THE COASTAL MANAGEMENT PLANNING PROCESS
BEING ADAPTED FOR THE PHILIPPINE LOCAL GOVERNMENT


External Revenue Sources


Purposes of Revenue Generation

a. To set tangible and easily measurable values on municipal water use zones and the resources found in the coastal zone
b. To provide the community with an obvious economic incentive to protect and manage their coastal waters and resources
c. To regulate and limit the extraction of resources
d. To generate funds for the continued implementation of CRM

Financing Mechanisms Available to LGUs for CRM

a. Internal Revenue Allotment
b. Share in Fishery Charges
c. Grants and Donations
d. Domestic Loans
e. Credit Financing Schemes
f. Income from Development Enterprises and Inter-LGU Cooperation
g. Revenue Generation from Water Use Zones

References

Primer on Coastal Resource Management. 1999. CRMP/DENR/USAID, Cebu City, Philippines


Financing Mechanisms Available to LGUs for CRM

a. Internal Revenue Allotment

Section 6, Article VI of the Philippine Constitution provides that local governments shall be entitled to a just share in national taxes. At present, local governments are entitled to 40% of internal revenue taxes (Section 284 of the Local Government Code). Of the current 40%, all provinces and all cities are entitled to 23% each; all municipalities, 34%, and all barangays, 20%. For particular local government units, the sharing is determined by applying this formula: 50% based on population, 25% on land area, and 25% on equal sharing (Section 285 of the Local Government Code).

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b. Share in Fishery Charges

Local government units shall, in addition to the internal revenue allotment, have a share of 40% of the gross collection derived by the national government from the preceding fiscal year from fishery charges (Section 290 and 291 of the Local Government Code).


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c. Grants and Donations

Section 23 of the Local Government Code states that the "local chief executive may, upon authority of the Sanggunian, negotiate and secure financial grants or donations in kind, in support of the basic services or facilities enumerated under Section 17 hereof, from local and foreign assistance agencies without necessity of securing clearance or approval therefore from any department, agency or office of the national government or from any higher local government unit." Grants may be sourced from local and foreign sources to support water resource utilization and conservation projects and enforcement of fishery laws in municipal waters, including the conservation of mangroves (Section 17b21 of the Local Government Code). Sources of these funds are, however, only recently being developed and are not available to all LGUs.

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d. Domestic Loans

Section 297 of the Local Government Code provides that a local government unit may contract loans, credits and other forms of indebtedness with any government or domestic private bank and other lending institution to finance the construction, installation, improvement, expansion, operation or maintenance of public facilities, infrastructure facilities, and the implementation of other capital investment projects. Thus, domestic loans may be contracted by municipalities for infrastructure facilities and capital investment projects necessary in the management of coastal resources.

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e. Credit Financing Schemes

a. Bond flotation - Section 299 of the Local Government Code authorizes municipalities to issue bonds, debentures, securities, collateral 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 avail of this scheme to finance self-liquidating, income-producing development or livelihood projects on CRM. These projects must be incorporated in the municipal development plan and public investment program.

b. Public infrastructure projects by the private sector - Section 302 of the Local Government Code permits municipalities to enter into contracts with any duly prequalified individual contractor, for the financing, construction, operation and maintenance of any financially viable infrastructure facilities, under the build-operate-transfer agreement, including infrastructure facilities needed for the effective management of coastal resources

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f. Income from Development Enterprises and Inter-LGU Cooperation

a. Development enterprises - Local governments may incorporate development enterprises. These corporations (where income from investments may be derived) may be created to assume projects and programs on the management of coastal resources. These enterprises may be referred to as quasi-municipal corporation or those corporations created by local governments for a specific governmental or proprietary purpose. Even if there is no law specifically authorizing local governments to incorporate enterprises, local governments may still do so pursuant to their broad revenue-raising powers.

b. Inter-LGU cooperation - LGUs may, through appropriate ordinances, group themselves, consolidate or coordinate their efforts, services and resources for purposes commonly beneficial to them (Section 33 of the Local Government Code). In support of such undertakings, the LGUs 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. Income may be derived from such undertakings. Participating or contracting municipalities may undertake joint projects on CRM and derive income from such projects.

Such undertakings may be recognized by the State or the President, which may legally entitle LGUs to some form of national support. In the case of the Metro Naga Development Council, for example, an executive order was issued by then President Fidel Ramos recognizing the Council. As a consequence of this recognition, national funds were transferred to finance the Council's projects. From a quasi-municipal corporation, Metro Naga was transformed to a quasi-corporation (created by the State to perform a governmental purpose).

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 g. Revenue Generation from Water Use Zones

Local governments may apply taxes, fees or other charges for the use of municipal waters. These include:

a. Fees for registration of municipal fishers
b. Fees for license to fish
c. Fees for license to operate municipal fishing boats
d. Fees for license for municipal fishing gears
e. Fees for the management, utilization and exploitation of coastal resources, including marine sanctuary entrance fees, dive fees, etc.
f. Fines imposed on violators of fisheries and related laws
g. Fishery charges such as rentals for mariculture
h. Taxes on income derived from sustainable use of resources in the multiple use zones - As in land use zones, municipal water use plans must be developed identifying zones for strict protection (no take zones), sustainable use (limited harvest), and multiple use zones. An appropriate system of taxes, fees and other charges must be developed depending on the use designated from each zone. The Philippine Fisheries Code of 1998 provides that fees for fishery activity in municipal waters should be determined by the LGU in consultation with the Fisheries and Aquatic Resources Management Councils (FARMCs). Primary uses of municipal waters that may serve as a source of revenue for CRM programs of the LGU may include fishing, mariculture and tourism. The FARMCs may also recommend the appropriate license fees to be imposed.

Generally, the computation of fees is based on the cost of administering the procedure and the cost of conducting surveillance to ensure compliance. Taxes are computed according to the formula prescribed by the Local Government Code. Subsistence fishers (those earning Php50,000 and below or the poverty line defined by the National Economic and Development Authority, <link to www.neda.gov.ph> whichever is higher) are tax-exempt.

Rentals should be computed based not only on the socio-political context in which the fishery is operating, but also on the total rent generated and the profitability of the fishery. In considering the relative proportion of rent which accrues to the LGU and that which is retained by operators of fishery as profit, an important consideration is to ensure that the fishery remains sufficiently profitable for the operators to encourage reinvestment of profits when required.

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