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Philippine Income Classification of Cities

by Jennibeth Montejo Alojado

With the enactment of the Local Government Code of 1991, municipalities and cities now share the same powers and responsibilities. But its citizens and/or leaders may feel that it might be more beneficial to get a larger share of the internal revenue allotment (IRA) and acquire additional powers by becoming a city, especially if the population and economy has grown enough.

In response to the rapid increase in the number of municipalities being converted into cities since the enactment of the Local Government Code of 1991, Senator Aquilino Pimentel authored what became as Republic Act No. 9009 in June 2001 which sought to establish a more appropriate benchmark by which municipalities that wished to become cities were to be measured. The income requirement was increased sharply in order to control the increase of conversions into cities of municipalities that were perceived to have not become urbanized or economically developed enough to be able to properly function as a city.

Cities are classified according to average annual income based on the 3 previous calendar years. Effective July 28, 2008, the thresholds for the income of the cities are:

Class Average annual income
First PHP 400 million or more
Second PHP 320 million or more but less than PHP 400 million
Third PHP 240 million or more but less than PHP 320 million
Fourth PHP 160 million or more but less than PHP 240 million
Fifth PHP 80 million or more but less than PHP 160 million
Sixth below PHP 80 million

On the other hand, due to the higher property taxes that would be imposed after cityhood, many citizens have become wary of their town’s conversion into a city. Even if some municipalities had already achieved a high degree of urbanization and have annual income which exceeds that of many lower-income cities, they prefer to remain as municipalities. This has been the case of many high-income and populous municipalities surrounding Metro Manila.

Despite the passage of RA 9009, 16 municipalities not meeting the required locally-generated income were converted into cities in 2007 by seeking exemption from the income requirement. This led to vocal opposition from the League of Cities of the Philippines against the cityhood of these municipalities, with the League arguing that by letting these municipalities become cities, Congress will set a “dangerous precedent” that would encourage others from seeking the same “special treatment.” The resulting legal battles resulted in the nullification of the city charters of the 16 municipalities by the Supreme Court as of August 2010.



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