D. Powers and Administration of Local Government Units (LGU)

D. LGUs

• Powers
• Police Power
• Eminent Domain
• Taxing Power
• Closure and Opening of Roads e. Local Legislation f. Corporate Powers g. Ultra Vires Acts
• Liability of LGUs
• Settlement of Boundary Disputes
• Vacancies and Succession of Local Officials
• Recall
• Term Limits

Sources of the powers of LGUs:

• Constitution
• Statute
• Those applicable to all municipal corporations or to the class to which it belongs

Nature of Fiscal Autonomy

Under existing laws, LGUs enjoy not only administrative autonomy, but also fiscal autonomy:

• This means that LGUs have the 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 power to allocate their resources in accordance with their own priorities.
• It extends to the preparation of their budgets, and local officials in turn have to work within the constraints thereof. They are not formulated at the national level and imposed on local governments, whether they are relevant to local needs and resources or not.

The COA is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds. The Court had therefore previously upheld the authority of COA to disapprove payments which it finds excessive and disadvantageous to the government; to determine the meaning of “public bidding;” and when there is failure in the bidding, to disallow expenditures which it finds unnecessary according to its rules even if disallowance will mean discontinuance of foreign aid; to disallow a contract even after it has been executed and goods have been delivered. Thus, LGUs, though granted local fiscal autonomy, are still within the audit jurisdiction of the COA. It is only when the COA has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning its rulings. (Veloso v. COA, G.R. No. 193677, September 6, 2011).

The absence of the public in the public bidding impels the City Treasurer to purchase the property on 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.  (City of Davao v. Intestate Estate of Amado S. Dalisay, G.R. No. 207791, March 7, 2016).

Internal Revenue Allotment (IRA) share of LGUs

The current sharing is 40% local, 60% national. The share of LGUs cannot be reduced, except if there is an unmanageable public sector deficit. The Congress can neither impose a limitation on the manner in which the IRA is released for the Constitution provides for automatic release.

General Rule: LGUs shall have a 40% share in national taxes, based on collections in the third fiscal year preceding the current fiscal year, subject to applicable statutory exclusions.

Exception: When the national government incurs an unmanageable public sector deficit, the President may adjust the allotment, but not below 30% of national taxes, upon the recommendations and consultations required by Sec. 284 of the Local Government Code.

Other Limitations on Taxing Powers of LGUs

Taxes already imposed by the National Government: Generally, LGUs cannot impose taxes that are already imposed by the National Government (e.g. income tax, documentary stamps, estate taxes, custom duties, excise taxes under the NIRC, VAT).

Persons Exempted: LGUs cannot impose taxes, fees and charges on (a) countryside and barangay business enterprises; (b) cooperative duly registered under the Cooperative Code; and National Government, its agencies and instrumentalities, and local government units.

• An instrumentality of the State or National Government is exempt from local taxation. Hence, the Manila International Airport, being such an instrumentality and not being a GOCC, is exempt from local taxation.
• However, GOCCs are generally not exempt from local taxation.

Ordinance v. Resolution

The higher council can declare the ordinance or resolution invalid if it is beyond the scope of the power conferred upon the lower Sangguniang. For barangay ordinances, the higher council can also rule that it is inconsistent with the law or city/municipal ordinances.

Grant of power to the local government units to create its own sources of revenue

LGUs have power to create its own sources of revenue and to levy taxes, fees and charges, subject to such guidelines and limitations as the Congress may provide which must be consistent with the basic policy of local autonomy [Section 5, Article X, 1987 Constitution].

Requisites of valid municipal contracts:

• It must comply with formal requirements
• LGU can exercise such other powers granted to corporations, subject to limitations in the LGC and other laws
• In case entered into by the local chief executive on behalf of LGU, prior authorization by Sanggunian concerned is needed.
• It must comply with substantive requirements
• LGU has express, implied, or inherent power to enter into a particular contract.
• It must be entered into by the proper department board, committee, or agent.

The doctrine of separate personality of a corporation finds no application in the Cooperative Development Authority which was created by virtue of RA 6939, since it is not a private entity but a government agency. (Verzosa v. Carague, G.R. 157838, 2011).

Review of Ordinance

• Review of component city and municipal ordinances or resolutions by the Sangguniang Panlalawigan. If the Sangguniang Panlalawigan finds that such an ordinance is beyond the power conferred upon the Sangguniang Panglungsod or Sangguniang Bayan concerned, it shall declare such ordinance or resolution invalid, whole or in part. The Sangguniang Panlalawigan shall enter its action in the minutes and shall advise the corresponding city or municipal authorities of the action it has taken.
• Review of Barangay Ordinances by the Sangguniang Panlungsod or Sangguniang Bayan. If the Sangguniang Panlungsod or Sangguniang Bayan, as the case may be, finds the Barangay ordinances inconsistent with law or city or municipal ordinances, the Sanggunian concerned shall within 30 days from the receipt thereof, return the same with its comments and recommendations to the Sangguniang Barangay concerned for adjustment, amendment or modification; in which case the effectivity of the barangay ordinance is suspended until such time as the revision called for is effected.