Local Legislation

1. Local legislative power is the power of LGUs through their local legislative councils to
enact, repeal, amend, modify ordinances and issue resolutions.
2. Local legislative power shall be exercised by the sangguniang panlalawigan for the
province; the sangguniang panlungsod for the city; the sangguniang bayan for the
municipality; and the sangguniang barangay for the barangay (Section 48, 1991 LGC).

2. Local legislation is referred to as subordinate legislation.

2.1 Local political subdivisions are able to legislate only by virtue of a valid delegation of
legislative power from the national legislature except only that the power to create their own
sources of revenue and to levy taxes is conferred by the Constitution itself. They are mere
agents vested with what is called the power of subordinate legislation. As delegates of
Congress, LGUs cannot contravene but must obey at all times the will of their principal. An
enactment local in origin cannot prevail against a decree, which has the force and effect of a
statute (Manila vs. Laguio, G.R. No. 118127, April 12, 2005).

2.2 An ordinance in conflict with a state law of general character and statewide application is
universally held to be invalid. The principle is frequently expressed in the declaration that
municipal authorities, under a general grant of power, cannot adopt ordinances which
infringe upon the spirit of a state law or repugnant to the general policy of the state. In every
power to pass ordinances given to a municipality, there is an implied restriction that the
ordinances shall be consistent with the general law (Batangas CATV vs. Court of Appeals,
G.R. No. 138810, October 20, 2004).

2.3 The delegate cannot be superior to the principal or exercise powers higher than those of
the latter (Lagcao vs. Labra, G.R. No. 155746, October 13, 2004).

2.4 A proviso in an ordinance directing that the real property tax be based on the actual
amount reflected in the deed of conveyance or the prevailing Bureau of Internal Revenue
zonal value is invalid not only because it mandates an exclusive rule in determining the fair
market value but more so because it departs from the established procedures stated in the
Local Assessment Regulations No. 1-92 (Allied Banking vs. Quezon City, G.R. No. 154126,
October 11, 2005).
3. Local legislative acts are referred to as denominated ordinances. For an ordinance to be
valid, it must not only be within the corporate powers of the LGU to enact and must be
passed according to the procedure prescribed by law, it must also conform to the following
substantive requirements: (1) must not contravene the Constitution or any statute; (2) must
not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit
but may regulate trade; (5) must be general and consistent with public policy; and (6) must
not be unreasonable (Lagcao vs. Labra, G.R. No. 155746, October 13, 2004; Ferrer vs.
Bautista, G.R. No. 210551, June 30, 2015).

4. As jurisprudence indicates, the tests are divided into the formal (i.e., whether the ordinance
was enacted within the corporate powers of the LGU and whether it was passed in
accordance with the procedure prescribed by law), and the substantive (i.e., involving
inherent merit, like the conformity of the ordinance with the limitations under the
Constitution and the statutes, as well as with the requirements of fairness and reason, and its
consistency with public policy). (Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015)

5. Ordinances enacted by LGUs enjoy the presumption of constitutionality. To overthrow this

presumption, there must be a clear and unequivocal breach of the Constitution, not merely a
doubtful or argumentative contradiction. In short, the conflict with the Constitution must be
shown beyond reasonable doubt. When doubt exists, even if well-founded, there can be no
finding of unconstitutionality (Tano vs. Socrates, G.R. No. 110249, August 21, 1997).

6. An ordinance must pass muster under the test of constitutionality and the test of
consistency with the prevailing laws. If not, it is void. (Ferrer vs. Bautista, G.R. No. 210551,
June 30, 2015)

7. An ordinance carries with it the presumption of validity. The question of reasonableness

though is open to judicial inquiry. Much should be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an ordinance as unreasonable unless the
amount is so excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry
are the municipal conditions as a whole and the nature of the business made subject to
imposition (Victorias Milling Co., Inc. v. Municipality of Victorias, G.R. No. L-21183,
September 27, 1968; Smart Communications, Inc. v. Municipality of Malvar, Batangas, G.R.
No. 204429, February 18, 2014).

8. A void legislative act such an ordinance granting a franchise to cable television operators,
a power vested on the National Telecommunications Commission, does not confer any right
nor vest any privilege (Zoomzat vs. People of the Philippines, G.R. No. 135535, February 14,
2005).

9. Ordinances passed in the exercise of the general welfare clause and devolved powers of
LGUs need not be approved by the devolving agency in order to be effective absent a
specific provision of law (Tano vs. Socrates, G.R. No. 110249, August 21, 1997). Otherwise,
this would amount to control.

10. The objective adopted by the Sangguniang Panlungsod to promote the constituents’
general welfare in terms of economic benefits cannot override the very basic rights to life,
security and safety of the people (Social Justice Society vs. Mayor Lim, G.R. No. 187836,
November 25, 2014).

11. There are no unlawful disbursements of public funds when disbursements are made
pursuant to a re-enacted budget. Money can be paid out of the local treasury since there is a
valid appropriation (Villanueva vs. Ople, G.R. No. 165125, October 18, 2005).

12. Local legislative councils enact ordinances and issue resolutions.

10.1 Legislative actions of a general and permanent character shall be enacted in the form of
ordinances, while those which are of temporary character shall be passed in the form of
resolutions. Matters relating to proprietary functions and to private concerns shall also be
acted upon by resolution (Art. 107, Implementing Rules and Regulations of the 1991 LGC)

13. LGUs can enter into contracts subject to certain requirements (Section 22[a][5], 1991
LGC).

11.1 Unless otherwise provided in the 1991 LGC, no contract may be entered into by the
local chief executive in behalf of the LGU without prior authorization by the sanggunian
concerned. A legible copy of such contract shall be posted at a conspicuous place in the
provincial capitol or the city, municipal or barangay hall (Section 22[c], 1991 LGC). Without
the council authorization/ ratification, the contract is unenforceable.

11.2 A mayor validly entered into a Contract of Legal Services where the sanggunian
unanimously passed a resolution authorizing his/her to hire a lawyer of his/her choice to
represent the municipality’s interest (Municipality of Tiwi vs. Betito, G.R. No. 171873, July
9, 2010).

11.3 The prior authorization may be in the form of an appropriation ordinance passed for the
year which specifically covers the project, cost or contract to be entered into by the LGU
(Quisumbing vs. Garcia, G.R. No. 175527, December 8, 2008).

11.4 A loan agreement entered into by the provincial governor without prior authorization
from the sangguniang panlalawigan is unenforceable. The sanggunian’s failure to impugn the
contract’s validity despite knowledge of its infirmity is an implied ratification that validates
the contract (Ocampo vs. People, G.R. Nos. 156547-51 / 156382-85, February 4, 2008).

11.5 the sanggunian barangay did not repudiate the acceptance of the donation and when the
barangay and the people of the barangay have continuously enjoyed the material and public
service benefits arising from the infrastructure projects put up on the subject property (Dolar
vs. Barangay Lublub, G.R. No. 152663, November 18, 2005).

11.6 A local chief executive has the authority to file suits for the recovery of funds and
property on behalf of the LGU, even without the prior authorization from the sanggunian.
Nowhere in the enumerated powers and duties of the sanggunian can one find the
requirement of such prior authorization in favor of the local chief executive for the purpose
of filing suits on behalf of the LGU (City of Caloocan vs. Court of Appeals, G.R. No.
145004, May 03, 2006).

11.7 For local government infrastructure projects, Regional Trial Courts may issue
provisional injunctive reliefs against government infrastructure projects only when (1) there
are compelling and substantial constitutional violations; (2) there clearly exists a right in
esse; (3) there is a need to prevent grave and irreparable injuries; (4) there is a demonstrable
urgency to the issuance of the injunctive relief; and (5) when there are public interest at stake
in restraining or enjoining the project while the action is pending that far outweighs (a) the
inconvenience or costs to the party to whom the project is awarded and (b) the public benefits
that will result from the completion of the project. The time periods for the validity of
temporary restraining orders issued by trial courts should be strictly followed. No
preliminary injunction should issue unless the evidence to support the injunctive relief is
clear and convincing. (Dynamic Builders and Construction Co., Inc. vs. Presbitero, G.R. No.
174201, April 7, 2015)

11.8 A municipality is a real party-in-interest and an indispensable party that stands to be

directly affected by any judicial resolution on the case assailing the validity of the loan,
considering that: (a) the contracting parties to the loans are the bank and the municipality;
and (b) the municipality owns the Public Plaza as well as the improvements constructed
thereon, and must therefore be impleaded in the case. (Land Bank vs. Cacayuran, G.R. No.
191667, April 22, 2015)

11.9 Liabilities arising from construction contracts of LGUs do not partake of loans or
forbearance of money but are in the nature of contracts of service. Hence, the rate of legal
interest imposable on the liability to pay for the service is 6% per annum. (WT Construction,
Inc. vs. The Province of Cebu, G.R. No. 208984, September 16, 2015)

11.10 The terms and conditions of Loan Agreement No. 4833-PH, which is an executive
agreement within the purview of Section 4 of R.A. No. 9184, being a project-based and
government-guaranteed loan facility, were incorporated and made part of the Subsidiary
Loan Agreement that was subsequently entered into by Land Bank with the City Government
of Iligan. Considering that Loan Agreement No. 4833-PH expressly provides that the
procurement of the goods to be financed from the loan proceeds shall be in accordance with
the IBRD Guidelines and the provisions of Schedule 4, and that the accessory SLA contract
merely follows its principal's terms and conditions, 5 procedure for competitive public
bidding prescribed under RA 9184 therefore finds no application to the procurement of goods
for the Iligan City Water Supply System Development and Expansion Project (Land Bank of
the Philippines vs. Atlanta Industries, G.R. No. 193796, July 2, 2014).

14. The local legislative process has the following stages/steps: (1) sponsorship; (2) 1 st
reading; (3) committee deliberations; (4) committee report; (5) 2nd reading (interpellation
and amendments); (6) 3rd readings, attestation; (7) transmittal to local chief executive; (8)
approval or veto; (9) publication/ posting; (10) effectivity; and (11) review by the
supervising-higher sanggunian.

15. A sanggunian is a collegial body.

11.1. Legislation requires the participation of all its members so that they may not only
represent the interests of their respective constituents but also help in the making of decisions
by voting upon every question put upon the body (Zamora vs. Caballero, G.R. No. 147767,
January 14, 2004).

11.2 The acts of only a part of the sanggunian done outside the parameters of the legal
provisions are legally infirm. All such acts cannot be given binding force and effect for they
are considered unofficial acts done during an unauthorized session (Zamora vs. Caballero,
G.R. No. 147767, January 14, 2004).

11.3 A majority of all members of the sanggunian who have been elected and qualified shall
constitute a quorum to transact official business. The determination of the existence of a
quorum is based on the total number of members of the sanggunian without regard to the
filing of a leave of absence (Zamora vs. Caballero, G.R. No. 147767, January 14, 2004).

11.4 A sanggunian may provide for a vote requirement different from that prescribed under
the law (i.e., generally, majority vote) for certain (but not all) ordinances as in amending a
zoning ordinance. (Casino vs. Court of Appeals, G.R. No. 91192, December 2, 1991).

11.5 The sanggunian’s verbal concurrence is not the concurrence envisioned under the law.
The sanggunian, as a legislative body, acts through a resolution or an ordinance, adopted in a
legislative session (Montuerto vs. Ty, G.R. No. 177736, October 6, 2008).

11.6 There is nothing in the language of the law that restricts the matters to be taken up
during the first regular session merely to the adoption or updating of the house rules. A
supplemental budget may be passed on the first session day of the sanggunian (Malonzo vs.
Zamora, G.R. No. 137718, July 27, 1999).

11.7 There is nothing in the law which prohibits the conduct of three readings of a proposed
ordinance from being held in just one session day (Malonzo vs. Zamora, G.R. No. 137718,
July 27, 1999).
11.8 Absent a law, local legislative councils have no contempt and subpoena powers (Negros
Oriental II Electric Cooperative Inc. vs. Sangguniang Panlungsod of Dumaguete, G.R. No.
72492, November 05, 1987). This is not an inherent power of local councils.

16. Governors and mayors have the power to approve or veto ordinances. The local chief
executive may veto any ordinance of the sanggunian panlalawigan, sangguniang panlungsod,
or sanggunian bayan on the ground that it is ultra vires or prejudicial to the public welfare,
stating his reasons therefor in writing (Section 55[a], 1991 LGC).

12.1 The governor or mayor has the power to veto the entire ordinance or particular items
thereof. The local chief executive, except the punong barangay, shall have the power to veto
any particular item or items of an appropriations ordinance, an ordinance or resolution
adopting a local development plan and public investment program, or an ordinance directing
the payment of money or creating liability (Section 55[b], 1991 LGC).

12.2 The local chief executive may veto an ordinance or resolution only once. The
sanggunian may override the veto of the local chief executive concerned by two-thirds (2/3)
vote of all its members, thereby making the ordinance effective even without the approval of
the local chief executive concerned (Section 55[c], 1991 LGC).

12.3 The grant of the veto power confers authority beyond the simple act of signing an
ordinance or resolution as a requisite to its enforceability. Such power accords the local chief
executive the discretion to sustain a resolution or ordinance in the first instance or to veto it
and return it with his/her objections to the sanggunian (Delos Reyes vs. Sandiganbayan, G.R.
No. 121215, November 13, 1997).

12.4 An appropriation ordinance signed by the local chief executive authorizes the release of
public funds. The mayor's signature approving the budget ordinance was his/her assent to the
appropriation of funds. If he/she did not agree with such allocation, he/she could have vetoed
the item (Caloocan City vs. Allarde, G.R. No. 107271, September 10, 2003).

12.5 A municipal mayor cannot issue a mayor’s permit to operate a cockpit without an
enabling ordinance. A general ordinance empowering a mayor to issue permits cannot be
used to justify the issuance of a license. A mayor cannot also be compelled to issue such a
license since this would constitute an undue encroachment on the mayor's administrative
prerogatives (Canet vs. Decena, G.R. No. 155344, October 20, 2004).

17. Review is a reconsideration or re-examination for purposes of correction. The power of

review is exercised to determine whether it is necessary to correct the acts of the subordinate
and to see to it that supervised unit performs the duties in accordance with law (Casino vs.
Court of Appeals, G.R. No. 91192, December 2, 1991).

18. An LGU has two branches of government, i.e. executive and legislative. The Governor
for the Provinces, Mayors for Cities and Municipalities, and the Punong Barangay for
Barangays are the local chief executives, while the Vice-Governor and Vice-Mayor are the
vice-local chief executives. The 1991 LGC does not provide for the position of Vice-Punong
Barangay.

19. The 1991 LGC allows for review of certain ordinances.

16.1 The law requires that a dissatisfied taxpayer who questions the validity or legality of a
tax ordinance must file its appeal to the Secretary of Justice within 30 days from effectivity
thereof. In case the Secretary decides the appeal, a period of 30 days is allowed for an
aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60
days, a party could already proceed to seek relief in court (Reyes et. al. vs. Court of Appeals,
G.R. No. 118233, December 10, 1999; Section 187, 1991 LGC). a. Failure to appeal to the
Secretary of Justice within 30 days from the effectivity date of the tax ordinance as mandated
by Section 187 of the 1991 LGC is fatal (Jardine Davies vs. Aliposa, G.R. No. 118900,
February 27, 2003).

16.2 The Department of Budget and Management shall review ordinances authorizing the
annual or supplemental appropriations of provinces, highly-urbanized cities, independent
component cities, and municipalities within the Metropolitan Manila Area (Section 326, 1991
LGC).

16.3 Ordinances banning the catching of certain species of fishes and corals need not be
approved by the Department of Environment and Natural Resources before they can be
effective because in the exercise of devolved power, such approval is not necessary (Tano vs.
Socrates, G.R. No. 110249, August 21, 1997).
16.4 The Office of the President, DILG, and other executive departments are not given the
power to review ordinances under the 1991 LGC. To assume such power without statutory
authority amounts to control, not just supervision, and thus, unconstitutional.

16.5 Ordinances and resolutions approving the local development plans and public
investment programs formulated by the local development councils of the Sangguniang
Bayan or Sangguniang Panlungsod become effective after review by the Sangguniang
Panlalawigan, posting on the bulletin board, and publication (Land Bank of the Philippines v.
Cacayuran, G.R. No. 191667, April 17, 2013).

20. The constitutionality and legality of ordinances and resolutions may be raised before the
courts on judicial review.

16.1 A petition for certiorari filed against a sanggunian the legality of an ordinance will not
lie since the sanggunian does not fall within the ambit of tribunal, board, or officer exercising
judicial or quasi-judicial functions. The enactment of an ordinance was done in the exercise
of legislative and executive functions of the sanggunian and mayor respectively and do not
partake of judicial or quasi-judicial functions (Liga ng mga Barangay National vs. Manila,
G.R. No. 154599, January 21, 2004).

16.2 The appropriate remedy is a petition for declaratory relief. The requisites of an action
for declaratory relief are: (1) the subject matter of the controversy must be a deed, will,
contract or other written instrument, statute, executive order or regulation, or ordinance; (2)
the terms of said documents and the validity thereof are doubtful and require judicial
construction; (3) there must have been no breach of the documents in question; (4) there must
be an actual justiciable controversy or the “ripening seeds” of one between persons whose
interests are adverse; (5) the issue must be ripe for judicial determination; and (6) adequate
relief is not available through other means or other forms of action or proceeding. Thus, an
action for declaratory relief questioning two resolutions and an ordinance by a sanggunian
panlungsod is premature where said issuances merely endorsed favorably to the Housing
Land Use and Regulatory Board (HLURB) an application to develop a memorial park. The
sanggunian has not yet acted on the application with finality. The HLURB, being the sole
regulatory body for housing and land development, has the final say on the matter. Under the
doctrine of primary administrative jurisdiction, courts cannot or will not determine a
controversy where the issues for resolution demand the exercise of sound administrative
discretion, requiring the special knowledge, experience, and services of the administrative
tribunal to determine technical and intricate matters of fact (Ferrer, Jr. vs. Roco, Jr., G.R. No.
174129, July 5, 2010).

16.3 The Supreme Court can only review, revise, reverse, modify on appeal or certiorari final
judgments and orders of lower courts in all cases in which the constitutionality or validity of,
among other things, an ordinance is in question (Ortega vs. Quezon City, G.R. No. 161400,
September 02, 2005).

16.4 It is a general rule that the regularity of the enactment of an officially promulgated
statute or ordinance may not be impeached by parol evidence or oral testimony either of
individual officers and members, or of strangers who may be interested in nullifying
legislative action (Reyes et. al. vs. Court of Appeals, G.R. No. 118233, December 10, 1999).

16.5 A person is real party-in-interest to assail the constitutionality and legality of the
ordinances because he is a registered co-owner of a residential property in the city and that he
paid property tax which already included the SHT and the garbage fee. He has substantial
right to seek a refund of the payments he made and to stop future imposition. While he is a
lone petitioner, his cause of action to declare the validity of the subject ordinances is
substantial and of paramount interest to similarly situated property owners in the city. (Ferrer
vs. Bautista, G.R. No. 210551, June 30, 2015)

Other Governmental and Corporate Powers

1. The corporate powers of LGUs are enumerated in the 1991 LGC but the listing is not
exclusive.

1.1 Every LGU, as a corporation, shall have the following powers to: (1) have continuous
succession in its corporate name; (2) sue and be sued; (3) have and use a corporate seal; (4)
acquire and convey real or personal property; (5) enter into contracts; and (6) exercise such
other powers as are granted to corporations, subject to the limitations provided in the 1991
LGC and other laws (Section 22, 1991 LGC).
2. Aside from express powers, LGUs also have implied powers (i.e. those powers implied
from express powers and state policies).

2.1 While the law did not expressly vest on LGUs the power to abolish that office, absent,
however, any contrary provision, that authority should be deemed embraced by implication
from the power to create it (Javier vs. Court of Appeals, G.R. No. L-49065, June, 1, 1994).

2.2 LGUs cannot use public funds for the widening and improvement of privately-owned
sidewalks. Under the law, no public money shall be appropriated or applied for private
purposes (Albon vs. Fernando, G.R. No. 148357, June 30, 2006).

2.3 An LGU must comply with the legal conditions imposed on a donation (City of Angeles
vs. Court of Appeals, G.R. No. 97882, August 28, 1996).

3. LGUs, aside from relating with supervising and supervised LGUs, may coordinate with
other LGUs.

3.1 Under Section 13, Article X of the 1987 Constitution, “Local government units may
group themselves, consolidate or coordinate their efforts, services, and resources for purposes
commonly beneficial to them in accordance with law.” In support of such undertakings, the
local government units involved may, upon approval by the sanggunian concerned after a
public hearing conducted for the purpose, contribute funds, real estate, equipment, and other
kinds of property and appoint or assign personnel under such terms and conditions as may be
agreed upon by the participating local units through Memoranda of Agreement (Section 33,
1991 LGC).

3.2 Regional development councils and other similar bodies composed of regional
representatives from the public sector and non-governmental organizations can be created by
the President (Section 14, Article X, 1987 Constitution). The President shall provide for
regional development councils or other similar bodies composed of local government
officials, regional heads of departments and other government offices, and representatives
from non-governmental organizations within the regions for purposes of administrative
decentralization to strengthen the autonomy of the units therein and to accelerate the
economic and social growth and development of the units in the region.
FISCAL AUTONOMY AND LOCAL SOURCES OF FUNDS

Sources of Funds

1. LGUs have constitutional and statutory sources of funds.

1.1 Under the 1987 Constitution, the sources of funds of local governments are their share in
national taxes, equitable share in the proceeds of the utilization and development national
wealth, local taxes, fees and charges, other sources of revenues (Sections 5, 6 and 7, Article
X, 1987 Constitution).

1.2 Under the 1991 LGUs raise funds from loans (Sections 300 and 301, 1991 LGC),
donations and grants (Section 23, 1991 LGC), float bonds (Section 299, 1991 LGC), exercise
of proprietary functions (Sction 22[d]. 1991 LGC), and credit-financing schemes such as
Build-Operate Transfer schemes (R.A. No. 7718 amending R.A. No. 6957).

Fiscal Autonomy

1. Local autonomy includes both administrative and fiscal autonomy (Province of Batangas
vs. Romulo, G.R. No. 152774, May 27, 2004; Pimentel vs. Aguirre, G.R. No. 132988, July
19, 2000).

1.1 LGUs enjoy fiscal autonomy. The constitutional basis of fiscal autonomy is Section 5,
Article X of the 1987 Constitution (Pimentel vs. Aguirre, G.R. No. 132988, July 19, 2000).

1.2 Fiscal autonomy means that LGUs have the: (1) power to create their own sources of
revenue in addition to their equitable share in the national taxes released by the national
government, as well as the (2) power to allocate their resources in accordance with their own
priorities. (3) It extends to the preparation of their budgets, and local officials in turn-have to
work within the constraints thereof (Pimentel vs. Aguirre, G.R. No. 132988, July 19, 2000).

1.3 Local fiscal autonomy does not however rule out any manner of national government
intervention by way of supervision, in order to ensure that local programs, fiscal and
otherwise, are consistent with national goals (Pimentel vs. Aguirre, G.R. No. 132988, July
19, 2000).

1.4 Fiscal autonomy does not leave LGUs with unbridled discretion in the disbursement of
public funds. They remain accountable to their constituency. Thus, the DILG can issue
circulars regarding the full disclosure of local budgets and finances and list of expenses
which the internal revenue allotment (IRA) can be used and which requires publication in
biddings, since these are mere reiterations of statutory provisions (Villafuerte v. Robredo,
G.R. No. G.R. No. 195390, December 10, 2014).

1.5 There can be no genuine local autonomy without fiscal autonomy. In order for local
governments to perform their constitutional and statutory mandates, local governments must
have sufficient funds to cover the costs of maintaining the organization, undertaking projects
for the general welfare, performing their legal mandates and obligations, delivering basic
services and advancing sustainable development, among other responsibilities. On the other
hand, fiscal autonomy cannot be realized without local autonomy in terms of usage, setting
priorities, and disbursement of local funds. If there were no local autonomy, the exercise of
discretion and wisdom on the part of local governments in accessing and utilizing revenues
would be unduly clipped.

2. As a consequence of fiscal autonomy:

2.1 The Department of Budget and Management cannot impose a limitation not found in the
law such as setting a cap on the amount of allowances for judges (Dadole vs. Commission on
Audit, G.R. No. 125350, December 03, 2002).

2.2 In reviewing tax ordinances, the Department of Justice can only declare a tax measure
unconstitutional and illegal. The Secretary cannot amend, modify or repeal the tax measure
or declare it excessive, confiscatory or contrary to public welfare (Drilon vs. Lim, G.R. No.
112497, August 4, 1994).
2.3 The restrictive and limited nature of the tax exemption privileges under the 1991 LGC is
consistent with the State policy of local autonomy. The obvious intention of the law is to
broaden the tax base of LGUs to assure them of substantial sources of revenue (Philippine
Rural Electric Cooperatives Association vs. DILG, G.R No. 143076, June 10, 2003)

2.4 With the added burden of devolution, it is even more imperative for government entities
to share in the requirements of local development, fiscal or otherwise, by paying taxes or
other charges due from them (National Power Corporation vs. Cabanatuan City, G.R. No.
149110, April 09, 2003).

2.5 In interpreting statutory provisions on municipal fiscal powers, doubts will have to be
resolved in favor of LGUs (San Pablo City vs. Reyes, G.R. No. 127708, March 25, 1999).
Internal Revenue Allotment

1. LGUs shall have a just share, as determined by law, in the national taxes which shall be
automatically released to them (Section 6, Article X, 1987 Constitution).

1.2 At present, all LGUs have a 40% share in the national internal revenue taxes based on the
collection of the third fiscal year preceding the current fiscal year (Section 284, 1991 LGC).

1.3 Of the 40%, provinces and cities are entitled to 23% each; municipalities, 34%; and
barangays, 20%. The share of a particular local government shall be based on this formula:
population, 50%; land area, 25%; and equal sharing, 25% (Section 285, 1991 LGC).

1.4 In the event that the national government incurs an unmanageable public sector deficit,
the President of the Philippines is hereby authorized, upon the recommendation of Secretary
of Finance, Secretary of Interior and Local Government (SILG) and Secretary of Budget and
Management, and subject to consultation with the presiding officers of both Houses of
Congress and the presidents of the “liga”, to make the necessary adjustments in the internal
revenue allotment of local government units but in no case shall the allotment be less than
thirty percent (30%) of the collection of national internal revenue taxes of the third fiscal
year preceding the current fiscal year (Section 284, 1991 LGC).

1.5 The IRA of LGUs: (1) forms part of the income of local government units; (2) forms part
of the gross accretion of the funds of the local government units; (3) regularly and
automatically accrues to the local treasury without need of further action on the part of the
LGU; (4) is a regular and recurring item of income; (5) accrues to the general fund of the
LGUs; (6) is used to finance local operations subject to modes provided by the 1991 LGC
and its implementing rules; and (7) is included in the computation of the average annual
income for purposes of conversion of LGUs (Alvarez vs. Guingona, G.R. No. 118303,
January 31, 1996).

1.6 The share of each LGU shall be released, without need of any further action, directly to
the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis
within five (5) days after the end of each quarter, and which shall not be subject to any lien or
holdback that may be imposed by the national government for whatever purpose (Section
286, 1991 LGC).

a. The President cannot withhold 10% of the IRA without complying with the requirements
under Section 284 of the 1991 LGC. This would be violative of local autonomy and fiscal
autonomy (Pimentel vs. Aguirre, G.R. No. 132988, July 19, 2000).

b. The General Appropriation Act cannot place a portion of the IRA in an Unprogrammed
Fund only to be released when a condition is met, i.e., the original revenue targets are
realized (Alternative Center vs. Zamora, G.R. No. 144256, June 8, 2005). Rider

c. The provisions in the General Appropriation Act creating the Local Government Special
Equalization Fund and authorizing the nonrelease of the full 40% to all LGUs are
inappropriate provisions/riders. Further, an appropriations act cannot amend a substantive
law, i.e., 1991 LGC (Province of Batangas vs. Romulo, G.R. No. 152774, May 27, 2004).

d. A “no report, no release” policy may not be validly enforced against offices vested with
fiscal autonomy. The automatic release provision found in the Constitution means that LGUs
cannot be required to perform any act to receive the “just share” accruing to them from the
national coffers (Civil Service Commission vs. Department of Budget and Management, G.R.
No. 158791, July 22, 2005).

Share in National Wealth Proceeds

 1. LGUs shall be entitled to an equitable share in the proceeds of the utilization and
development of the national wealth within their respective areas, in the manner provided by
law, including sharing the same with the inhabitants by way of direct benefits (Section 7,
Article X, 1987 Constitution).

1.1 LGUs shall have a 40% share of gross collection derived by the national government
from the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and
such other taxes, fees, or charges, including related surcharges, interests, or fines, and from
its share in any co-production, joint venture or production sharing agreement in the
utilization and development of the national wealth within their territorial jurisdiction (Section
290, 1991 LGC).

1.2 The host province shall be entitled to 20%; component municipality/ city, 45% (If highly-
urbanized or independent city, 65%), and barangay, 35% (Section 292, 1991 LGC).

Power of Taxation

1. Each LGU shall have the power to levy taxes, fees, and charges subject to such guidelines
and limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to the LGUs (Section 5,
Article X, 1987 Constitution; Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015)

1.1 The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may
be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as
before, but pursuant to direct authority conferred by Section 5, Article X of the 1987
Constitution. The exercise of the power may be subject to such guidelines and limitations as
the Congress may provide which, however, must be consistent with the basic policy of local
autonomy (Mactan Cebu International Airport Authority vs. Marcos, G.R. No. 120082,
September 11, 1996)

1.2 LGUs have no inherent power to tax except to the extent that such power might be
delegated to them either by the basic law or by the statute. Under the now prevailing
Constitution, where there is neither a grant nor a prohibition by statute, the tax power must be
deemed to exist although Congress may provide statutory limitations and guidelines. The
basic rationale for the current rule is to safeguard the viability and self-sufficiency of local
government units by directly granting them general and broad tax powers. Nevertheless, the
fundamental law did not intend the delegation to be absolute and unconditional; the
constitutional objective obviously is to ensure that, while the local government units are
being strengthened and made more autonomous, the legislature must still see to it that (a) the
taxpayer will not be over-burdened or saddled with multiple and unreasonable impositions;
(b) each local government unit will have its fair share of available resources; (c) the
resources of the national government will not be unduly disturbed; and (d) local taxation will
be fair, uniform, and just. (Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015)

1.3 An LGU is empowered as well to apply its resources and assets for productive,
developmental, or welfare purposes, in the exercise or furtherance of their governmental or
proprietary powers and functions. (Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015)

1.4 The list of taxes under Book II of the 1991 LGC is not exclusive. LGUs may exercise the
power to levy taxes, fees or charges on any base or subject: (1) not otherwise specifically
enumerated herein or taxed under the provisions of the National Internal Revenue Code, as
amended, or other applicable laws: Provided, That the taxes, fees, or charges shall: (2) not be
unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided,
further, That the: (3) ordinance levying such taxes, fees or charges shall: (4) not be enacted
without any prior public hearing conducted for the purpose (Section 186, 1991 LGC).

1.5 To pass judicial scrutiny, a regulatory fee must not produce revenue in excess of the cost
of the regulation because such fee will be construed as an illegal tax when the revenue
generated by the regulation exceeds the cost of the regulation. (Ferrer vs. Bautista, G.R. No.
210551, June 30, 2015)

1.6 While local government units are authorized to burden all such other class of goods with
“taxes, fees and charges,” excepting excise taxes, a specific prohibition is imposed barring
the levying of any other type of taxes with respect to petroleum products (Petron Corporation
v. Tiangco, G.R. No. 158881, April 16, 2008; Batangas City vs. Pilipinas Shell Petroleum
Corp., G.R. No. July 8, 2015)

1.7 The sanggunian of the municipality or city cannot enact an ordinance imposing business
tax on the gross receipts of transportation contractors, persons engaged in the transportation
of passengers or freight by hire, and common carriers by air, land, or water, when said
sanggunian was already specifically prohibited from doing so. Any exception to the express
prohibition under Section 133(j) of the LGC should be just as specific and unambiguous
(City of Manila vs. Judge Colet, G.R. No. 120051, December 10, 2014).

1.8 Section 187 of the LGC, which outlines the procedure for questioning the
constitutionality of a tax ordinance, is inapplicable when the imposition is not in the nature of
taxes, but of fees (Smart Communications vs. Municipality of Malvar, Batangas, G.R. No.
204429, February 18, 2014).

1.9 The municipality is empowered to impose taxes, fees and charges, not specifically
enumerated in the LGC or taxed under the Tax Code or other applicable law (Smart
Communications vs. Municipality of Malvar, Batangas, G.R. No. 204429, February 18,
2014).

1.10 The Court of Tax Appeals has exclusive appellate jurisdiction to review on appeal,
decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
resolved by them in the exercise of their original or appellate jurisdiction; it has no
jurisdiction over cases involving fees, which are regulatory in nature (Smart
Communications, Inc. v. Municipality of Malvar, Batangas, G.R. No. 204429, February 18,
2014).

1.11 The local franchise tax cannot be imposed on a taxpayer who no longer owned or
operated the business subject to local franchise tax, and owned the properties being levied
upon by the province (National Power Corporation vs. Provincial Government of Bataan,
G.R. No. 180654, April 21, 2014).

1.12 The LGC allows the local government to collect an interest at the rate not exceeding 2%
per month of the unpaid taxes, fees, or charges including surcharges, until such amount is
fully paid. However, the law provides that the total interest on the unpaid amount or portion
thereof should not exceed thirty-six (36) months or three (3) years. In other words, the city
cannot collect a total interest on the unpaid tax including surcharge that is effectively higher
than 72% (National Power Corporation vs. City of Cabanatuan, G.R. No. 177332, October 1,
2014).
1.13 The fact that a separate chapter is devoted to the treatment of real property taxes, and a
distinct appeal procedure is provided therefor does not justify an inference that Section 7(a)
(3) of R.A. 9282 pertains only to local taxes other than real property taxes. Rather, the term
“local taxes” in the aforementioned provision should be considered in its general and
comprehensive sense, which embraces real property tax assessments, in line with the precept
Generalia verba sunt generaliter inteligencia—what is generally spoken shall be generally
understood. Based on the foregoing, the general meaning of “local taxes” should be adopted
in relation to Paragraph (a)(3) of Section 7 of R.A. 9282, which necessarily includes real
property taxes (National Power Corporation vs. Municipality of Navotas, G.R. No. 192300,
November 24, 2014).

1.14 Setting the rate of the additional levy for the special education fund at less than 1% is
within the taxing power of local government units. It is consistent with the guiding
constitutional principle of local autonomy. The option given to a local government unit
extends not only to the matter of whether to collect but also to the rate at which collection is
to be made. The limits on the level of additional levy for the special education fund under
Section 235 of the Local Government Code should be read as granting fiscal flexibility to
local government units (Demaala v. COA, G.R. No. 199752, February 17, 2015).

1.15 The Airport Lands and Buildings are devoted to public use because they are used by the
public for international and domestic travel and transportation. The fact that the MCIAA
collects terminal fees and other charges from the public does not remove the character of the
Airport Lands and Buildings as properties for public use. As properties of public dominion,
they indisputably belong to the State or the Republic of the Philippines, and are not subject to
levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on
execution or auction sale of any property of public dominion is void for being contrary to
public policy. Essential public services will stop if properties of public dominion are subject
to encumbrances, foreclosures and auction sale (Mactan Cebu International Airport vs. City
of Lapu-Lapu, G.R. No. 181756, June 15, 2015).

1.16 By operation of Sec. 151 of the LGC extending to cities the authority of provinces and
municipalities to levy certain taxes, fees, and charges, cities may therefore validly levy
amusement taxes on cinemas subject to the parameters set forth under the law (Film
Development Council of the Philippines vs. City of Cebu et al, G.R. No. 204418, June 16,
2015).

1.17 Taxes levied by LGUs shall accrue exclusively to the LGU and to earmark, if not
altogether confiscate, the income to be received by the LGU from the taxpayers in favor of
and for transmittal to the Film Development Council of the Philippines, is repugnant to the
power of LGUs to apportion their resources in line with their priorities (Film Development
Council of the Philippines vs. City of Cebu et al, G.R. No. 204418, June 16, 2015).

1.18 The expanded jurisdiction of the CTA includes its exclusive appellate jurisdiction to
review by appeal the decisions, orders or resolutions of the RTC in local tax cases originally
decided or resolved by the RTC in the exercise of its original or appellate jurisdiction. The
power of the CTA includes that of determining whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the exclusive appellate jurisdiction of the tax court.
(CE Casecnan Water and Energy Company, Inc. vs. The Province of Nueva Ecija, G.R. No.
196278, June 17, 2015) The CTA has jurisdiction over a special civil action for certiorari
assailing an interlocutory order issued by the RTC in a local tax case (City of Manila vs.
Grecia-Cuerdo, G.R. No. 175723, February 4, 2014).

1.19 An injunction case before the RTC is a local tax case. A certiorari petition questioning
an interlocutory order issued in a local tax case falls under the jurisdiction of the CTA (CE
Casecnan Water and Energy Company, Inc. vs. The Province of Nueva Ecija, G.R. No.
196278, June 17, 2015).

1.20 The mayor has the ministerial duty to ensure that all taxes and other revenues of the city
are collected, and that city funds are applied to the payment of expenses and settlement of
obligations of the city, in accordance with law or ordinance. On the other hand, under the
LGC, all local taxes, fees, and charges shall be collected by the provincial, city, municipal, or
barangay treasurer, or their duly-authorized deputies, while the assessor shall take charge,
among others, of ensuring that all laws and policies governing the appraisal and assessment
of real properties for taxation purposes are properly executed. Thus, a writ of prohibition may
be issued against them to desist from further proceeding in the action or matter specified in
the petition (Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015).
1.21 The socialized housing tax charged by the city is a tax which is within its power to
impose. Aside from the specific authority vested by Section 43 of the UDHA, cities are
allowed to exercise such other powers and discharge such other functions and responsibilities
as are necessary, appropriate, or incidental to efficient and effective provision of the basic
services and facilities which include, among others, programs and projects for low-cost
housing and other mass dwellings. The collections made accrue to its socialized housing
programs and projects. The tax is not a pure exercise of taxing power or merely to raise
revenue; it is levied with a regulatory purpose. The levy is primarily in the exercise of the
police power for the general welfare of the entire city. It is greatly imbued with public
interest (Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015).

1.22 The socialized housing tax imposed by the city is not confiscatory or oppressive since
the tax being imposed therein is below what the UDHA actually allows (Ferrer vs. Bautista,
G.R. No. 210551, June 30, 2015).

1.23 The garbage fee is a charge fixed for the regulation of an activity. It is not a tax and
cannot violate the rule on double taxation (Ferrer vs. Bautista, G.R. No. 210551, June 30,
2015).

1.24 The authority of a municipality or city to impose fees is limited to the collection and
transport of non-recyclable and special wastes and for the disposal of these into the sanitary
landfill. Barangays, on the other hand, have the authority to impose fees for the collection
and segregation of biodegradable, compostable and reusable wastes from households,
commerce, other sources of domestic wastes, and for the use of barangay MRFs (Ferrer vs.
Bautista, G.R. No. 210551, June 30, 2015).

1.25 For the purpose of garbage collection, there is, in fact, no substantial distinction between
an occupant of a lot, on one hand, and an occupant of a unit in a condominium, socialized
housing project or apartment, on the other hand. Most likely, garbage output produced by
these types of occupants is uniform and does not vary to a large degree; thus, a similar
schedule of fee is both just and equitable. Different rates based on the above classification is
therefore void (Ferrer vs. Bautista, G.R. No. 210551, June 30, 2015).
 1.26 Since the lot remained in private ownership, there is no factual or legal basis to
question the sale thereof by the local government unit for tax delinquency (Homeowners
Association of Talayan Village, Inc. vs. JM Tuason & Co., Inc., G.R. No. 203883, November
10, 2015).

2. LGUs may not tax national government instrumentalities.

2.1 The PEZA is an instrumentality of the national government exempt from payment of real
property taxes under Section 133(o) of the Local Government Code. As this court said in
Manila International Airport Authority, “there must be express language in the law
empowering local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments.” Furthermore, the lands
owned by the PEZA are real properties owned by the Republic of the Philippines. (City of
LapuLapu vs. Philippine Economic Zone Authority, G.R. No. 184203, November 26, 2014).

2.2 Mactan Cebu International Airport Authority is an instrumentality of the government not
a GOCC; thus, its properties actually, solely and exclusively used for public purposes,
consisting of the airport terminal building, airfield, runway, taxiway and the lots on which
they are situated, are not subject to real property tax and the city is not justified in collecting
taxes from petitioner over said properties (Mactan Cebu International Airport vs. City of
Lapu-Lapu, G.R. No. 181756, June 15, 2015).

Participation in Public Auction/ Biddings

1. The law authorizes the local government unit to purchase the auctioned property only in
instances where “there is no bidder” or “the highest bid is insufficient.” A disqualified bidder
is not among the authorized grounds (Spouses Plaza vs. Lustiva, G.R. No. 172909, March 5,
2014).

2. The absence of the public in the public bidding impels the City Treasurer to purchase the
property in behalf of the city. Reason would therefore dictate that this purchase by the City is
the very forfeiture mandated by the law. The contemplated “forfeiture” in the provision
points to the situation where the local government ipso facto “forfeits” the property for want
of a bidder (The City of Davao vs. Intestate Estate of Amado S. Dalisay, G.R. No. 207791,
July 15, 2015).
3. Under the Government Procurement Reform Act, decisions of the Bids and Awards
Committee shall be protested or elevated to the head of the procuring entity, who is the local
chief executive (Land Bank of the Philippines v. Atlanta Industries, 729 SCRA 12).