basic Services and Facilities Devolved to Barangays Under the Local Government Code

    Functions/Services (National Agencies)aBarangays
    Agriculture services (Department of Agriculture)Agricultural support services, which include planting materials distribution system and operation of farm produce collection and buying stations
    Local infrastructure services (DepEd)Information and reading center

    Natural resource management services

    Environmental services (DENR)

    		Services and facilities related to beautification, and solid waste collection
    Health services (DOH, DOST-FNRI, NEDA-CPD)Health services, which include the maintenance of barangay health centers
    Other services: local infrastructure services Local development and supervision services Maintenance of peace and order (DILG, DPWH)Satellite or public markets, where viable
    DOJMaintenance of Katarungang Pambarangayb
    Local infrastructure services (DPWH, DENR)Maintenance of barangay roads and bridges and water supply systems
    Infrastructure facilities such as multipurpose halls, multipurpose pavements, plazas, sports centers, and other similar facilities
    Services and facilities related to general hygiene and sanitation
    Social welfare services (DSWD, OPPP, NYC, NEDA-CPD)Social welfare services, such as maintenance of daycare centers
    • aThese are the national agencies performing the devolved functions/services.
    • bBarangay conciliation proceedings which are a pre-condition to filing a complaint in court between persons actually residing in the same or adjoining barangays to explore possible amicable settlement.

    DENR = Department of Environment and Natural Resources, DepEd = Department of Education, DILG = Department of Interior and Local Government, DOH = Department of Health, DOST-FNRI = Department of Science and Technology-Food and Nutrition Research Institute, DPWH = Department of Public Works and Highways, DSWD = Department of Social Welfare and Development, NEDA-CPD = National Economic and Development Authority-Commission on Population and Development, NYC = National Youth Commission, OPPP = Office of Presidential Adviser on the Peace Process.

    Source: Government of the Philippines. 1991. Local Government Code of the Philippines; 2021. Implementing Rules and Regulations of Executive Order No. 138, S. 2021, Annex A.

    The figure below shows the number of local PPP projects under preparation and procurement in 2023.

    Local Public–Private Partnership Projects Under Preparation and Procurement, 2023

    ICT = information and communication technology.

    Source: PPP Center. Corporate Planning and Development Division. Projects List (provided 9 August 2024)

    Based on the projects list of the PPP Center as of October 2024, there were 46 local PPP projects in the pipeline across various infrastructure sectors (roads, railways, ports, airports, energy, water and wastewater, ICT, agriculture and fisheries, social infrastructure, and solid waste). A total of 41 PPP projects are under preparation (including those in the approval phase and in the negotiation phase for USPs). Five are under procurement.

    Local Public–Private Partnership Projects Under Preparation and Procurement, as of October 2024

    ICT = information and communication technology.

    Source: PPP Center. 2024. List of PPP Projects in the Pipeline (accessed 27 October 2024).

    Pipeline Local Public–Private Partnership Projects, as of October 2024

    No.ProjectImplementing AgencyProcurement ModeSectorEstimated Project CostStatus
    ($ million)(₱ billion)
    1.Cavite Bus Rapid Transit SystemProvincial Government of CaviteUnsolicitedRoads32.071.87Procurement phase (under comparative challenge)
    2.Smart Urban Mobility ProjectCity Government of BaguioUnsolicitedRoads43.392.53Negotiation phase
    3.High-Capacity Bus System in Iloilo CityCity Government of IloiloUnsolicitedRoads42.532.48Negotiation phase
    4.Baguio City Intermodal Terminal ProjectCity Government of BaguioUnsolicitedRoads20.411.19Approval phase
    5.La Union Integrated Terminal ExchangeProvincial Government of La UnionSolicitedRoads-TBDPreparation phase (under conceptualization)
    6.South-Luzon Integrated Terminal Exchange ProjectCity Government of CarmonaUnsolicitedRoads13.550.79Preparation phase (under evaluation by IA)
    7.Baguio Transport Solutions (Elevated Monorail and Electric Bus System)City Government of BaguioUnsolicitedRailways198.9411.60Negotiation phase
    8.Tri-City Ferry SystemCity Governments of Alaminos and Dagupan, Pangasinan, and San Fernando, La UnionSolicitedPorts83.524.87Preparation phase (under development)
    9.New Surigao Airport ProjectCity Government of SurigaoSolicitedAirports-TBDPreparation phase (under conceptualization)
    10.Development and Improvement of Asin Hydropower PlantsCity Government of BaguioUnsolicitedEnergy21.781.27Negotiation phase
    11.Solar Rooftop ProjectProvincial Government of BataanUnsolicitedEnergy0.690.04Negotiation phase
    12.Bataan Rooftop Microgrid ProjectProvincial Government of BataanUnsolicitedEnergy4.630.27Negotiation phase
    13.Negros Occidental Bulk Water Supply ProjectProvince of Negros OccidentalSolicitedWater and wastewater20.581.2Procurement phase
    14.Bulk Water Supply SystemProvincial Government of BataanUnsolicitedWater and wastewater27.441.6Negotiation phase
    15.Pampanga Bulk Water Supply ProjectProvincial Government of PampangaUnsolicitedWater and wastewater137.378.01Negotiation phase
    16.Cavite Bulk Water Supply ProjectProvincial Government of CaviteSolicitedWater and wastewater-TBDPreparation phase (under development)
    17.La Union Bulk Water Facility ProjectProvincial Government of La UnionSolicitedWater and wastewater-TBDPreparation phase (under conceptualization)
    18.Iloilo Bulk Water Supply ProjectProvincial Government of IloiloUnsolicitedWater and wastewater144.928.45Preparation phase (under evaluation by IA)
    19.Bacolod Super City ProjectCity Government of BacolodUnsolicitedICT36.022.1Procurement phase (under comparative challenge)
    20.Digitalized Traffic Enforcement for Bacoor CityCity Government of BacoorSolicitedICT0.510.03Negotiation phase
    21.Digitalized Traffic SystemProvincial Government of BataanUnsolicitedICT0.170.01Negotiation phase
    22.Binan City Digitalized Traffic EnforcementCity Government of BinanUnsolicitedICT0.340.02Negotiation phase
    23.Sta. Rosa City Digitalized Traffic EnforcementCity Government of Sta. RosaSolicitedICT0.340.02Preparation phase (under evaluation by IA)
    24.Municipality of Cainta Digitalized Traffic EnforcementMunicipal Government of CaintaSolicitedICT0.340.02Preparation phase (under evaluation by IA)
    25.Caloocan City Digitalized Traffic EnforcementCity Government of CaloocanSolicitedICT0.510.03Preparation phase (under evaluation by IA)
    26.Cauayan City Digitalized Traffic EnforcementCity Government of CauayanSolicitedICT0.340.02Preparation phase (under evaluation by IA)
    27.Catbalogan City Digitalized Traffic EnforcementCity Government of CatbaloganSolicitedICT0.340.02Preparation phase (under evaluation by IA)
    28.Lipa City Digitalized Traffic EnforcementCity Government of LipaSolicitedICT0.340.02Preparation phase (under evaluation by IA)
    29.Municipality of Pagasanjan Digitalized Traffic EnforcementMunicipal Government of PagasanjanUnsolicitedICT0.170.01Preparation phase (under evaluation by IA)
    30.Dasmariñas City Digitalized Traffic Enforcement SystemCity Government of DasmariñasUnsolicitedICT0.340.02Preparation phase (endorsed to IA after completeness check)
    31.Gen. Mariano Alvarez Cavite Digitalized Traffic EnforcementMunicipal Government of Gen. Mariano Alvarez, CaviteUnsolicitedICT0.170.01Preparation phase (endorsed to IA after completeness check)
    32.Redevelopment of the Baguio City Public MarketCity Government of BaguioUnsolicitedAgriculture and Fisheries78.724.59Negotiation phase
    33.Redevelopment of General Santos City Public Market ProjectCity Government of General SantosUnsolicitedAgriculture and Fisheries39.962.33Approval phase
    34.Santiago City Hemodialysis Center ProjectCity Government of Santiago, IsabelaSolicitedSocial Infrastructure6.170.36Procurement phase
    35.O&M of Pampanga Dialysis Centers ProjectProvincial Government of PampangaUnsolicitedSocial Infrastructure12.520.73Procurement phase (under comparative challenge)
    36.Mariveles Dialysis CenterProvincial Government of BataanUnsolicitedSocial Infrastructure0.690.04Negotiation phase
    37.Establishment of Hemodialysis Centers in Iloilo Provincial and District HospitalsProvincial Government of IloiloUnsolicitedSocial Infrastructure3.940.23Negotiation phase
    38.O&M of Palayan City HospitalCity Government of Palayan, Nueva EcijaUnsolicitedSocial Infrastructure1.030.06Negotiation phase
    39.Subdivision and Housing Program in Barangay Ordoñilla and Bethel, Victoria Oriental MindoroProvincial Government of Victoria, Oriental MindoroSolicitedSocial Infrastructure-TBDPreparation phase (under conceptualization)
    40.La Union Dialysis Center Central CircuitProvincial Government of La UnionUnsolicitedSocial Infrastructure-TBDPreparation phase (under evaluation by IA)
    41.San Juan–4PH ProgramCity Government of San JuanUnsolicitedSocial Infrastructure25.211.47Preparation phase (under evaluation by IA)
    42.O&M Including Supply and Installation of Laboratory Equipment and Information SystemCity Government of AntipoloUnsolicitedSocial infrastructure0.340.02Preparation phase (endorsed to IA after completeness check)
    43.General Santos City Sanitary Landfill ProjectCity Government of General SantosSolicitedSolid waste-TBDPreparation phase (under conceptualization)
    44.Catanduanes Solid Waste Management ProjectProvincial Government of CatanduanesSolicitedSolid waste-TBDPreparation phase (under conceptualization)
    45.Zamboanga City Integrated Solid Waste Management SystemCity Government of ZamboangaSolicitedSolid waste-TBDPreparation phase (under evaluation by IA)
    46.Comprehensive Provincial Waste Management and Carbon Capture System Utilizing Bio-Methanation No-Burn ProjectProvincial Government of QuirinoUnsolicitedSolid waste13.720.8Preparation phase (under evaluation by IA)

    4PH = Pambansang Pabahay Para sa Pilipino, IA = implementing agency, ICT = information and communication technology, O&M = operation and maintenance, TBD = to be determined.

    Source: PPP Center. 2024. List of PPP Projects in the Pipeline (accessed 27 October 2024).

  • Revenues for Local Governments

    LGUs have the power to create their own sources of revenue and to levy taxes, fees, and charges, which accrue exclusively to such LGUs. The LGUs source their revenues from both local and external sources, which are summarized in the table below. The BLGF publishes the statement of receipts and expenditures of LGUs on a quarterly and annual basis.1 As of 2022, the total revenues of LGUs from all sources amounted to 1,108,735.97, with revenues from external sources accounting for almost 75% of all revenues.

    Sources of Revenues of Local Government Units, 2022

    Sources of RevenueRevenues
    ($ thousands)(₱ million)
    Local sources
    Local tax revenue 3,551.66 207,093.63
    • Real property tax (41% of local tax revenue)
    		1,462.48 85,275.63 
    • Tax on business (52% of local tax revenue)
    		1,851.00 107,929.88 
    • Other taxes (7% of local tax revenue)
    		238.18 13,888.12 
    Local non-tax revenue 1,282.51 74,782.12
    • Regulatory fees (23% of local non-tax revenue)
    		294.63 17,179.60 
    • Service/user fees (35% of local non-tax revenue)
    		447.92 26,117.69 
    • Receipts from economic enterprises (34% of local nontax revenue)
    		440.47 25,683.55 
    • Other receipts (8% of local non-tax revenue)
    		99.49 5,801.35 
    Total revenue from local sources4,834.17 281,875.82
    External sources
    National tax allotment 13,140.52 766,211.18
    Other shares from national tax collection 790.28 46,080.37
    • Share from Economic Zones (Republic Act No. 7227, as Amended, and  Republic Act No. 7916, as Amended)
    		140.87 8,214.15 
    • Share from expanded value-added tax
    		1.49 86.74 
    • Share from national wealth
    		81.77 4,768.18 
    • Share from PAGCOR/PCSO/Lotto
    		15.75 918.10 
    • Share from tobacco excise tax (Republic Act No. 7171)
    		541.99 31,602.75 
    • Others
    		8.41 490.44 
    Inter-local transfers 126.20 7,358.76
    Extraordinary receipts/grants/donations/aids 123.65 7,209.84
    Total revenue from external sources14,180.65 826,860.15
    Total revenue from all sources19,014.82 1,108,735.97

    PAGCOR = Philippine Amusement and Gaming Corporation, PCSO = Philippine Charity Sweepstakes Office.

    Source: BLGF. 2022. SRE-FY2022-by-LGUupdated.

    1. Local Sources

    Provinces and cities, as well as municipalities within the Metropolitan Manila area, impose a uniform rate of basic real property tax based on the assessed value of the real property: 1% in the case of a province and 2% in the case of a city or a municipality within the Metropolitan Manila area. An additional 1% over the basic real property tax is imposed for a special education fund. Cities and municipalities likewise impose community and business taxes. Provinces may impose franchise, professional, and amusement taxes, among others. Aside from local taxes, LGUs have non-tax revenues derived from their collection of fees and charges for services rendered; rates for the operation of public utilities they own, operate, and maintain within their jurisdiction; and toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by them.2

    2. External Sources

    LGUs have a share in the national taxes and in the gross collection of the national government and GOCCs relating to the utilization and development of the national wealth within their jurisdiction.3

    Registered enterprises within the Subic, Clark, John Hay, and Poro Point special economic zones, in lieu of paying local and national taxes, pay 3% of their gross income earnings to the national government, 1% to the LGUs affected by the declaration of the zone, and the remaining 1% to a development fund utilized for the development of municipalities outside and contiguous to the zone.4 Enterprises registered with the PEZA, in lieu of all taxes, except real property tax on land owned by the developers, pay 3% of their gross income earnings to the national government and 2% to the municipality or city where they are registered.5

    There are also special allotments to LGUs pursuant to various laws. Provinces producing Virginia tobacco are entitled to special financial support from the national government. Provinces producing burley and native tobacco have a 15% share in the incremental revenues collected by the national government from the excise tax on tobacco products.6 LGUs receive a share in the national government’s revenues from collection of expanded value-added tax for the immediately preceding year, and 20% share for the Fire Code revenue fees collected by the Bureau of Fire Protection.7 The Philippine Amusement and Gaming Corporation, a state-owned enterprise, remits fixed amounts to cities hosting casinos for their respective community development programs.8 The Philippine Charity Sweepstakes Office shares lotto and small town lottery proceeds to LGUs.9

  • Borrowings by Local Governments

    The basic policy under the LGC is that LGUs may create indebtedness, and avail of credit facilities to finance local infrastructure and other socioeconomic development projects in accordance with the approved local development plan and public investment program. They may likewise avail of credit lines from government or private banks and lending institutions for the purpose of stabilizing local finances.

    Specifically, the LGC authorizes LGUs to contract loans, credits, and other forms of indebtedness with any government or domestic private bank and other lending institutions to finance the construction, installation, improvement, expansion, operation, or maintenance of public facilities, infrastructure facilities, or housing projects, the acquisition of real property, and the implementation of other capital investment projects. LGUs may likewise secure from any government bank or lending institution short-, medium-, and long-term loans and advances against security of real estate or other acceptable assets for the establishment, development, or expansion of agricultural, industrial, commercial, house financing, or livelihood projects, and other economic enterprises. Provinces, cities, and municipalities are also authorized to issue bonds, debentures, securities, collaterals, notes, and other obligations to finance self-liquidating, income-producing development or livelihood projects pursuant to the priorities established in the approved local development plan or the public investment program. LGUs may secure loans from other LGUs. They may also jointly or severally contract loans, credits, and other forms of indebtedness for purposes mutually beneficial to them. The LGC further allows LGUs to source additional financing from loans secured by the national government from foreign financial institutions or other international funding agencies.

    Borrowings by LGUs need to be authorized by the local legislative body or sanggunian and included in their annual investment plans and priorities. Further, LGUs must secure a Certificate of Net Debt Service Ceiling and Borrowing Capacity from the BLGF and the prior opinion of the Monetary Board on the probable effects of the proposed borrowing on monetary aggregates, the price level, and the balance of payments.1

  • Budgetary Allocation to Local Governments

    LGUs have a 40% share in the national taxes based on the collection of the third fiscal year preceding the current fiscal year. This national tax allotment (NTA) is allocated among the LGUs as follows: provinces, 23%; cities, 23%; municipalities, 34%; and barangays, 20%. The share of each province, city, and municipality in the NTA is determined on the basis of the following formula: population, 50%; land area, 25%; and equal sharing, 25%. LGUs also have a 40% share in the gross collection of the national government from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or charges, relating to the utilization and development of the national wealth within their jurisdiction. In addition, LGUs share in the proceeds derived by any GOCC engaged in the utilization and development of the national wealth.1

    LGUs are required to use the NTA first for the provision of basic services and facilities, particularly those devolved by the national government, before other purposes. Each LGU is required to appropriate in its annual budget no less than 20% of its annual NTA for development projects, referred to as the 20% Development Fund.2

  • Credit Rating of Local Governments

    Part of the strategy framework in the PDP to ensure sound fiscal management is to strengthen local government finance to enable LGUs to raise more revenues and implement devolved functions. This comprises the development of a local credit market and a credible and independent LGU credit rating system, including the conduct of a comprehensive preliminary study on the development of an LGU bond market.1 The PDP recognizes that bond financing can provide LGUs with access to direct funding sources and, in the process, require them to practice discipline in transparency, accounting, and auditing finances. It also notes that a local credit market system would allow the public to participate in local governance and invest their savings in worthwhile local programs.2 The development of the LGU capital market through the formulation of its appropriate framework highlights the importance of likewise developing capacity-building programs for LGUs to enable them to issue bonds, especially sustainable bonds, to finance their programs and projects.