Credit Ficing for Local Governments

Local governments may seek credit facilities or borrow only if local funds are insufficient.
Borrowings must finance prosecution, completion, expansion, operation, and maintenance of local infrastructures and socio-economic projects.
In emergencies or financial distress, provisional advances or credit lines from government banks are allowed to stabilize finances.

Provisional advances may be secured from the Central Bank or government banks upon the Finance Secretary's recommendation.
Advances capped at 15% of average annual income from the last three fiscal years.
Repayment due within the first quarter of the following fiscal year.
Advances cannot be treated as revenue and must fund only approved budget expenditures.
If unpaid, Finance Secretary can withhold internal revenue allotments or tax allotments to settle obligations.

Local governments may contract loans with national lending institutions (PNB, DBP, GSIS, Land Bank) for capital investment projects.
Loans subject to terms prescribed by law and charters of lending institutions.
Budgets must include appropriations for principal and interest payments until full amortization.

Local governments may acquire heavy equipment and machinery under supplier's credit or deferred payment plans.
Purchase contracts under deferred plans allowed only if previous loans are paid or being amortized properly.
Subject to laws on purchasing and regulations by the Finance Secretary and Commission on Audit.

Provinces and cities authorized to issue bonds and other obligations for self-liquidating or income-producing projects.
Debt limit at 0.5% of total assessed value of taxable real property.
Issuance requires majority vote of the local board/council and approval of the President upon Finance Secretary’s recommendation.
Bonds are registered, transferable at Central Bank, sold at no less than face value, redeemable after 10 years or more.
Interest rate and payment mode fixed by Finance Secretary after consultation with Monetary Board.
Bonds exempt from all taxes.
Sinking fund required for redemption, managed by Central Bank, funded by annual contributions equal to principal and interest.
Republic of the Philippines guarantees payment; funds from the National Treasury may be used if local governments default.

Provinces, cities, municipalities may lend to others for public purposes like disaster repairs, relief purchases, beautification projects.
Loans capped at 5% of the lender’s previous year’s general fund income.
Terms include repayment within 24 months at no more than 12% interest.
Failure to appropriate amortizations may lead to budget inoperation under PD No. 477.

President may negotiate loans with foreign institutions and governments.
Loans extended to local governments through DBP or Land Bank for capital improvement projects.
Loan repayments financed from project income and local budgets.
Compliance with relevant laws and Presidential Decrees required.
Multiple local governments may jointly undertake projects and loans.

Local governments may contract with private parties for financing self-liquidating projects like toll roads, utilities, transportation systems.
Approval by NEDA and Finance Secretary required.
Contracts must not exceed local government’s borrowing capacity certified by Commission on Audit.
Projects subject to approval and public bidding based on local government engineer’s plans.
Contract awarded to lowest qualified bidder within 15% of estimated cost.
Contractors must post performance bonds.
Toll/fee collection authorized, to be handed weekly to contractors for up to 20 years.
Toll fees set by local tax ordinance, adjusted by subsequent ordinances.
Toll collection stops after full recovery of principal and interest.
Project supervision by local engineers.
Legal review of contracts by Provincial/City/Municipal Attorneys or Fiscal.
Prohibition on public officials and close relatives from interest in contracts, violation leads to removal and imprisonment up to 5 years.

Local governments must appropriate funds to service loans and redeem obligations annually.
Failure to appropriate may result in budget declared inoperative.
Secretary of Finance empowered to enforce payments via withholding internal revenue or drawing against accounts.
Officials refusing or delaying payments liable to fines from PHP 10,000 to PHP 50,000, imprisonment from 2 to 5 years, or both.

Repeals inconsistent laws and charter provisions, but preserves vested rights and powers of local governments.
Contracts existing at enactment remain governed by original terms.