PLANNING AND DEVELOPMENT COLLABORATIVE INTERNATIONAL

Capital Investment ProgrammingFor Local Governments:A Manual of Procedures

URBAN MANAGEMENT SERIES

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UMS-l

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Capital Investment Programming for Local Governments: A Manual of ProceduresCountry: The Philippines Document ID# PN-ACA-380

Manual de Contabilidad Patrimonial Municipal (Manual ofAccounting for Municipal Assets)country: Nicaragua Document ID# PN-ACA-381 (Spanish only)

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p~ _PrcA - 3g0C(35L{3

U M S No. 1URBAN MANAGEMENT SERIES

CDIE Document ID# PN-ACA-380

Capital Investment ProgrammingFor Local Governments:A Manual of Procedures

Prepared for

USAIDJPhilippinesDecentralized Shelter and Urban Development Project

Prepared by

UP Planning and Development Research Foundationand

PADCO, Inc.1025 Thomas Jefferson Street, NW

Suite 170Washington, DC 20007

April 1993

""""'4••'."

Funds for production of this report were provided by theUnited States Agency for International Development

CAPITAL INVESTMENT PROGRAMMINGFOR LOCAL GOVERNMENTS

A MANUAL OF PROCEDURES

TABLE OF CONTENTS

LEITERS

PREFACE

Page

1.

2.

3.

4.

INTRODUCTION

SCOPE AND COVERAGE OF THE CIP

THE OVERALL FRAMEWORK

STEPS AND PROCEDURES

1

1

2

4

Stream 1:Stream 2:Stream 3:

APPENDIX A:

APPENDIX 8:

Project IdentificationFinancial Policy DevelopmentMatching and Iteration

OUTLINE AND FORMAT OF THE CIP

CITY PILOT-TESTING EXPERIENCES

Case 1: Naga CityCase 2: Lipa City

4

16

41

A-1

B-1

B-6

TABLE OF CONTENTS

Page

LIST OF FORMSForm

1.1 Project Idea Proposal File 101.2 Summary List of Project Ideas, Initial and

Preliminary Project List 111.3 Conflict-Compatibility-Complementarity Matrix 121.4a Sample Goals Achievement Payoff Matrix 131.4b Summary of Sector Scores, Goals Achievement Payoff Matrix 141.5 Ranked List of Proposed Projects for

Investment Programming 152.1 Time Series Record of Property Tax Revenue 302.2 Time Series Record of Revenue Other Than

Property Tax 312.3 Time Series Record of City Operating Expenditure 322.4 Obligated Debt Service Expenditure 332.5 Projection of Property Tax Revenue 342.6 Projection of Total Revenue 352.7 Projection of City Operating Expenditure 362.8 Projection of New Capital Financing Potential 373.1 Project/Resources Matrix 473.2 Capital Investment Program (CIP) Project Summary 48

LIST OF TABLES

Table

2.1 The Sharing and Distribution of the InternalRevenue Allotment (IRA) 38

2.2 Projected Internal Revenue Allotment, By City,1992 - 1995, in Million Pesos 39-40

81-1 Proposed Naga City Capital InvestmentProjects: 1993-1995 8-5

B2-2 Proposed Lipa City Capital InvestmentProjects: 1993-1995 B-10

Figure A CIP Process as part of the DevelopmentPlanning - Investment Programming· Budgetingand Implementation Cycle 3

REPUBLIC OF THE PHILIPPINESDEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT

EDSA Corner Reliance St. Mandaluyong,Metro Manila

4 June 1993

CIRCULARNO. 93-14

TO

SUBJECT

ALL CITY MAYORS, MUNICIPAL MAYORS, PROVINCIAL

GOVERNORS, SANGGUNIAN MEMBERS AND ALL OTHER

CONCERNED

MANUAL FOR CAPITAf, INVESTMENT PROGRAMMING FOR

LOCAL GOYERNMENTS

In fulfillment of its responsibility to assist local government units (LGUs) formulate acapital investment programming process, a joint Committee made up of representatives of theNational Economic and Developmen.t Authority (NEDA), the Department of the Interior andLocal Government (DILG), and the Department of Finance (DOF) reviewed and endorsed for useby LGUs the attached "Manual for Capital Investment Programming",

The Manual was developed under the US Agency for International Development(USAID)-assisted Decentralized Shelter and Urban Development (DSUD) Project to help localgovernments establish a multi-year rolling capital investment program. The system andprocedures in the Manual have been introduced in the cities of Naga ancl Lipa.

Specifically, the Manual will serve as a guide for LGUs in:

(1) Formulating a prioritized list of capital investment projects, with their associated costs, tobe funded over a given time period;

(2) Developing a time-phased investme.nt program; and

(3) Generating fund source projections for proposed capital projects.

All local chief executives are therefore enjoined to utilize the Manual to facilitate theirlocal capital investment planning.

Secreta

REPUBLIC OF THE PHILIPPINESNATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY

NEDA sa Pasig, Amber Avenue, Pasig, Metro Manila

Cable Address: NEDAPHILP.O. Box 419, GreenhillsTels. 631-09-45 to 64

02 June 1993

For

Subject

All Provincial Governors, City Mayors, Municipal Mayors,Sanggunian Members and All Others Concerned

MANUAL FOR CAPITAL INVESTMENT PROGRAMMING FORLOCAL GOVERNMENTS

The attached Manual for Capital Investment Programming developed under the US Agencyfor International Development (USAID)-assisted Decentralized Shelter and Urban Development(DSUD) Project was reviewed by the National Economic and Development Authority (NEDA)in cooperation with representatives of the Department of Interior and Local Government (DILG)and the Department of Finance (DOF).

The NEDA finds the system and procedures embodied in the Manual a useful guide inhelping local governments establish a multi-year rolling capital investment program and endorsesthe use of the Manual by local government units.

The NEDA considers the Manual as a useful instrument in support of President Fidel V.Ramos' policy of devolution and local autonomy which is enunciated in the Philippines 2000 orthe Medium-Term Philippine Development Plan, 1993-1998.

This important document is a milestone in NEDA's Five-Point Agenda which calls forinstitutional reforms for efficient plan implementation.

I sincerely hope that you will find use of this Manual.

Thank you.

1

PREFACE

The following Manual was prepared by a consultant team of the University of thePhilippines Planning and Development Research Foundation (UP PLANADES)and Planning and Development Collaborative International (PADCO, Inc.) underUSAID/Philippines Contract No. 492-0388-C-OO-2005-00: Decentralized Shelterand Urban Development (DSUD) Project: Policy Analysis and SystemsDevelopment Studies.

THE CONSULTANT TEAM

Senior Consultants

Benjamin V. Carino - Team Leader (PLANADES)Arturo G. Corpuz - Systems Design Expert (PLANADES)

Ernesto M. Serote - Urban Planner (PLANADES)Norman R. Ramos - Development Finance Expert (PADCO)

Roque A. Magno - Infrastructure Planning Expert (PLANADES)Matthew S. Westfall - Urban Development Planner (PADCO)

Corazon Cruz - LGU Procedures/Systems Consultant (PLANADES)

Research Assistants

Loreto Marinas (PLANADES)Joey Sena (PLANADES)

Dickton Rye (PLANADES)Cesar Dizon (PADCO)

This Manual w~scompleted· through thEt assi$tance of. the •.United States Agency forInternational Development (USAlD).The views, expressions and opinions contained in thisManual areethe authors'and notinteodedas ~atementsof policies of either USAiD or theauthorst patent institutions. . .. .. . . .

CAPITAL INVESTMENT PROGRAMMING FORLOCAL GOVERNMENTS

A Manual of Procedures

1. Introduction

This Manual of Procedures operationalizes a Capital Investment Programming(CIP) process for local governments. It outlines in detail the steps and processesinvolved in the preparation of a CIP at the city/municipal level. The output of theinvestment programming process shall basically consist of: a) a prioritized listand costing of capital investment projects that could be funded over a given timeperiod; b) the year in which each project is to be started and completed, and theamount expected to be spent in each year; and c) the analysis and projection oflocal funds that are likely to become available for capital forming expendituresover the same period.

2. Scope and Coverage of the CIP

To define the limits and scope of the CIP, the system has the following features:

a) It delimits capital investments to asset-forming or capital improvementexpenditures, i.e., physical infrastructures such as buildings, roads andbridges, etc., which are of significant value and have a useful life ofseveral years. Technical assistance expenditures, which do not form partof a capital improvement project (e.g., manpower development), areexcluded.

b) It limits the scope of the CIP to local projects, i.e.. projects which are,identified, initiated and decided upon by the city/municipality. Whileprojects identified and developed at higher levels must necessarily guidethe investment programming process at the city/municipal level, it issuperfluous to include them in the local CIP as th,ey already appear ininvestment programs at higher levels of government. What is important isthat the city or municipality assumes responsibility and "ownership" forprojects included in the CIP.

c) For practical purposes, the investment programming system will cover inthe short-term a period of three years, to coincide with the term of local

officials. In a three-year investment programming cycle, local officials willhave the opportunity to embrace the program and give sustained supportto its implementation.

It should also be emphasized that the elP system is not intended to cover alllocal government investments. Other investments, particularly those for projectswhich are emergency in nature or which cannot be anticipated during theinvestment programming process, may be pursued outside of the CIP systemprovided that existing laws and regulations on budgeting and auditing arefollowed.

3. The Overall Framework

The overall framework of the CIP process is summarized in Figure A. It isimportant to note that investment programming is only one of three majorelements of the planning-programming-budgeting and implementation cycle. Asshown in Figure A, investment programming links planning to implementationeven as it relies heavily on the local development plan for project ideas.Essentially, the CIP process consists of three major streams, as follows:

Stream 1: Project Identification

Production of a ranked list with cost estimates to be programmedover the short-term (a 3 year period).

Stream 2: Financial Analysis

Analysis and projection of the amount of funds likely to becomeavailable for capital investments for the next three year period.

Stream 3: Matching and Iteration

Matching the capital requirements with projected amounts for thethree year period and, through iterations, modify the project list oroutline revenue raising strategy to fund the desired project mix.

The steps involved in each stream will be outlined and described in detail in thesections that follow. In the process, the major actors in the preparation andimplementation of the elP will be identified. The required sample forms for eachof the three streams are presented at the end of the discussion of each stream.

3. BUDGETING AND

IMPLEMENTATION

2. INVESTMENT

PROGRAMMING

PREPARE (lTO)

5·10 YR. FINANCIAL STATEMENTS

PROJECT IDEAS + PROPOSALS

..OF PROJECTS

PROJECTED FUNDS FOR CAPITALliBERATE

OUTLAYS FROM REGULAR SOURCESALUATE

lECT

TIMATECOST

..po PROJECTED FUNDS FROM IMPROVED

FISCAL MANAGEMENT

OF .... -._. ...PROJECTED FUNDS FROM PUBLIC

S 0 BORROWINGS, ETC.

MATCHED

? TOTAL FUNDS AVAILABLE FOR CAPITAL[....-OUTLAYS

YES

3 YA. INVESTMENT PROGRAM ~------------------

(lPDO) SCREEN WITH

DE

EV

SE

ES

TECHNICAL CRIITERIA

L

"Y

--. RESOLUTION, ORDINANCES, ETC. f--

~

'--- ANNUAL BUDGET .... -

Iy

NT IMPLEMENTATION ,+-

RANKED LIST

PROJECT

(lDC

EXCOM)

(LPDO)

(BDC) (lCE) (POliNGO) SUGGEST

(~GA) (llB) (HOD) ETC• .........-.

(LLB) ADOPT

(lCE)

(H 00) IMPLEME

(POn-lGO)

PREUMINARY LIST

(LPDO) PREPARE

(LOC) APPROVE,

ENDORSE

I LOCAL DEVELOPMENT PLAN ,.-- - - -1~DEVELOPMENT---iPLANNING :

.........................................................................................................J 1 .IIIIIIIIIIII,,II,II

ANALVZE, ESTIMATE (LFC) REVENUES (LPDO) :

IIIIIIIIIIIIII,II

(LFC) :

RECOMMENDS:

TO LCE + l.DC IIIIIIIIIIIIII,III!IIIII

-----.--tIII

...................................................................................1 : .IIIIIIIIIIIII

-----------------------~IIIII,....................1 [

Figure A. CIP Process as Part of the Development Planning-Investment

Programming-Budgeting and Implementation Cycle

/ ) I

4. Steps and Procedures

Stream 1: Project Identification

The output of the Project Identification Stream is a short list andcost estimates of projects to be considered for implementationwithin the three-year period covered by the CIP. This list will bematched with the initial estimate of available funds (derived inStream 2) in the process of determining the final list of projects(Stream 3). It should be kept in mind thatthe implementation ofprojects included in the final list need not be completed within thethree-year period since the 1991 Local Government Code allowscontinuing appropriations extending beyond annual budgets.

The Local Planning and Development Office (LPDO), under thesupervision of the Local Planning and Development Officer, has themajor responsibility for the conduct of the project identificationprocess.

There are three major activity outputs in the Project IdentificationStream:

a. an initial list of projects derived from the Local DevelopmentPlan (LDP) and other sources;

b. a preliminary list of projects screened on the basis oftechnical and socio-political criteria; and

c. a ranked list of projects with cost estimates.

The Local Chief Executive (LCE) initiates the CIP process byissuing an official announcement to public and private sectoragencies and organizations stating that the LPDO will be solicitingand compiling ideas for projects. If the CIP process is going to beconducted for the first time, the announcement should also:

a. call for project ideas, specifying the cut-off date for projectsto be considered in the initial list;

b. mention the relevance and importance of local developmentinvestment programming, particularly within the context ofthe 1991 Local Government Code;

c. present a summary of the CIP process, schedule and a list ofthe participating lead offices and agencies;

The agencies and organizations to which the announcement should be addres­sed are outlined in Step 2.

The completion of Step 1 signals the start of the CIP process.

Immediately after the LCE announces the start of the CIP process,the LPOO solicits and compiles project ideas from various sources.These sources may be classified into three categories that corres­pond to three simultaneously occurring substeps.

Substep 2A:

SUbstep 28:

Substep 2C:

Compile project ideas based on the LOP

The LOP, if it is properly formulated, should serve as themajor source of project ideas. LOP-based projects that havenot yet been implemented or funded should be included inthe initial list.

If an LGU has no LOP or if its LOP does not provide projectideas (because it has not been updated or because condi­tions have drastically changed since it was formulated) thensubsteps. 28 and 2C should provide the bulk of project ideas.

Compile projects identified by the LPOO

Under this substep, the LPOO develops a supplementary listof projects based on its own planning activities. LPOO­initiated project ideas should include projects that were notanticipated by the LOP because of new developments in thesocial, economic, al1d physical environments of the localcommunity and because of shifts in the development policiesof the local government.

Substep 28 should be an important source of project ideasfor LGUs with no LOP or where the LOP is out-dated.

Compile projects from other sources

Finally, because the LPOO cannot anticipate all developmentconcerns, other sources of project ideas need to be tapped.These sources include other government departments and

5 10

offices, barangay development councils, local communityorganizations, central and regional offices of government lineagencies, non-government organizations, private individuals,etc.

Regular consultations with these sources should be held sothat the LPDO is familiar with current development thrusts,issues, and interests. Sectoral master plans, reports, andbulletins also provide important information that could give anindication of what projects are being planned or consideredby other agencies and organizations.

The primary objective of the LPDO in dealing with extra-localagencies and organizations such as central or regionalgovernment line offices is to acquire information about thelatter's projects. This information is to be used by the LPDOto identify complementary projects that can be implementedand monitored by the LGU. Only the latter projects, how­ever, should be included in the initial list of projects beingcompiled by the LPDO. If, however, a joint or shared projectis being contemplated by the LPDO with any agency ororganization, then this project, with the local componentdefined as clearly as possible, should be included in theinitial list of projects.

For each of the projects identified in Step 2, the LPDO shouldcreate a Project Idea Proposal File (See Form 1.1) that contains thefollowing basic information:

a. Project title;

b. Proponent's (or proponent representative's) name andaddress;

c. Date project was compiled;

d. Description and location of project (provide map if availableor improvise with a sketch map);

e. Objective of project;

f. Intended beneficiaries of project;

g. Estimate of cost and other required resources of project (ifavailable);

h. Proposed funding (if available);

i. Period of implementation of project (if available).

The project idea file serves as a record of all projects consideredand as the initial basis for subsequent project screening activities.A summary list of the project ideas including the appropriate projectfile number should be compiled. Form 1.2 is used for this purposeand to keep track of subsequent project screenings in Steps 3 and4.

The completion of Step 2 results in a compilation of project ideafiles.

The initial screening of the projects compiled by the LPDO hasthree objectives:

a. To consolidate repetitive or redundant proposals.

This is done by going through all the files of the individualprojects and checking for identical or similar project descrip­tions, objectives, intended beneficiaries, and location. Pro­jects with identical or near-identical descriptions, Objectives,intended beneficiaries, and location should be consolidatedand treated. as one project.

b. To screen out projects that are obviously impractical orundesirable.

Project proposals that are obviously impractical or undesira­ble (such as an international airport in a remote and ruralpart of the country) should be removed from the initial list.As a general rule, if there is reasonable doubt on whether aproject idea should be considered "obviously impractical orundesirable," then it should not be removed from the list.

c. To screen out projects that are more appropriately imple­mented by other agencies, organizations, and local govern­ments.

Proposed projects which are identical to or are in fact pro­jects to be funded by other sources (central or regional

7

offices of government line agencies, for example) are dele­ted from the list.

It is possible that proposed projects will have conflicting objectivesor will be competing for the same location. In these cases, theconflict in question should be identified by the LPDO and thenresolved through prioritization in subsequent steps.

The completion of Step 3 results in an initial list of city imple­mentable projects. (See Form 1.2, Column 2).

In Step 4, the initial list is screened by the LPDO to remove orreformulate conflicting projects. If the list of proposed projects is ashort one, screening for complementarity, compatibility, or conflictmay take place simultaneously with the initial screening (Step 3). Inthis case, Step 4 may be omitted and the project identificationstream can proceed to Step 5. If the list is long, however, Step 4will be needed to systematically organize screening for comple­mentarity, compatibility, or conflict.

For this step, a Conflict-Compatibility-Complementarity Matrix(See Form 1.3) is used. This matrix allows the identification ofprojects that complement, are compatible, or conflict with otherprojects.

The completion of Step 4 results in a preliminary list (See Form 1.2,Column 3) that excludes projects that are, for the most part,incompatible with the other remaining projects.

The ranking of proposed projects included in the preliminary listallows for social and political considerations to be inputted into theproject identification process.· It also facilitates the trimming andmodification of the project list in subsequent streams of the CIPprocess. For these purposes, a Goal-Achievement Payoff Matrix(GAPM) is utilized. The GAPM is essentially a list of the localgovernment's social and political goals, weighted according to thelocal administration's priorities and commitments. The extent towhich proposed projects contribute to the attainment of these goalsare then estimated. An example of a GAPM that can be used forproject prioritization screening is shown in Forms 1.4a and 1.4b.

Goals 1 to 3 of the sample GAPM matrix (Forms 1.4a and 1.4b)represent socioeconomic benefit indicators that can be quantifiedin Stream 3. This would entail the computation of crudeapproximation of economic rates of return (ERRs) either forindividual projects or investment packages, depending on the sizeand scale of individual projects.

Each LGU, through its LDC, should formulate its own GAPMaccording to its development goals. As a reference, the LPDO canmake use of the "Elements of the General Welfare" outlined in SubSec. 16 of the 1991 Local Government Code as an initial basis forits GAPM. These elements include:

a. Preservation and enrichment of culture;

b. Enhancement of the people's right to a balanced ecology;

c. Development of appropriate and self-reliant scientific andtechnological capabilities;

d. Improvement of public morals;

e. Enhancement of economic prosperity and social justice;

f. Promotion of full employment;

g. Maintenance of peace and order;

h. Preservation of the comfort and convenience of residents.

The completion of Step 5 results in a list of projects that are ranked according toLDC priorities and objectives.

The only remaining task before the list of proposed projects can be matched withthe estimate of available funds (derived in Stream 2) is to estimate the cost ofeach project. For some projects, cost estimates will already be available (as partof the initial information compiled in their files in Step 2). In this case, the LPDOonly needs to confirm or refine the estimates. A ranked list of the proposedprojects with cost estimates and other information are compiled in Form 1.5.

A. Project Title

B. Proponent

C. Proponent's Address and Telephone

D. Description of Proposed Project

E. Location

F. Objective(s)(Attach additional sheets if necessary)

G. Intended Beneficiaries

H. Cost Estimate(if available)

I. Proposed Source of Funding

J. Proposed Period of Implementation

10 X\_\\1

1.

2.

3.

4.

5.

6.

7.

8.

9.

(1)Project IdealProject File No.

(2)Initial List

(Projects that PassedInitial Screening)

(3)Preliminary List

(Projects that PassedConmc~CompaUbilny­

Complementarity Screening)

11

Proposed

Projects

Proj.1

Proj.2

Proj.3

Proj.4

Proj.5

Proj.6

12

Form 1.4a

Salllple(;otlis.~C.lli~"~T~rlt.f)aY()~Nltltri)( ..Sector: _

GOAL%

1. Public Health and Safety1.1 Reduce traffic congestion1.2 Reduce discomfort due to pollution, noise1.3 Avoid high risk areas1.4 Contribute to disaster mitigation1.5 Reduction in morbidity and mortality rates

2. Economic Efficiency2.1 Provide a cost-effective solution to the identified

city problem2.2 Make use or enhance the utilization of complementary

city facilities2.3 Result in a net increase in city revenue in the form

of taxes, fees, charges, etc. such that a rate of returnat least equal to the social opportunity cost of capitalis realized over the project's life cycle

2.4 Promote local economic activities3. Social Equity

3.1 Provide basic services, especially to low-income groups3.2 Promote urban-rural integration3.3 Accommodate the needs of small, barangay- and

sUb-barangay-level groups in local governmentprograms, projects, and activities

4. Enviromental Integrity4.1 Protect ecologically sensitive areas4.2 Preserve conservation areas

5. Local Political Leadership5.1 Minimize government regulation5.2 Encourage private sector participation5.3 Fulfill political agenda/platform of LG leadership

TOl A L 100%INSTRUCTiONS.'········ .. »: .•..

1PROJECT

23456

Note: Some of the goals outlined in the sample GAPM are adapted from Nathaniel Lichffield,Evaluation in the Planning Process (Oxford: Pergamon Press, 1975) 134\

PROPOSED

PROJECTS

Proj.1

Proj.2

Proj.3

Proj.4

Proj.5

Proj.6

A B

SECTOR

C D E F TOTAL SCORE RANK

14~

Rank

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

ProposedProject/File No. Location Cost Estimate

;.;.;.; ;.;.;.;.;.;.:-:.;.;.;.;.:.:;; /:;.-;..:: :.; ;.;;:, .. ;ij..........:.

......:.:.:.;.:.:.:::.:.:.:.:.;.:-:.:.:.'::;.;:; }}

Stream 2: Financial Policy Development

A Capital Investment Programming system and the resulting capitalbudget is only as good as the financial plan for the proposedprojects. The number of public projects that a city can financedepends on: (1) the revenue level of the city; (2) the level ofrecurring city government operating expenditures; (3) the currentcity debt level; (4) the statutory debt ceiling; and (5) potentialsources of additional revenue available for capital project financing.

Financial policy development for CIP purposes in Philippine citieshave to be guided by:

• Historically observed trends and structural relationshipsapplicable to existing revenue sources, and expenditurerequirements.

• The provisions of the 1991 Local Government Code (LGC)with respect to (1) additional responsibilities that entailincreased expenditure levels; and (2) more importantly,expanded revenue sources.

• The financing preferences of city constituents as reflected inthe city legislative body's overall financial policy.

Financial policy development for CIP purposes entail the followinggeneral steps:

(1) Data collection on key financial variables;

(2) Trend and structural relationship analyses including theimpact of policy, legislative, and system/procedural changes;

(3) Projection of key financial variables;

(4) Determination of new capital financing potential; and

(5) Setting up of the appropriate financing plan.

The process must be done in a transparent manner with all theassumptions and considerations clearly set out.

16

The Local Finance Committee (LFC) composed of the City PlanningCoordinator, the Budget Officer, and the Treasurer is chargedunder the 1991 LGC with the setting of the "level of the annualexpenditures and the ceilings of spending for economic, social, and

general services based on the approved local development plans"(Sec. 316 c). As such, they should undertake the required CIPfinancial plan development in close coordination with the LocalDevelopment Council (LDC) for consideration and approval of theSangguniang Panglungsod.

With the work of the three city bodies effectively coordinated, asound and appropriately funded city CIP can be pushed through bythe city government.

Revenue is defined as any inflow of funds to the city regardless ofwhether the source is repayable or not.

Data on city revenue and expenditures for the past 5 to 10 yearsmust be collected and the historical trends in terms of the averageannual rate of growth analyzed.

Specifically, historical analyses need to be done on the followingcity revenue items:

a. Real Property Taxes (See Form 2.1 for a sample of theRPT data collection and historical growth trend analysestable)

b. Business Fees and Licenses (See Form 2.2 for a sampleof the Other Revenue data collection and historical growthtrend analyses table including detailed filling-up instructions)

c. Other Taxes (See Form 2.2)

d. Service and Operations Income (See Form 2.2)

e. IRA (See Form 2.2 and Tables 2.1 and 2.2)

f. All Others (See Form 2.2)

The analyses of current revenue levels must distinguish between(1) recurring revenue sources (revenue source a. to e.) and (2)non-recurring ones (f.) such as grants-in-aid from local and foreignsources, special appropriations or transfers from Congress or otherunits of government; interfund and inter-local government transfers.This is because a capital investment program needs a stable

source of financing, and should not depend on revenue sourceswhich are not assured of being in the city coffers each year. Thus,for capital investment planning purposes, only projections of recur­ring revenue sources should be utilized.

The IRA used to be highly unpredictable in terms of amount andtiming of disbursement. Under the 1991 LGC, however, theamount due each local government can easily be computed and thenational government is committed to disburse the amount on amonthly basis. The allotment formula are presented in Table 2.1,and the IRA projection on a per city basis are shown in Table 2.2.

The analyses must distinguish between the impact on revenuevolume of (1) changes in the tax base such as increases in thenumber of taxable structures or businesses; and (2) changes in taxrates.

The historical trend analyses must take into consideration theoccurrence of an unusually large increase in a particular revenuesource for a particular year which may be attributed to a ratechange, a new system of billing and collection, or other proceduraland system improvements. Such an increase cannot be expectedto continue into the future. The imp.act of one-time procedural andsystem changes such as the granting of a tax amnesty andenactment of new tax laws and ordinances on revenue growthmust, therefore, bE? segregated in the analyses.

Operating expenditures include personnel services (including socialcharges) and maintenance and operating expenses (MOE) such asoffice supplies and expenses, utilities (power, water, telecom­munications), office equipment and miscellaneous expenses.

Correspondingly, city expenditure patterns must be analyzed usingavailable historical data. The period of analyses for the expenditureside will have to match the number of years used in the revenueanalyses.

Historical analyses need to be done on the following city operatingexpenditure items:

a. General Public Services (See Form 2.3 for a sample of theexpenditure data collection and historical growth trendanalyses table)

b. Social Services (See Form 2.3)

c. Economic Services (See Form 2.3)

d. All Others (See Form 2.3)

The amount of debt service payments for existing and otheranticipated city obligations must be established, and compared tothe relevant (if any) statutory debt service ceilings. (See Form 2.4for the appropriate sample form and detailed filling-up instructions)

In the case of expenditures, election years usually result inabnormally high expenditure levels. Usually, such "abnormal yearsll

need to be taken out of the projection exercise.

The assessment of such relationships will aid historical trendanalyses and the preparation of the required revenue andexpenditure projections. Among the key factors that must beconsidered are (1) the overall national and regional economicpicture including development trends; (2) demographic shifts; and(3) changes in the local market, particularly in the local labormarket.

The qualitative and quantitative response of each revenue sourceand expenditure item to demographic and economic changes mustbe established for each major revenue source and expenditure itemto come up with a comprehensive analyses of city fiscal patterns.

The analyses can take the form of per capita analyses. Forexample, the trend in per capita real property tax (RPT) yield or themovement of business tax yield per registered businessestaplishment can be examined. After factoring in the effects ofanticipated developments within the city, the adjusted per capita

19

figures can then be applied to available demographic and economicforecasts to come up with the required revenue and expenditureprojections.

The growth movement of each revenue source can also be linkedto demographic and economic changes through the use of elasticityanalyses wherein the elasticity is defined as the ratio of thepercentage change over the study period (5 to 10 years) of thedependent variable (for example, sales tax) to the independentvariable (for example, average family income). The elasticityanalyses should also distinguish whenever applicable between therevenue response to changes in the tax base and the response tochanges in tax rates. These elasticity estimates can be appliedagainst available government (NEDA, NSO, etc.) population andeconomic growth forecasts for the city to generate forecasts foreach major revenue type.

Future recurring revenue levels can be projected based on acareful assessment of all the probable factors that affect eachrevenue source.

The assessment of the factors can be built into the growth ratesthat will be used to project each revenue source either through (1)a conscious upward or downward adjustment of the computedhistorical growth rates or (2) through the assumed per capitaincome growth rates to which the appropriate revenue elasticity isto be applied. It is important that the pertinent provisions of the1991 LGC, particularly those that refer to new tax bases or toincreased rates, be considered in the projections.

RPT collection (Revenue Item a), because of its large contributionto city revenue sources and because real properties will be themain beneficiary of city capital improvements in terms of increasedvalues should be projected separately. See Form 2.5 for thesample projection form and detailed instructions.

~20

Revenue items b to d and f can be projected using either thehistorical growth rates (with or without adjustments) or usingcomputed elasticities and assumed per capita income growth rates.See Form 2.6 for the sample projection form for these revenueitems.

The IRA projections (Revenue Item e) should already consider theincreases provided for by the 1991 LGC. Table 2.1 presents acomparison of the sharing and distribution of the IRA while Table2.2 gives an IRA projection for 1992 to 1995 by city. The 1992 to1994 projections are based on actual SIR collections between theyears 1989 to 1991. The 1995 figures are based on OOFprojections for the Medium Term Plan (1992 - 1998).

Future normal recurring expenses can be projected using either (1)the historical (5 to 10 year average) annual expenditure increase,or (2), the historical average expenditure per unit of output in thecase of city business enterprises. See Form 2.7 for the sampleprojection table and the detailed instructions.

In using either of the two techniques, judgment as to the effects ofpolitical and organizational developments within the city governmenton the future growth of various departments should be factored intothe projections.

The incremental cost of the devolved functions to the city alsoneeds to be considered into the expenditure projections.Preliminary estimates indicate that the basic per capita cost ofdevolved services will amount to P146.94. An additional P12.35 ofadministrative overhead needs to be added to the basic cost for atotal per capita cost of P159.29. For an average small city with apopulation of 338,000 in 1990, devolution will mean an annualincremental operating cost of P53.8 million. The correspondingamount for a large city with an average population of 823,000 in1990 is P131.1 million. The derived per capita cost figure is just48.01 % of the estimated average P331.72 per capita IRA srlare ofsmall cities and 61.20% of the P260.26 average per capita IRAshare of large cities.

In setting the appropriate future growth rate for each revenue andexpenditure item, each city must determine from its historical trendanalyses and assessment of the overall city operating environmentprospects (demographic, economic, political, legal, etc.) whichcombination of assumptions are most appropriate for the city.

Four alternative future growth rate scenarios can be used by citiesin coming up with the required financial projections. These include:

21

22

a. No Change

This method assumes that the present level of the financialvariable will continue into the foreseeable future. Thus, aconstant absolute amount based on a recent year, or on theaverage calculated over a certain number of years, is usedin the projection.

This method may be used in two instances: (1) if thehistorical trend analysis indicates little or no change and ifthere is no reason to expect a change in this pattern; and (2)to provide a conservative estimate of an uncertain revenuesource such as grants and aid from the central governmentor from foreign sources.

b. Change by constant amounts

The technique assumes yearly changes based on a constantamount.

The technique usually applied to assessed value forecasting,makes use of the average yearly change over the historicalperiod of analyses as the amount to be added to the currentyear's value to obtain next year's value.

In utilizing the calculated yearly amount of increase forprojection purposes, allowances should be made for (1)recent shifts in the yearly increase over the years; (2)anticipated changes in conditions, policies and resourcesthat are not reflected in the historical data; and (3) differentestimates for different portions of the projection period such

.as during an expected period of either high or low inflation.

c. Change at a constant rate

The technique assumes annual changes at a constant ratebased on the historical annual average percentage changeestimate.

The percentage change estimate is multiplied by the currentyear value to derive the amount that should be added to thecurrent year value to arrive at next year's value.

The same considerations as discussed in b apply inchoosing the appropriate percentage change estimate to beused in the projections.

d. Correlation with demographic or economic variable

This method assumes a constant relationship between thefinancial variable and a demographic or economicvariable.

As discussed in Step 1, either the results of a per capitaanalysis or an elasticity analysis adjusted to reflectanticipated special developments in the city's socio­economic and political environment can be used forprojection purposes.

In the case of per capita analysis, available forecasts of thereference demographic or economic variable (population,number of business establishments, etc.) can be multipliedby the per capita figure estimated from historical data toarrive at projections of the relevant financial variable.

The available growth rate forecasts of the referencedemographic and economic variable can be multiplied by theelasticity figure estimated from historical data to arrive at thegrowth rate projection for the relevant financial variable. Theestimated financial variable growth rate is then applied to thecurrent year value of the financial variable to come up withthe amount to be added to the current year value to arrive atnext year's value in the same manner as in c.

The same considerations as discussed in b apply inchoosing the appropriate per capita or elasticity estimates tobe used in the projections.

23

After the future revenue inflows and corresponding expenditureoutflows are established, the new capital financing capacity of a citycan be established based on the following computationalprocedure:

PROJECTED REVENUES

(LESS) PROJECTED OPERATING EXPENSES

(LESS) EXISTING DEBT SERVICE REQUIREMENTS

(EQUALS) AMOUNT AVAILABLE FOR NEW CAPITALFINANCING

See Form 2.8 for the sample table and detailed filling-upinstructions.

In the light of the new Local Government Code which gives moreauthority to the city government in overall city developmentplanning, and the realities of Philippine politics, the analyses ofcapital expenses must look at commitments made by the cityexecutive in order that the cost of such projects can be factoredinto the analyses.

The assumption taken at this stage is that the existing stock ofphysical capital in the city is inadequate so that any surplusrevenue after meeting existing operating expenses and debtservice requirements will be used for capital expenditure.

Given the authority provided by the new LGC to local governmentsin setting local tax rates, city policy makers would want to examinethe impact of proposed capital outlays on the amount of additionaltax revenues that need to be raised to meet such capital outlays.The final impact will depend on (1) the size of the proposed capitalinvestment program; and (2) the method of financing selected.

The private sector, including corporations, NGOs, cooperatives andcommunities, is often willing and able to finance or co-finance somecity developments included in the city CIP. A city government canexplore a number of alternative financing and managementarrangements, including contracting out, BOTs, etc.

The following capital financing schemes are available to localgovernments for capital project financing.

a. Pay-as-you go: This is method of financing capitalprojects with current revenues. Cash ispaid out instead of borrowing againstfuture revenues. The amount availablefor capital financing is the differencebetween what is currently collected andwhat is required for operating expensesand prudent reserves. The method mayinclude (1) multi-year budgetary appro­priations for projects that are imple­mented over two or more years; and (2)multi-year build-up of a reserve capitalproject funds using availabie surpluses.This technique works well where capitalneeds are steady and modest, andinternal financial resources are ade­quate. It also requires advance plan­ning on the part of the local governmentso that capital expenditures can bescheduled prudently to effectively matchavailable funds. Under Sec. 287 of the1991 LGC, a minimum of 20% of IRAis earmarked for local developmentprojects.

b. Debt Financing: Borrowing is the major alternative to thepay-as-you go method. A local govern­ment can opt for either (1) long-termborrowings backed by bonds or (2)short-term borrowings. This financingtechnique, when applied to costly butlong-life assets, lightens the financialburden during the project year(s), andallows the payment for the cost of theproject to be shared by future users.Borrowing by local government units arecovered under Sections 295 to 302 ofthe 1991 LGC. Sec 458 (a) (2) providesauthority for the city government to use

25

c.

d.

BOT Method:

SpecialAssessments:

appropriations or borrow funds, inclu­.ding bonds, for building construction

Under this lease-purchase approach,the local government can preparespecifications for a needed infra­structure project, and have it con­structed by a private company. Thefacility is then leased by the city at anagreed rental rate for a specific leaseperiod. At the end of the lease period,the title to the facility is conveyed to thecity government without any futurepayments. Under Sec. 302 (b) of the1991 LGC, BOT arrangements areauthorized with an amortization period ofup to 50 years.

Public works that benefit certain proper­ties more than others may be more equi­tably financed by special assessment.Such projects as street paving, sanitarysewers, and water mains inside highvalue residential and commercial en­claves may be financed by this method.Under Sec. 240 to 245 of the 1991 LGC,up to 60% of the project cost can beallocated and recovered from infra­structure bene!iciaries. A very importantconsideration in the use of this capital fi­nancing tool is that infrastructure bene­ficiaries are individually identified.

r026')

e. Central Governmentand ForeignGrants: This is a major source of project

financing that should be vigorouslyexplored by cities. Sec. 23 of the 1991LGC provides that the city governmentmay negotiate and secure financialgrants or donations from any source,foreign or local, in support of the basicservices and facilities that must be

f.

g.

Joint Financing:

LandReadjustment:

provided by the city. However, citiesshould see to it that their local prioritiesshould be maintained. A project shouldnot be undertaken just because fundsare available.

Cities have to explore with other nearbycities and municipalities the possibility ofjoint development and cost sharing forlarge capital-intensive projects that areneeded by all the parties concerned.There is· also a need to assure thatspatially contiguous infrastructure net­works are constructed by coordinatingnational and local plans as provided forunder Sec. 455 (b)(4) of the '1991 LGC.

Under Sec. 458 (2) of the 1991 LGC,land may be subdivided with lots sold tofinance the on-site infrastructure andconnections to off-site trunk lines.

A cap~tal program supported by central government and foreigngrants as well as long-term debt will have less immediate impact onthe property tax rate than· a program financed by current revenuesor short-term debt.

Under the new LGC, cities can now creatively explore variousfinancing options without having to pass through lengthy centralgovernment review and approvals.

Capital projects, particularly infrastructure projects, largely benefitreal property owners in terms of increased property values. It alsobenefits to a lesser extent business establishments since goodinfrastructure facilities encourages the inflow of customers, andlowers the transport cost for commodities.

Increased business taxation is not generally recommended for thecost recovery of city capital projects since business taxes distortconsumer and business choices, and could cause business flight iftax level is set such that the cost of relocation to alternative sites ismore than offset.

27

Land-based sources, with emphasis on land taxation, should bearthe burden of capital improvement costs since real properties arethe main beneficiaries of city capital projects, and the supply of landis inelastic and land cannot be moved out of the city. Thus, it isimportant that the impact of alternative CIP financing packages onreal property tax rates be analyzed.

A relatively simple method of establishing the potential impact ofproposed capital outlays on the local property tax rate is presentedbelow.

a. Determine the funding requirement for all the proposedcapital projects in each future year.

b. Determine the own-source capital financing needs bysubtracting the amount that can be secured from grants,donations, and other external sources.

c. Compare this amount to the new capital financing potentialestablished in Step 3. All additional operating costs that areassociated with the new projects should be deducted fromthe new capital financing potential in the appropriate years.

d. Determine the method for financing capital projects thatcannot be supported by the new capital financing potential.Annual additional capital financing costs will vary dependingon the method or combination of methods chosen.

e. Calculate the real property tax impact of each alternativefinancing method using the following formula:

(Own-Source Capital (New CapitalFinancing Costs) Less Financing Potential) = Add'i Impact

(After CIP Assessed Property Valuation) On RPT Rate

f. Capital projects, particularly infrastructure projects, generallyenhance property values so that the relevant denominator isthe estimated revalued city property tax base.

28

g. For Philippine cities, it is conservatively estimated that thecompletion of a package of capital projects generally result ina 5 to 10% increase in property values depending on the"before CIP" infrastructure con.:jjtions. The lessinfrastructure a city has before the CIP, the larger is thepotential increase in property values arising from the CIP.

This analysis will give city officials an indication of the impact ofalternative financing methods.

The results of this financial capability assessment approach mustnot be looked at as "exact figures" but rather as indicative figureswhich showing the range of financial possibilities open to cities intheir pursuit of development.

The development of an effective financial policy for capital projectsrequires that the city administrators and legislators base theirpreferences for certain types and levels of revenues, expendituresand debt for the city on the following considerations:

• Holding the line on property taxes;

• Using appropriate service and user charges and evenspecial assessments for projects with clearly definedbeneficiaries;

• Exploring joint financing with other cities and municipalities,and BOT arrangements for project financing;

• Utilizing domestic and foreign grant funds for projects,particularly for the technical assistance components of large­scale projects; and,

• Limiting debt service to manageable levels.

•• •By devoting serious study to the above considerations in a transparent manner,city governments can be sure that the financial policy being developed for theirrespective capital investment programs will (1) not unduly jeopardize the futurecity improvement options; and (2) be politically acceptable.

29

ooForm 2.1Time Series Record Of Property Tax Revenue

Year

(1)Assessed ..• Valuatlo'l

I·..... ·1 :'.' ... I

(a) . . (b) ..... .... ..•.. (a)Amount %Change··· General

. (2)Tax Aale

(b) .SEf

(e)Total

(3)··TaXLeVy

. (at >I·>(b)AmoUnt •. % Change

(4)

Coli.As%Of Levy

(5)Total Revenue Form

Property Taxation(a) I (b)

Amount %Chaoge

INSTRUCTIONS:. .. . .. ...

(1) EnterA$$e~s«JVal~~~!9JlblCO'.(1a)andthepr()pertyT~RevenueCoUected in CoL (sa).(2) .. Entertheta>trateSI?C§tS-(~a)and(2. blandenterthetolllllng0l. (?Ch»>(3).. MUltIPIy·thea$sess~yalu~tlory(1 a)••bYtheTota'TtlXRateCoIUrn~(2Ck> ••••••••••••••••• ···and entert~ePtcxJu~tJflt~eTa.xLeVYColumn(3a).... ••• ......> ..< •••••••.••••...(4) computetheTaxCoU~~()Fl$.~s%()f Levy, Col (4), by dividlngtl)e •.•. .•. ....> ....

Total PropenyTa)(FleV~riUft Column (S3) by the TaxLe\iYCoIUrr\n(33.)'> ,i . ..(5). comput.e.•the ••%••c~a?ge.ov,rt~~ •.precTdlng.yellra.nd••enterttt~r~H'ts ••••••••••••••• >•••••.•••.·

In the approprtatecCilumni.<» •..• •• . .. .•.••• •.. ••• .••• ••• ••• ......> > >(6) The exerCise will requireaUeast 5 years of historical data to beUQedasthethe bas's for a S-year projectIon.

Year

w...

~

Form 2.3Time Series Record Of City Operating Expenditure

.••(a>••••••••••••••••• I· ••••••••••••••••••·•••(b)•••••••••••••••••••••·I ••••••••••·•••••••(a>••••••••••••••••• 1........ <bl.i .1 •••••••••••••••••(a)••••••••••••·•••• I•••••••••••••••••••••••(6)•••••••••••••••••••••• ,·.·.· •.•..•••(rYear IAmount> %dhanri~ Amount< % Chang. A.mount> %Qt1i6~eY

~,. (5)

Grand Tota'

> ...•. (bl< , .• <•••••••(a>•.•••••••••.••••. t•.•. <••..<bJ••%t~harlge· Amount %Change

INSTRUCTIONS:For each year:

(1) Enter tM amoulltof operating expenditure inlhe appropriatecolumo.Note thatde~tandcapfta'expendltures are excluded. •..• < •..••.•...• < •...•....••..•...Co'umn headings; Sfl()uklreflectthemajoropertltlng~p~Jldlt9r~f;at~gQrleshlthecity.

Notll:

II, Generalpl!bllosent~ include city administration, peaae l1"dOf'lkr, etf?b. soc. 8ttfVlces Include f'JdUCIltlon, 1JeaJth, welfare, etc,

(2) Compute the % Change over the precedIng yeantn(j ellterthe results 'In the appropriate columns. ....•••.• •••.....<ii.<i .

(3) The exercise win require at least 5 years ofl1istorif.Hl/d~tat()be used as thebasis of a 5 year projection.

Form 2.4 <. .... ..•.. . .

Obligated Debt Serlice Expern:liture

·lNSTRUCTJONS:························· .

~

SfFonn 2.5Projection Of Property Tax Revenue

(2)TeotativelyProjeeted

....axRate

Year

(1)Proje~ted

A$s&$sed..... -.-.. -, -, "

Va'(J~tJofl

(a)AmQunt

(a)General

. . (c)·SEF . ·1 Totcl'·

(3)Projected Total·

.Tax Levy .

fa)Amount

(4)

Coli.As%

I··ortevy

(5)Projected

Total Revenue FromProperty Taxation

fa)~mount

INSTRUCTIONS: .. . . .•. .•.... •.. . ......• .. ..•.... .....• . •...•. ..•• .• . .. .. .. .. .For each year: .. . .. . . . . .. (1) 'Enter the projected Assessed valuati()nincol,(1)Inr.tthee$tinmt~dCollectionas %. . Of Leevy in Col. (4) ......< .....•••••...•...•.........(2) Enter the tentatively proje(;ted hue rate, inCols~ (2a)$nd (2b) and enter. the total inCo'. (2c). . ... . .. .... . .... . .... ..... .., . .. ..(3) MUltiply the projected Assessed Val~tion(1a)by the Total Tax Rate Column (2c),to obtain the total Tax levy, Col. (3)~··· . . •....•.. ..... . . ..•..(4) Mu'tiplyCOt(3~ by the Collecfionas% OfLevy;CQk(4),and enter ttl&result.. .. . into the Total Property Tax Re~nue, Cot (5). . • .. ..... •.•. .. . . .. . ......•••••.•..·In·developing this revenue baooforpreliminary testing, different Issumptions may be usedregarding the Projected tax· rate•. For example, a) theculTeflt18X ra~~ can ~e u~i4:~dJor the..... enti", projection period; or b) some cnange in .he tiXtatedinbe assu.nedover the. pr*~ion period depending on t~f) adopted CfP fjnanciog p~~ag~~· .•.

Form 2.6Projection of Total Revenue

Year

(1)

ProjectedAPT

(2)

Bus. Fees& Lie.

(3)OtherTaxes

" (4)

Svc.&Opns.

(5)

IRA

(6)

AllOthers

(7)

ProjectedTot. Rev.

(..)U1

..J::::~

INSTRUCTIONS:For each year:. .. . . . ... ...

Use the projection methods discussed·Inthe text.(1) .Get the RPT projection from Form 2.5.(2) Entet the $UM$ of Cols.1 to 4to get C()I. $.

Form 2.7Projection Of City Operattng Expenditure

(1). . (2) (3} (4) (5}Gen. PUb. Svcs. Soc. Svcs. Econ. Svcs. AU Others Grand Total

(a) tal (a) (a) (a)Year Amount Amount Amount Amount Arilount

INSTRUCTJONS;<i •..•••• ••• .....••.••••.•.•••..•.For each year: Ii<..•..•• ..•.•••.••.•.•>.........i.i·

Use the project'onrnethOdS discussed In.the text.(1) .•Enterthepro]e~~'~nditures inttteappropriate columns.(2) EnterthealJnt()fg§'~~(1Jt(){4l in COl. (5) to get the total Operating

ExpendftlJres.«<· ...

.

36

Form 2.8Projection Of New Capital Financing Potential

ItemNo. ftem 1 2

Year3 4 5

1 Projected Revenue

2 Less: Projected OperatingExpenditures

3 Sub-Total (1 - 2)

4 Less: Obligated Debt Service

5 New Capital Financing Potential (3 - 4)

INSTRUCTIONS: ....................................< .C1l .Item N~1 is to be takenfrom FOrm 2~6.· ...•....•.....•••.•.•......

. .. ... .(2) .·Item No~ 2 tst6~ taken from r<lrrn2:7.·. ...• .• ••..•.••..•.••.•... •.....• (3»ttemNo}4f$toi)e>taken from form 2;4.·.·•...> .

... . .

37

Particulars New Old

1. Allotment Base 1st year of implementation 20% of the net general

(1992) =30% fund collection based on

the 3rd preceding year

following the current year.

2nd year of implementation

(1993) =35%

of the collection from the

national internal revenue

taxes based on the 3rd

preceding year following

the current year.

2. Sharing By Level of Provinces = 23% Provinces = 30%

Local Government

Cities = 23% Cities = 25%

Municipalities = 34% Municipalities = 45%

Barangays = 20% Barangays = 10%

After deducting 10%Barangay share

3. Distribution Scheme Population = 50% Population = 70%

Land Area = 25% Land Area = 20%

Equal Sharing = 25% Equal Sharing = 10%

38

Table 2.2 . •. ..... '.' . ..' . ,'. .....IDOO. . • 'R"E'ilEtiIUUIE:: AI r .. '. .'. " .... ".. ,' ..,,~w~~lcUlN._.on~,. . ~y •.

-:f;92. ';;7;;70#, 'Tn MIUlorn r'~ ". • ' •._-- ." ---- .

.... . .' .. ', . " '., . ,.,.,..... . ..'... ,.. ' .... '.

REGION/CITY··.·· . . ..•. 1992 . 1993.> ".. .' 1994 .. ",". ·1995

REGION I - ILOCOS REGIONBaguioDagupanLaoagSan Carlos

REGION 1\1 • CENTRAL LUZONAngelesCabanatuanOlongapoPalayanSan Jose

REGION IV· S. TAGALOGBatangasCaviteUpaLucenaP. PrincesaSan PabloTagaytayT. Martires

REGION V • BICOLIrigaLegaspiNaga

REGION VI- W. VISAYAS

!

1

65.58151.7749.16 1

77.83 1

74.79:72.031

54.721

84.42.43.29 1

73.3660.25

208.46174.04 1

33.8129.35

48.1060.7153.48

97.26,76.7872.9192.601

115.431110.92 1

106.83144.61 !

81.151

125.2164.201

108.8089.35

309.16109.81

50.14143.54

71.34,90.0479.32

124.36198.1793.221

118.391

147.58i141.81\136.591

103.76

160.09182.09 1

139.11114.25'395.29140.41,

64.1155.66!

91.22115.12101.42

148.97117.6

111.66141.82

176.78169.88163.62

68.31124.29

191.7698.33

166.64136.85473.51168.19

76.7966.67

109.26137.90121.48

Sacolod 112.38 166.67 213.10 255.26Sago 80.65 119.62 1 152.94 183.20Cadiz i 89.01 132.01 168.79 202.19Iloilo ' 92.91 137.80 176.18 211.05La Carlota 45.72 67.81 86.70 103.86Roxas 52.84 78.36' 100.19 120.02San Carlos 80.90i 119.98 153.40 183.76Silay 61.27 90.87 116.19 139.18~'------------+-----+---------lr------t-------':....:..c...'--"-I

~-GION VII- C. VISAYAS !

Bais 60.54 89.79i 114.801 137.52Canlaon 43.51 64.53 82.511 98.83Cebu 174.361 258.59 330.63 396.06Danao 46.941 69.62 89.01 106.62Dumaguete ' 44.35: 65.77 84.09+- 100.73Lapu-Lapu 58.49 86.75 110.911-- 132.86Mandaue-----·---- ~~ 62.05! 92.031r-- -- 117.671 -14Q.95---- ._------------ - ~- ----j----- ----+------

~b(e~~~n--~-.--- ----.-- --- - --i----%HB-- ----~n 1~~:~~! 1:~:~~

Table 2.2PROJECTED INTERNAL REVENUE ALLOTMENT, BY CITY1992-1995, in Million Pesos

REGrON/CITY 1992 1993 1994 1995

---._-------. - _ .. -~.~ ..--_._-- ~-_._.._-------~-----_.~ - ------- - .~ .~--- - ----

REGION I VIII • E. VISAYAS~_.- ---'---- ~._.--'- - ----- ..._---- -----._-----.- -- -- - --- -----

~9Ib~y~g____ 118.54 175.80 224.78 269.26-~..--_._----_.- ---._-

Or;noe 86.95 128.96 164.88 197.51f- ---- -------- ~-- -------- --" -----Taeloban 59.96 88.92 113.69 136.19----~~_. ---------- ----

I, ---------- '---~

REGION IX - W. MINDANAO ---._-Dapitan 52.40 77.71 99.36 119.02

- ------

Dipolog 57.20. 84.84 108.47 129.94I --- ----

Pagadian ! 75.31 111.69 142.81 171.07

i..---

Zamboanga 228.10 338.29 432.54 518.13I -- ------

I ---REGION X - N. MINDANAO r

Butuani

112.67 167.10, 213.65 255.93

Cagayan de Oro 127.40 188.94 241.58 289.38Gingoog 72.32 107.26 137.14 164.27Oroquieta , 49.43 73.30: 93.72 112.27Ozamis 53.69 79.63 101.81 121.96Surigao I 63.54 94.23' 120.48 144.32,

Tangub i 41.43 61.45' 78.57 94.11

REGION XI • S. MINDANAO,

Davao I 377.20 559.40 715.26' 856.79G. Santos

,138.661 205.64, 262.93' 314.96

: iREGION XII • C. MINDANAO I i,

I

Cotabato 63.73: 94.521 120.851 144.76lligan 128.49 ' 190.57 243.66, 29187

Marawi r_ 44.19

:

--65.55 83.80 100.39

II

NCR I IKalookan 188.52j 279.59 357.48, 428.22Manila 364.601 540.72 691.37 828.18Pasay 101.691 150.82 192.83 1 230.99Quezon 389.051 576.98 737.73 883.71

ITOTAL

.' ...... 5,50B.08 •. 8.168~92· ·.··10,444.66 12,511.34

~.40

Stream 3: Matching and Iteration

After the ranked list of and fully costed projects has beencompleted ( Stream 1) along with the projection of funds availablefor capital outlays (Stream 2), the matching exercises can nowproceed. A 3-year planning horizon shall be adopted to coincidewith the tenure of local officials.

Three planning approaches are available to local governments.These include:

OPTION 1: Conservative approach. Under this approach, only projects thatcan be funded from regular sources will be implemented.

OPTION 2: Developmental approach. Here, the short list of projects is takenas final and irreducible. The LGU will then tap all sources possibleto raise the needed funds to implement the project package.

OPTION 3: Pragmatic approach. This is a combination of the two optionsabove.

The relevant steps to be taken under each of the three options are presentedbelow.

SCENARIO 1: LDC chooses the conservative approach.

This means that when the projected total cost of the projectsexceeds the funds available the number of projects will haveto be trimmed down.

For this purpose, the project rankings derived in the GAPM (Form1Ab) is recommended as a starting point.

In addition to the Project/Resources Matrix (see Form 3.1), thesocio-economic benefit indicators such as those presented inForms 1.4a and 1Ab will have to be quantified for each project orfor separate investment packages depending on the investmentsize of each project. The magnitude of the socio-economic benefitswill measure the resulting gross improvement in the quality of life forthe city residents. Correspondingly, the socio-economic costs suctft

41

as relocation, traffic diversion costs during construction, and othernuisance costs will also have to be quantified depending on theexpected magnitude of their impact.

Along with the project economic investment costs (equal to theproject financial investment cost less taxes and with appropriate"shadow pricing" applied to labor and foreign exchange), thequantified socioeconomic costs will constitute the total projecteconomic costs. Estimates of ERRs can then be computed foreach project or for each investment package. The computed ERRswill be used as the basis for final project prioritization since theyindicate whether the localized benefits of the project are more thanenough to offset the potential socioeconomic costs.

The trimming process begins with the grouping of projects followingthe ranked list, and a running total of the cost is developed. Whenthe total cost equals or nearly equals the available funds for the firstyear, the corresponding group of projects comprises the first yearcapital investment program. The same procedure is repeated forthe second and third year investment programs.

In the event that more projects are needed to complete the list forthe second and third year programs, projects which were screenedout earlier during the project identification process may bereconsidered.

The LOC shall approve the final project list when a proper match isattained between project cost and available funds on a year-by­year basis through a vote or by consensus. The final project list isto be formally adopted by the Sanggunian through an appropriateresolution.

$t~p4Ji!/ .••.;.·•.·.:.:..::.p..:.·.rm.·.·.:.•..•.OO.:.:.•:.::; ...:.••.•..~...•:.••.••...•.:.••...•~.::.•.:...••.•::....::.•...•:•.••...:.••.•:~.::.:.•.::.:.•..•:;.:.:~:~~:_:.~"~!mM~~m~1:i~~~~I~:_.!!~I$~~i!!:'v . CI~ ::::::::::::::::;::;:}::t:r;~~{){~(;::::}:: . .:.:.;-'.;-:.'.:x .. ..:,:;:;:;;;:;::::~:::'::.-... . ':-:"':::::::'::::::::::;::;:;::::::);:)<;\:~::~r~::~~ \~<::::: :::::::::::::<;:\;~;;;f(:::;:}:::::::::::::

The LPOO prepares the investment program and submits this to theLeE who then endorses it to the Sanggunian for deliberation andadoption.

SCENARIO 2: LOC chooses the developmental approach.

This means that the ranked list of projects are taken as thefinal package of projects to be implemented and the LGUwill secure the needed funds from all possible sources.

!$[tee•••g.•••.•• HH

•••••••••~[)(; ••appl'oves •.th~ranke'1 •••I~Qtpr.!~·uU·.i ••••.•·.>« ••..•.••.....•/. ···········/.·····•••••·)\>.1The LOC through a vote or resolution approves the ranked list ofprojects with their corresponding cost estimates.

The purpose of this matching is to determine how many of theapproved projects can be funded from regular sources for the 3year period I and how .many have to be financed from other_sources. The procedure for this exercise is as follows:

a. Using the ranked list of projects derived from Form 1Ab,take the cumulative total of the project costs from the top ofthe list downwards. Stop at the project that gives thecumulative total equal to or nearly equal to the estimatedavailable funds for the next 3 years.

An alternative to the ranked list of projects derived fromForm 1Ab is to develop with another ranking based on aprojects/resources matrix. The LPOO shall prepare thismatrix in a form that allows the whole membership of theLOC to take part in the rating and ranking of projects. Theprocedure in preparing the projects/resources matrix is givenin Form 3.1.

b. Take the total cost of the remaining projects that cannot befunded out of recurring sources. This amount should betransmitted to the Local Finance Committee.

When the amount to be raised from other sources is known, theLeE directs the local finance committee to make further studies.The LFC should first look into the possibility of raising the neededamount by adopting certain fiscal measures to realize savings fromnormal operations. The following measures may be investigated todetermine their impact on savings for the next two or three years:

43

OPTION 1: Improved Fiscal Management

a. Increasing the collection efficiency by a certainpercent for certain taxes such as the real propertytax, business taxes, or receipts from municipalenterprises.

b. Curbing expenditures which may not be absolutelynecessary, such as a freeze on hiring of newpersonnel, limiting the allocation of district funds forsanggunian members, or reducing the number ofofficial trips.

c. Imposing the betterment levy as per Sections 240-245of the 1991 Local Government Code.

d. Imposing a tax on idle lands. (Sections 236-239).

It must be noted that a one-to-two year lead time isneeded before the proceeds from any of thesemeasures will accrue to the general fund of the LGU.

OPTION 2: Incurring Public Debt or Credit Financing

Determine initially the legal borrowing and paying capacity of theLGU by the following formula.

Legal borrowing capacity

= Seven percent (7%) of the total assessed value of taxablepropertyLess: outstanding loans and other long-term indebtedness

Legal debt paying capacity

= Average financial surplus (revenue minus expenditure) forthe last five (5) years divided by 0.24 (if the loan is payablein 10 years at 14% interest)*

Multiplied: by 50% (if loan is for a non-revenue generatingproject and 60% if the loan is for a self-liquidating project)

Less: outstanding loans and other indebtedness.

* Note: This factor needs to be validated with the COA dueto changes in interest rates.

After establishing the legal borrowing and paying capacity of theirLGU, the LFC shall determine which of the following options, or acombination thereof, will yield the needed amount at the mostbeneficial terms. These options a~e allowed by the LocalGovernment Code and are discussed in detail in the financialstrategy formulation presented in STREAM 2:

a. Contracting loans, credit and other forms of indebtednesswith any government or domestic private bank and similarlending institutions (Sec. 297);

b. Deferred payment and similar financial schemes for landacquisition (Sec. 298);

c. Issuance of bonds, debentures, securities, collaterals, notesand other obligations, subject to rules and regulations by theCentral Bank and the Securities and Exchange Commission(Sec. 299);

d. Contracting loans, credits and other obligations with otherlocal government units (Sec. 300);

e. Borrowing from the national government through itsrelending institutions using funds secured from foreignsources (Sec. 301);

f. Pre-financing by the private sector through the build­operate-transfer (BOT) scheme (Sec. 302 and A.A. 6957).

After assessing the amount of project financing that could begenerated from each of the above options, the LFC recommendsone or two to the LCE who then endorses it to the Sanggunian fordeliberation.

The Sanggunian, by resolution, authorizes the office of the Lee tocontract loans, credits and other forms of indebtedness.

. \

The LPDO now prepares the 3-year investment program. It is pro­bable that the first year projects will have to be funded fromavailable funds from regular sources. This is due to the lead time

45

necessary before the proceeds of the' different fund-raisingmeasures begin to accrue to the local coffers. The succeedingyears' investment funds vyill become a combination of those comingfrom recurring sources and those expected to accrue from othersources. Form 3.2 presents a suggested format for the presenta­tion of the 3-year investment program.

The LPOO then submits the draft CIP to the LCE who endorses it tothe Sanggunian for adoption.

,·.•••.5.•·•.•..7.•·••. 1:.ft.•• ·. 6.• ··..• ·••... n·<Sa.•·.~.••··.>n.>.9.•·.".••.··.•• ·. i.•.•~.·•.n.••.·••.·.·.I.·•..•~.••.••.d..•.•••••.o.·•••••.. ·~.·.·.••·.'t$.•.•·•.••·.••·.••..•·.P.·•.•••.•• ·.·.J..•.e.••..•·..• •.· •.••·.••·.••.·•·.•.••••••• ·i.>n... n.. ..••.••·....;.••·.:.....•...•...••·.:......·.......)..'{>.. .. . .~:~:r:I... . .. r: ".., ::::::r~r~:rr

After receiving the draft CIP from the LPDO through the LCE, theSanggunian deliberates on and through a resolution, adopts the 3­year investment program.

SCENARIO 3:

46

LOC chooses the pragmatic approach.

This is a combination of the first two approaches. In general,the approach entails being conservative during the initialyears and eventually becoming developmental as the statusof local finances and sources are secured. The proceduralsteps can freely shift from the conservative to the develop­mental approach as the situation demands.

FORM 3.1Project /Resources Matrix

1.

2.

3.

4.

5.

6.

7.

ProposedProjects

NaturalResources

HumanResources Infrastructure institutional

Total Impact(+) (-)

Rating Symbols:

(+) Indicates that project increases stock or improves

quality of existing resources.

(- ) Shows depletion of stock or reduction in quality

of existing resources.

INSTRUCTIONS: .. . .. . .. ••.•••.•.... ...• .....•. •... .. .. .. •.. .•••.•.• •.. .. .. • .

1. List the short-listed projects ~l'iZ()l'Italty. .•.•.•. . .•....... ....•.•......2. Ust the resources available In the locality grouped Into NATURAl.t HUMAN, . ..

INFRASTRUCTURE, and INSTITUTIONAL. . PUt each type of resource at the· ....head of the column. . ...... .. . ..•.... ....• •.. .. ..•.. .... .•. . ...... . .•...• .. .. ...••.••..••.. .

3. Provide a last column for putting the total score.. Split this total score column into·two: one for positive scores. the second for' negative.

: .......•.•. --<::, - ,,', ,.'-:- '.<.:::.'-::':::<,: - - ',::-::":',:::::::::::::,::>.:::.:: .... :::::::.':'---'::::.':.:::::::-:::,:

Rating procedure:>..> .>..... ..../ .. >... ../...:/> .

a. Examine each project in terms of its demand or impact on eachofttte-Wpe.s.of·····resources. •...•..• .. i . > •....•••••••.• If the project contributes to an increase in the quantity oranlmpt"ovement.ln

the quality of the resource, put a POSITIVE SIGN (+) in the appropriate cell• ·11 the project is expected to lead to a decrease in the quantityorlow«ingof

the quality of the resource, put a NEGATIVE SIGN (.) In the proper celt• .11no effects are seen. one way or the" other. put a ZERO. (O)in.theappropOate

matrix celt. .. ••••••.•.....••.•.•.••••••.•••...• > .. ..» >.. .. .......> ·ii> ••b. Enter the total positive scores and totafnegative scores in theproperceU.> Ifthe

rating is done by each individual member of the LOC or by smaUgroups.a·summary table should be provided.

c. Subract the total negative from the totafpositive scores. for each project.d. Reject the projects with net negative scores.e. Rearrange the projects with the net positive scores from the highesno the lowest.

The cost is indicated opposite each project.

47

FORM 3.2Capital Investment Program (CIP) Project Summary

.. . ....... ...

Schedule of

Project! Implementation Implementing Cost Source

File No. Location (From - To) Office/Dept. Estimate of Funds

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

INSTRUCTIONS:

Ust all projects approved for the Projects should be fistedin the order of their implementation.

48

APPENDIX A: OUTLINE AND FORMAT OF THE CIP

The firral output of the CIP process is the 3-year capital investment program ofthe LGU. The responsibility for puttirrg this document into final shape lies with theLPDO. It starts immediately after the matching of project costs and availablefunds has been completed and the draft approved by the LOC. It is desirablethat the Sanggunian adopt the investment program in draft form so that lastminute revisions can be accommodated. In addition, the Sanggunian resolutionadopting the capital investment program should be included in the finaldocument.

To facilitate the preparation and standardize the presentation of the CIPdocument, an annotated outline and sample forms are presented below.

1. Preliminaries

A. Message from the LeE

This is a one-page message by the LCE setting the general goalsof his 3-year term and offering the CIP as a major instrument forattaining those goals. It ends with an exhortation for the city resi­dents to support the CIP and to become involved in its operationa­lization.

B. Preface from the LPDC

This is a technical introduction setting out, among others, therationale, assumptions, approaches and methodology adopted.The preface shall close with an acknowledgment of the contri­butions of all participants in the process. If the list of persons andinstitutions to be acknowledged is long enough, devote a separatepage for this.

C. Summary of the 3-year Investment Program

For quick and easy reference, the projects to be implemented in thenext 3-year period should be listed in one page, grouped by year ofimplementation. This should be accompanied by a map indicatingthe approximate location of each project. Other information on theproject like cost and type may be included in the summary.

A-1

2. Analyses

This portion of the document presents the intermediate and final outputs ofthe various streams in the CIP process described in the Manual.

A. Results of the project identification process

Insert: Forms 1.2, and 1.5.

B. Results of the financial analysis and projections

Insert: Forms 2.1-2.8

C. THE3~EARINVESTMENTPROGRAM

This portion of the document details the actual investment program.It presents the results of the preceding streams of processes in asummary table (Form 3.2), indicating basic information about eachproject. This information should include cost, location, the office ordepartment responsible for its implementation, funding source, andschedule of implementation. The projects should be grouped byyear of implementation. Within each year and group, projectimplementation should be noted in priority sequence.

After presenting the project summary, a more detailed descriptionof each project should follow. A minimum of one page should bedevoted to each project noting all pertinent facts related to itsdevelopment and implementation.. This should include, at aminimum:

a.

b.

c.

d.

e.

f.

g.

h.

<JoA·2

name and type of project

project proponent

location (preferably plotted on base map)

estimated cost and funding source

project justification

intended beneficiaries

project components or phases

offices or departments responsible for each component orproject phase

I. detailed schedule of implementation (including feasibilitystudies, project development, and project implementationphases).

j. physical and financial targets for monitoring and evaluation

k. desired private sector response

I. additional measures that the LGU will adopt to elicit thedesired private sector response

D. IMPLEMENTATION STRATEGY

This final portion of the document shall spell out in detail theconditions, resources, and mandates that must be made availablein time to effectively carry out the program. It specifies guidelinesfor subsequent actions such as:

a. budgeting

b. capability building in project management

c. enactment of necessary ordinances and resolutions

d. documentation for loan application

e. conduct of additional researches

f. monitoring and evaluation

E. APPENDICES

All relevant documents not otherwise accommodated in the body ofthe document should be appended.

A-3

..

..... " ..... ,. , ...

. ."'.: . "':, .. ": .. :'.,::::'-0.::.':' ,:' .':>::,<.,'::':: ..\,,::,,::'.:>.-.'.:";; ....

APPENDIX B

CITY PILOT-TESTING EXPERIENCES

• Case No.1 - Naga City• Case No.2 - Lipa City CIP

CASE NO.1

THE NAGA CITY CIP EXPERIENCE

1.0 BACKGROUND AND RATIONALE

The Naga City seminar-workshop on Capital Investment Programming (CIP)was the first of two exercises aimed at the model CIP developed underUSAID-financed Decentralized Shelter and Urban Development (DSUD)Project "being tried in at least 2 chartered cities (CCs), including training anddeveloping the CIP process".

The formal CIP seminar-workshop was held 05 to 07 November 1992 at theCasa Catalina Hotel in Naga City. Although the formal CIP sessions lastedfor only three days, the key inputs to Jhe process --- the development goals,the list of priority plans and projects, and the financial data --- were preparedin advance and made available to the actual CIP workshop paticipants.

2.0 OBJECTIVES OF THE SEMINAR-WORKSHOP

2.1 To test the acceptability of the CIP system to city local governmentunits (LGUs).

2.2 To enable the participants to learn CIP techniques, to provide a critiqueof the procedures: and to apply their knowledge to the actual situationsin their respective localities. .

2.3 To utilize the pilot exercise as a basis for preparing a revised andimproved version of the system preparatory to its adoption by LGUsnationwide.

3.0 PARTICIPANTS

The participants in the workshop included the following:

a. City Mayor (Jesse Aobredo)

b. City Planning and Development Coordinator (Juan Villegas, Jr.)

c. CPDO Staff

B-1

d. City Treasurer (Isauro del Villar)

e. City Budget Officer (Francisco Deocareza)

f. City Engineer (Romeo Sanares)

g. City Development Council Executive Committee

h. Sanggunian Members and Sectoral Representatives

i. Heads of other city departments and other city officials

j. Mayors (representatives of the mayors) of neighboring municipalities

k. Planning and Development Coordinators of neighboring municipalities

For Naga City, all the key CIP "players" attended the workshop, intenselyparticipated in the discussions and deliberations, and endorsed the outp.ut ofthe workshop.

Representatives from adjoining municipalities were invited to familiarizethemselves in the CIP process in anticipation of the eventualmetropolitanization of the Naga City area.

4.0 CONSULTANT TEAM

The Consultant team was made up of the following senior personnel from theUP Planning and Development Research Foundation (UP PLANADES) andPlanning and Development Collaborative International (PADCO).

Dr. Benjamin Carino

Dr. Norman Ramos

Dr. Arturo Corpuz

Mr. Ernesto Serote

Team Leader (PLANADES)

Development Finance Expert(PADCO)

Systems Expert (PLANADES)

Urban Planner (PLANADES)

In addition, two Research Associates of the UP PLANADES, Mr. LoretoMarinas and Mr. Dickton Rye, assisted the Consultant Team.

B-'Y

5.0 ACTIVITIES UNDERTAKEN

The CIP testing activity consisted of two major components: (1) a seminar onthe developed CIP system; and (2) a workshop wherein a proposed CIP forNaga City was developed by the participants.

The team presented the CIP system as only one aspect of the developmentplanning -- investment programming -- budgeting and implementation cycle.

The CIP for Naga City was prepared during the workshops wherein theparticipants divided themselves into two working groups: (1) the projectidentification group, and (2) the financial analysis group.

In preparing the CIP for Naga City, the participants went through the threemajor streams of the CIP process as follows:

STREAM 1: PROJECT IDENTIFICATION

Production of a ranked list with cost estimates to be programmed overa 3 year period.

The source of the project ideas was the local development plan asprepared by the City Development Council (CDC).

The projects, plans, and activities (PPAs) of Naga City were based onthe City's development plan. The goals and objectives of the planwere transformed by the group into a set of criteria which was used inevaluating and screening project ideas. The criteria developed by thegroup were as follows:

a. Public Health and Safetyb. Economy and Public Conveniencec. Environmentd. Public/Private Sector Investment Mixe. Political Leadership/Empowermentf. Social Welfareg. Cultural Integrity

Ranking was done by the City Executive, the representatives of theCity Legislative Council (CLC) and the Executive Committee of theCDC.

B·3

STREAM 2: FINANCIAL ANALYSES

Projection of the amount of funds likely to become available for capitalinvestments for the next 3 years.

The Local Finance Committee (LFC) composed of the City PlanningCoordinator, the City Treasurer, and the City Budget Officer played akey role in the preparation of the financial projections.

STREAM 3: MATCHING AND ITERATION

Matching the Capital requirements with the projected supply of fundsfor the 3-year period, and through iterations, modify the project listand/or outline additional revenue raising measures to fund the desiredproject mix.

The resulting CIP is a product of the joint multi-sectoral efforts of theelected city officials, the professional planners and technical people ofthe city government, and community leaders.

The list of capital investment projects desired by Naga City for implementationfrom 1993 to 1995 is shown in Table B1-1.

Funding will basically come from projected increases in tax collections as wellas grants from the national government.

6.0 EVALUATION

The Naga city CIP exercise results indicated that the CIP system can be auseful and acceptable tool for LGUs. The ease with which the CIP systemcan be applied depends on two major inputs: (1) a good local developmentplan; and a (2) good financial management system.

A multi-sectoral CIP was produced during the exercise which the CityExecutive as well as the members of the CLC stated will be further reviewedand refined utilizing the techniques learned during the seminar-workshop foradoption by the city government as its capital investment plan.

8-4

TABLE 81-1

Proposed Naga City Capital Investment Projects: 1993-1995Priority· .. Budgetary

Project Title Ranking •Cost EstimateReforestation Mt. Isarog 1 1,000,000Naga + Bicol River Bamboo Planting 2 1,000,000Spring Development 3 2,000,000Garbage Dumpsite 4 20,000,000Central City Transport Terminal 5 50,000,000Low Cost Housing (Land) 6 6,000,000Mabolo-Garriza Concreting 7 400,000Casarayan Road Repair 8 10,000,000Bridge Construction Del Rosario 9 15,000,000Mabulo-Pagdarican Road 10 2,500,000Coop + Livelihood Dev. 11 3,500,000Brgy. Irrigation System 12 960,000Pumping Stations 13 19,500,000Refrigerated Storage 14 5,000,000Cementing of City Roads (Urban) 15 10,734,500Completion of NC 16 3,000,000NC Manpower Training Center· 17 1,000,000Drainage Proj. Phase 2 18 30,000,000Sattelite Market - C. Pequena 19 5,000,000Livestock Auction Market - Del Rosario 20 2,000,000Completion of NC Civic Center 21 5,000,000Malabsay Falls Dev. Project 22 20,000,000Display Center - CBD 23 1,500,000Metalcraft ViiI. 24 10,000,000Mini Hydro 25 60,000,000Sabang National High School 26 2,000,000Cultural/Sports Center 27 20,000,000

Grand Total 307]094,500

B-5

CASE NO.2

THE LlPA CITY CIP EXPERIENCE

1.0 BACKGROUND AND RATIONALE

The Lipa City seminar-workshop on Capital Investment Programming (CIP)was the second of two exercises aimed at the model CIP developed underUSAID-financed Decentralized Shelter and Urban Development (DSUD)Project "being tried in at least 2 chartered cities (CCs), including training anddeveloping the CI P process".

The formal CIP seminar~workshop was held 16 to 17 February 1993 at theHotel Limou in Lipa City. Although the formal CIP sessions lasted for only twodays, the key inputs to the process ~-- the development goals, the list ofpriority plans and projects, and the financial data --- were already preparedand made ready before the conduct of the actual CIP seminar-workshop.

2.0 OBJECTIVES Or: THE SEMINAR-WORKSHOP

2.1 To test the acceptability of the CIP system to city local governmentunits (LGUs).

2.2 To enable the participants to learn CIP techniques, to provide a critiqueof the procedures, and to apply their knowledge to the actual situationsin their respective localities.

2.3 To utilize the pilot exercise as a basis for preparing a revised andimproved version of the system preparatory to its adoption by LGUsnationwide.

3.0 PARTICIPANTS

The participants in the workshop included the following:

a. City Mayor (Ruben Umali)

b. Vice Mayor (Emmanuel de Castro)

c. City Planning and Development Coordinator (Dante Villanueva)

~8-6

d. CPDO Staff

f. City Treasurer (Gregorio Villena, Jr.)

g. City Budget Officer (Mario D. Africa)

h. City Engineer (Hermogenes lIagan)

i. City Development Council Executive Committee

j. Sanggunian Members and Sectoral Representatives

i. Heads of other city departments and other city officials

For Lipa City, all the key CIP "players" attended the workshop, intenselyparticipated in the discussions and deliberations, and endorsed the output ofthe workshop.

4.0 CONSULTANT TEAM

The Consultant team was made up of the following senior personnel from theUP Planning and Development Research Foundation (UP PLANADES) andPlanning and Development Collaborative International (PADCO).

Dr. Benjamin Carino

Dr. Norman Ramos

Dr. Arturo Corpuz

Mr. Ernesto Serote

Team Leader (PLANADES)

Development Finance Expert .(PADCO)

Systems Expert (PLANADES)

Urban Planner (PLANADES)

In addition, two Research Associates of the UP PLANADES, Mr. LoretoMarinas, Mr. Dickton Rye, and Mr. Cesar Dizon of PADCO, assisted theConsultant Team.

5.0 ACTIVITIES UNDERTAKEN

The CIP testing activity consisted of two major components: (1) a seminar onthe developed CIP system; and (2) a workshop wherein a proposed CIP forLipa City was developed by the participants.

C?1B-7

The team presented the CIP system as only one of the development planning--- investment programming --- budgeting and implementation cycle.

The CIP for Lipa City was prepared during the workshops wherein theparticipants divided themselves into two working groups: (1) the projectidentification group, and (2) the financial analysis group.

In preparing the CIP for Lipa City, the participants went through the threemajor streams of the CIP process as follows:

STREAM 1: PROJECT IDENTIFICATION

Production of a ranked list with cost estimates to be programmed overa 3-year period.

The source of the projects, plans, and activities was the citydevelopment plan prepared by the City Development Council (CDC).Project ideas that were considered in the city development plan weregenerated through the city's "8ipaglakas Movement" I an organizationdesigned to ensure people's participation in the growth anddevelopment of the city.

Ranking was done by the City Executive, the representatives of theCity Legislative Council (CLC) and the Executive Committee of theCDC.

STREAM 2: FINANCIAL ANALYSES

Projection of the amount of funds likely to become available for capitalinvestments for the next 3 years.

The Local Finance Committee (LFC) composed of the City PlanningCoordinator, the City Treasurer, and the City Budget Officer played akey role in the preparation of the financial projections.

STREAM 3: MATCHING AND ITERATION

Matching the Capital requirements with the projected supply of fundsfor the 3-year period, and through iterations, modify the project listand/or outline ~dditional revenue raising measures to fund the desiredproject mix.

~8-8

The resulting CIP is a product of the joint multi-sectoral efforts of theelected city officials, the professional planners and technical people ofthe city government, and community leaders.

The list of capital investment projects desired by a City for implementationfrom 1993 to 1995 is shown in Table B2~2.

Funding will basically come from projected increases in tax collections as wellas grants from the national government.

6.0 EVALUATION

The Lipa city CIP exercise results indicated that the CIP system can be auseful and acceptable tool for LGUs. In fact, the participants stated that theCIP process will strengthen their "8ipaglakas Movement" by rationalizing theproject selection process for the city. The ease with which the CIP systemcan be applied depends on two major inputs: (1) a good local developmentplan; and a (2) good financial management system.

A multi-sectoral CIP was produced during the exercise which the CityExecutive as well as the members of the CLC stated will be further reviewedand refined utilizing the techniques iearned during the seminar-workshop foradoption by the city government as its capital iovestment plan.

B-9

TABLEB2-2 < > .. •.•. .. .•.••• .•.••. •.. .•••••••• .>i . .« •• .•.•. ..• •..•....... •... ..Proposed t..ipaCitY: Capital Investment.Projects: .···1993~1995

Water Impounding System 1 500,000Propagation of Fruit Tree Seedlings 2 60,000Improvement of City Abbattoir 3 8,000,000Sattelite Public Market 4 30,000,000State College 5 30,000,000Sports/Cultura: Center 6 15,000,000Special Education Center 7 300,000City Library 8 1,000,000Museum 9 500,000Boy/Girl Scout Building 10 1,000,000Division Office+Teacher Training Center 11 3,000,000Dumpsite Improvement 12 12,000,000Installation of Underdrain 13 10,000,000Main Health Center 14 700,000District Health Unit 15 2,600,000Daycare Center 16 1,000,000Manpower Training Center 17 5,000,000Job Placement Assistance Center 18 250,000Squatter Relocation Site 19 3,000,000Reforestation Projects 20 3,000,000

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