Local Government Autonomy and Reorganization Act

Scope: budgets, taxation, governance powers

The Act addresses local government budgets for provinces, cities, municipalities, and regularly organized municipal districts (Section 1).
The Act grants local governments taxation authority for chartered cities, municipalities, and municipal districts (Section 2).
The Act expands additional powers of provincial boards, municipal boards, city councils, and municipal and regularly organized municipal district councils (Section 3).
The Act reorganizes and adjusts provincial and local executive succession rules and provincial board composition (Sections 4 to 8).
The Act preserves local autonomy already enjoyed or exercised by provinces, cities, municipalities, and municipal districts (Section 10).

Local budget controls and review

Section 1 allows a local budget to be in full force and effect provided the aggregate budget appropriation does not exceed the estimated tax receipts and/or income for the ensuing year, certified collectible by:
- the Provincial Treasurer for provinces, municipalities, and regularly organized municipal districts, and
- the City Treasurer for cities.
Section 1 requires that local budgets make provisions for statutory and/or current contractual obligations.
Section 1 prohibits any official or employee from receiving a salary higher than the maximum salary provided by subsisting salary laws and executive orders.
Provincial, city, municipal, and regularly organized municipal district budgets become effective only on the effectivity date fixed by the proper local legislative body, with specified approvals:
- provincial budget: in force on effectivity date fixed by the Provincial Board;
- city budget: in force on effectivity date fixed by the Municipal Board or City Council, with approval of the City Mayor;
- municipal/regularly organized municipal district budgets: in force on effectivity date fixed by the municipal council, with approval of the municipal mayor.
If a local legislative body fails to enact a budget before the beginning of the fiscal year:
- the preceding year’s budget is deemed re-enacted; and
- changes may be made only through supplemental budgets prepared and adopted the same way as the annual budget (Section 1).

Department/treasury review and budget consequences

Copies of provincial and city budgets must be furnished to the Secretary of Finance within ten days from approval, and the Secretary may review to ensure compliance with budget limits, salary limits, and obligation provisions (Section 1).
If the Secretary of Finance takes no action within ninety days after submission, the budget is deemed to have complied with the requirements (Section 1).
If the Secretary of Finance determines within the ninety-day period that salary laws and executive orders were violated, the Secretary shall advise the Provincial Treasurer or City Treasurer as may be, and further disbursements of funds for items in question become unlawful unless expressly authorized in the advice.
Further disbursement is allowed only after the budget is corrected or revised to address objections, and after the correction or revision is submitted to and approved by the Secretary of Finance, whose approval may not be unreasonably withheld (Section 1).
If the Secretary of Finance finds that a provincial or city budget fails to provision for all statutory and/or current contractual obligations, or exceeds the certified limit on estimated receipts/income:
- the Secretary of Finance, within ninety days after receipt, may declare the budget inoperative and return it for proper adjustment to the Provincial Governor or City Mayor (Section 1).
When a budget is declared inoperative:
- the province or city operates on the previous year’s budget until a new budget meeting the objections is made (Section 1).

Municipal and regularly organized district budget review

Copies of municipal and regularly organized municipal district budgets must be furnished to the Provincial Treasurer within ten days from approval, and the Provincial Treasurer may review for compliance (Section 1).
If the Provincial Treasurer takes no action within ninety days after submission, the municipal/municipal district budget is deemed to have complied (Section 1).
If within the ninety-day period the Provincial Treasurer determines that salary laws and executive orders were violated, the Provincial Treasurer advises the municipal or regularly organized municipal district treasurer, and further disbursements for items in question become unlawful unless expressly authorized in the advice.
Further disbursement is allowed only after the budget is corrected or revised and until the Provincial Treasurer admits and approves the corrected/revised budget, whose approval may not be unreasonably withheld (Section 1).
If the Provincial Treasurer determines that the municipal/municipal district budget fails to provide for all statutory and/or current contractual obligations, or exceeds the certified limit:
- the Provincial Treasurer, within ninety days after receipt, may declare the budget inoperative and return it for proper adjustment to the municipal mayor or municipal district mayor.
When declared inoperative, the municipality/municipal district operates on the previous year’s budget until a new budget meeting the objections is made (Section 1).

Local taxation: powers, limits, ordinances

Section 2 authorizes chartered cities, municipalities, and municipal districts to impose municipal license taxes or fees and to:
- require business/occupation/practice licenses at rates fixed by the proper local council;
- collect fees and charges for services rendered by the local government;
- regulate and impose reasonable fees for services connected with businesses, professions, or occupations conducted within the local unit; and
- levy just and uniform taxes, licenses, or fees for public purposes (Section 2).
Municipalities and municipal districts must not impose:
- any percentage tax on sales or any other tax in any form based thereon, and
- taxes on articles subject to specific tax,
- except for gasoline under the national internal revenue code (Section 2).
Section 2 prohibits any city, municipality, or municipal district from levying or imposing the following:
- Residence tax
- Documentary stamp tax
- Taxes on the business of persons engaged in printing and publication of any newspaper, magazine, review, or bulletin appearing at regular intervals and having fixed prices for subscription and sale, and which is not published primarily for the purpose of publishing advertisements
- Taxes on persons operating waterworks, irrigation and other public utilities except electric light, heat and power
- Taxes on forest products and forest concessions
- Taxes on estates, inheritances, gifts, legacies, and other acquisitions mortis causa
- Taxes on income of any kind whatsoever
- Taxes or fees for registration of motor vehicles and for issuance of all kinds of licenses or permits for driving thereof
- Customs duties registration, wharfage on wharves owned by the national government, tonnage, and all other kinds of customs fees, charges and dues
- Taxes of any kind on banks, insurance companies, and persons paying franchise tax
- Taxes on premiums paid by owners of property who obtain insurance directly with foreign insurance companies
A tax ordinance becomes effective on the fifteenth day after its passage, unless the ordinance provides otherwise (Section 2).
The Secretary of Finance may suspend effectivity of any ordinance within one hundred twenty days after passage if the Secretary believes the tax/fee is unjust, excessive, oppressive, or confiscatory (Section 2).
When effectivity is suspended, the municipal board or city council (or municipal council or municipal district council) may appeal the Secretary of Finance’s decision to court.
During the pendency of the appeal, the tax levied is deemed paid under protest (Section 2).

Expanded provincial and local board powers

Section 3 authorizes provincial boards to:
- appropriate money for purposes not specified by law for general welfare;
- appropriate money for loans or aids to municipalities or municipal districts under terms and conditions fixed by the provincial board;
- exercise eminent domain (with specified recommendations and hearing requirements) for enumerated public purposes including roads, streets, sidewalks, bridges, ferries, levees, wharves, piers, air fields, public buildings (including schoolhouses) and improvements, parks, playgrounds, plazas, market places, artesian wells and water systems, irrigation canals and dams, nurseries breeding centers for animals, health centers, hospitals, cemeteries, crematories, drainage systems, cesspools, sewage systems, and abattoirs;
- permit (subject to public service law and specified recommendations/conditions) construction and maintenance of railways, conduits and telephone lines across public thoroughfares and property, without preventing or obstructing public use, with permits subject to revocation by the President if public interest requires it;
- create and define boundaries of barrios and sitios upon petition of a majority of voters in the affected areas; and
- change names of barrios, sitios, and public buildings not oftener than once every ten years, with name changes on petition of a majority of voters for barrios/sitios.
Section 3 authorizes municipal boards and city councils to:
- appropriate money for purposes not specified by law for general welfare;
- authorize payment of uniforms of police force members;
- create and define boundaries and change the names of barrios and sitios upon petition of a majority of voters; and
- change names of public buildings and public streets within city limits not oftener than once every ten years.
Section 3 authorizes municipal councils of municipalities and regularly organized municipal districts to:
- create a legal division/office headed by an attorney-at-law appointed by the mayor with council approval, with compensation fixed by the council; this head is called the municipal attorney, who serves as legal counsel and performs duties/powers assigned by the council; and
- appropriate money for purposes not specified by law for general welfare of the municipality/municipal district; and
- change names of public buildings and public streets not oftener than once every ten years.
Section 3 grants authority to City Mayors and Municipal Mayors to grant permits to hold benefits for public and charitable purposes excepting cockfighting and prohibited games of chance, and without requiring approval of the Office of the Social Welfare Administrator.
Section 3 authorizes municipal boards or city councils (in cities) and municipal councils (in municipalities) to adopt zoning and subdivision ordinances or regulations for their respective areas, subject to approval of the City Mayor or Municipal Mayor, and allows consultation with the national Planning Commission on zoning and planning matters.
Section 3 authorizes provinces, cities, and municipalities to make purchases of materials, equipment, and supplies locally or elsewhere without buying through the Bureau of Supply, subject to:
- auditing rules and regulations;
- payment not exceeding maximum prices set by the Bureau of Supply;
- forwarding supplies/materials/equipment requiring scientific tests for analysis to the Institute of Science and Technology and/or the Materials Testing Laboratories of the Bureau of Public Highways, and referring equipment to the Bureau of Public Highways or Public Works for specifications, using the analysis reports and specifications as the basis for purchase;
- making purchases by public bidding and using the specified Provincial/City/Municipal Committee on Award composition; and
- requiring certification before payment by the provincial/city/municipal treasurer that purchases conform to specifications as to quality, quantity and price.
Section 3 requires the Bureau of Supply to furnish a list of current government prices and specifications at least once every three months.
Section 3 permits non-bidding purchases after a price canvass for amounts not exceeding:
- PHP 5,000 in case of provinces and chartered cities, and
- PHP 1,000 in case of municipalities and municipal districts,
- conducted by representatives of the mayor, treasurer, and a councilor chosen by the council (with the provincial governor and provincial treasurer representatives for provinces).
Section 3 authorizes provinces, cities, and municipalities to undertake and carry out public works projects financed by local funds or other borrowed/advanced funds from private third parties without intervention of the Department of Public Works and Communications, subject to supervision and approval involving:
- District Engineer for provinces and municipalities; and
- City Engineer for cities;
- plans and specifications approval by the Provincial Governor and District Engineer (for provinces/municipalities) and by the City Mayor and City Engineer (for cities) with favorable recommendation of the provincial board/city/muncipal council.
Section 3 allows provinces/cities/municipalities to consult the Department of Public Works and Communications for preparation of plans and specifications.
Section 3 authorizes public works execution by administration or by contract under usual bidding, and allows dispensing with public bidding where expenditure of public funds is involved.

Provincial executive succession rules

Section 4 provides that every province has a provincial governor, elected in the same manner, with the vice-governor elected so that, at election time, the vice-governor has the same qualifications as the provincial governor.
The vice-governor assumes the office of provincial governor for the unexpired term in case of permanent vacancy in the governor’s office (Section 4).
If the governor-elect dies before assumption or fails to qualify, the vice-governor-elect assumes as provincial governor but holds office only until the governor-elect qualifies (Section 4).
If the governor is temporarily incapacitated due to absence on leave, sickness, or temporary incapacity, the vice-governor performs delegated duties and exercises delegated powers that the governor gives in writing during the period of incapacity.
Section 4 requires the vice-governor to receive the same salary as the governor during the delegation period.
The vice-governor is entitled to per diems, allowances and other privileges granted to members of the provincial board (Section 4).

Provincial board composition and voting

Section 5 provides that the provincial board composition depends on province class:
- First, second, and third class provinces: provincial governor (presiding officer), vice-governor, and three other members elected at large.
- Fourth to seventh class provinces: provincial governor (presiding officer), vice-governor, and two other members elected at large.
Section 5 provides that the presence of three members constitutes quorum for board transactions.
Section 5 provides a tie-break rule: in case of tie, the side for which the governor voted prevails.
Section 5 provides that in the absence of the governor, the vote of the majority of members present constitutes a binding act of the board.

Qualifications and election timing provisions

Section 5-A requires that a person shall be elected member of the provincial board other than the governor and vice-governor only if, at the time of election, the person:
- is a qualified voter of the province,
- is a bona-fide resident in the province for at least one year prior to the election,
- and is not less than twenty-three years of age.
Section 6 provides that the first provincial vice-governor shall be elected in the general elections for provincial and municipal officers to be held next following the approval of the Act.

City and municipal mayor succession

Section 7 provides that every vice-mayor of a city, municipality, or municipal district assumes the office of mayor for the unexpired term in case of permanent vacancy.
If the vice-mayor is incapacitated from assuming or refuses to assume, the councilor who obtained the largest number of votes in the preceding local elections assumes mayor; if that councilor is incapacitated or refuses, the next largest vote-getter assumes, and so on until the vacancy is filled (Section 7).
If the mayor-elect dies before assumption or fails to qualify:
- the vice-mayor-elect assumes mayor but holds office only until the mayor-elect qualifies (Section 7).
If the vice-mayor-elect is incapacitated or refuses:
- the councilor-elect with the largest votes in the preceding local elections assumes mayor; then progressively the next largest vote-getter until filled (Section 7).
During temporary incapacity of the mayor due to absence on leave, sickness, or temporary incapacity:
- the vice-mayor performs duties and exercises powers of the mayor except the power to appoint, suspend, or dismiss employees when the vice-mayor is temporarily incapacitated to perform such duties; in that case, the councilor with the largest votes among incumbent councilors in the preceding local elections performs the mayor’s duties and exercises the powers except appointing, suspending, or dismissing employees (Section 7).
Section 7 provides that its succession provisions do not apply to cities that have no elective mayors and/or vice-mayors.

Appointment effectivity and civil service review

Section 8 provides that appointments by provincial governors, city mayors, and municipal mayors become effective upon issuance and attestation by the proper treasurer:
- provincial governor appointments and municipal mayor appointments: attestation by the provincial treasurer;
- city mayor appointments: attestation by the city treasurer.
Provincial treasurers and city treasurers are deputized as deputies of the commissioner of civil service for attesting appointments made by local government officials (Section 8).
Once attested:
- appointees by provincial governors and municipal mayors are entitled to collect the compensation rate fixed for their appointments;
- appointees by city mayors are similarly entitled after attestation (Section 8).
Temporary appointments to unclassified or emergency positions take effect immediately upon issuance without attestation (Section 8).
Section 8 requires that after attestation, all appointments be forwarded within ten days to the commissioner of civil service for review under civil service law and rules.
If the commissioner of civil service makes no corrections or revisions within one hundred eighty days after receipt:
- appointments are deemed properly made (Section 8).
If appointments are attested contrary to civil service law and rules:
- the provincial or city treasurer is responsible for compensation received by the appointee from the time of attestation (Section 8).
Section 8 places provincial and city treasurers under the supervision and control of the commissioner of civil service, and the commissioner shall issue rules and regulations relative to attestation.

Repeal, savings, separability, and interpretation

Section 9 repeals or modifies all acts, executive orders, administrative orders, proclamations, or parts thereof inconsistent with Republic Act No. 2264.
Section 9 preserves vested/earned rights: rights already acquired and existing at the time of passage are not abridged, modified, or affected.
Section 10 states that nothing in the Act deprives any province, city, municipality, or municipal district of any power it already enjoys or exercises, and it does not diminish autonomy.
Section 11 provides separability: if any part of the Act is declared unconstitutional, the declaration does not invalidate the other provisions.
Section 12 provides interpretive rules:
- implied powers of a province, city, or municipality are liberally construed in favor of local governments;
- fair and reasonable doubt on existence of power is interpreted in favor of local government and presumed to exist;
- the general welfare clause is liberally interpreted in case of doubt so as to give more power to local governments in promoting economic condition, social welfare, and material progress; and
- vested rights arising from contracts between local governments and third parties are governed by the original contract terms and provisions, and the Act does not infringe existing rights.