THIRTY-FOUR of the 50 municipalities and cities under Cebu Province were given an “unofficial” updated status of their income classification by the Bureau of Local Government Finance in Central Visayas (BLGF 7) on Thursday, Feb. 8, 2024.
This was based on the computation of the average of their annual regular income over the three years starting from 2020.
The information was revealed during a meeting Cebu Gov. Gwendolyn Garcia led at the Cebu Capitol Social Hall Thursday that was attended by city and municipal mayors of Cebu Province, and regional directors of the Commission on Audit and BLGF 7.
According to a report from the Cebu Provincial Government’s Public Information Office, BLGF 7 local treasury operations officer Kevin Soon said there are now 19 municipalities in the province that are first-class municipalities, six that are second-class municipalities, five that are third-class municipalities, six that are fourth-class municipalities, and two municipalities that have fifth-class status.
Classification as a first-class municipality means the municipality has an average annual regular income of at least P200 million.
Soon said that for the six component cities, Toledo City has been upgraded to first-class city, while Talisay City is now a second-class city. The cities of Danao, Carcar and Naga are third-class cities, while Bogo City is a fourth-class city.
This is in concurrence with Republic Act 11964, also known as the Automatic Income Classification of Local Government Units Act of 2023.
According to the Department of Finance (DOF) website, the law updates the income classification of local government units (LGUs) according to their current financial capabilities, while it empowers the agency to “efficiently and systematically” verify the LGUs’ financial capabilities and fiscal positions in line with the economy and local development.
Benefits
The income classification of provinces, cities, and municipalities serves as the basis for the (a) identification of financial grants and other forms of assistance to local government units (LGU), (b) determination of the financial capability of LGUs to undertake developmental programs and priority projects, (c) annual appropriation for the LGU’s personnel services, (d) number of elective members in the Sangguniang Panlalawigan and the Sangguniang Bayan, (e) limitations on the use of agricultural land, and (f) even the creation of a new LGU, among others.
The unofficial upgrading of Cebu’s LGUs was based on a simulation conducted by the BLGF 7 on the reports of the Regular Annual Income provided by the local government units of Cebu Province.
Using the income classification of municipalities and cities per DOF Order 23-08 in 2008 as basis for the LGUs’ current classification, SunStar Cebu determined that this means 34 of the 44 Cebu LGUs that were classified according to income were upgraded.
Soon said six LGUs were not included in the simulation because these LGUs lacked one year in their submitted annual income reports to the BLGF 7. He named these LGUs as Balamban, San Fernando, Tabogon, Medellin, Boljoon and Alcoy.
Classifications
The first-class municipalities are Consolacion, Minglanilla, Liloan, Bantayan, Daanbantayan, Argao, Tuburan, Dalaguete, Barili, Pinamungajan, Cordova, Asturias, San Remigio, Carmen, San Francisco, Dumanjug, Compostela, Sibonga and Moalboal.
He added that Balamban and San Fernando are likely to retain their status as first-class municipalities.
The second-class municipalities are Badian, Madridejos, Balamban, Oslob, Sogod, Tabuelan and Borbon. The third-class municipalities are Catmon, Santa Fe, Aloguinsan, Tabogon, Alegria and Poro.
Samboan, Ronda, Malabuyoc, Santander, Ginatilan, Alcantara and Medellin, on the other hand are among the fourth-class municipalities, while Tudela and Pilar are fifth-class municipalities.
As for Boljoon and Alcoy towns, their income class will be evaluated after they submit the necessary data for income simulation.
Income requirement
Soon said a first-class city has to record an average Annual Regular Income (ARI) of at least P1.3 billion; second-class city, P1 billion to less than P1.3 billion; third-class city, P800 million to less than P1 billion; fourth-class city, P500 million to less than P800 million; and fifth-class city, below P500 million.
ARI refers to the revenues including fees and receipts actually realized which are reported yearly on cash basis by provinces, cities and municipalities from regular sources, including the Internal Revenue Allotment (IRA) and other shares, Soon said.
The IRA is now called the National Tax Allotment.
On the other hand, municipalities are also divided into five income classes based on their ARI.
A first-class municipality must have an average annual regular income of at least P200 million; second-class municipality, P160 million to less than P200 million; third-class municipality, P130 million to less than P160 million; fourth-class municipality, P90 million to less than P130 million; and fifth-class municipality, less than P90 million.
However, Soon emphasized during the Thursday meeting that all of these data are not yet final and therefore are still unofficial. These are subject to the final deliberation of the DOF.
The DOF will then release a department order on the new income classes of the LGUs.
Application
Garcia asked Soon whether a LGU that has exceeded the threshold for its annual regular income in a certain year, could automatically apply for a higher income class category.
Soon replied that as of the moment, the law’s implementing rules and regulations (IRR) are still being drafted at the DOF, and they expect the IRR’s release by the end of the first quarter or second quarter of this year.
He added that he could not answer the governor’s question as there were no specific provisions in the IRR concerning the application of an LGU to a higher income class category.