One year of shelter, then the cliff

Republic Act 12001 gave local governments two years to update their property valuations. It gave property owners exactly one year of protection from the result. That arithmetic should trouble every homeowner in the country — but in Iloilo City, where a new Schedule of Market Values is already moving through public consultation, the trouble has a deadline.

A policy paper from the Institute of Contemporary Economics (ICE) has mapped out what happens after the law’s lone year of cushion expires: a residential property tax bill that barely moves in 2028 could spike by nearly 70 percent the following year, with no phase-in mechanism and no automatic backstop written into the statute. The study used a Jaro subdivision as its case, but the structural flaw it exposed belongs to Congress.

RA 12001 — the Real Property Valuation and Assessment Reform Act, signed in June 2024 — is, on paper, overdue and necessary. The Department of Finance has long warned that outdated valuations cost local government units roughly PHP 30.5 billion a year in uncollected revenue. As of 2023, about 80.7 percent of provinces and cities were still using stale Schedules of Market Values, many untouched for a decade or longer. The reform correctly mandates that all properties be assessed at current market value under the Philippine Valuation Standards, with the Secretary of Finance approving each new SMV.

Nobody serious is arguing against updating those values. The problem is what Congress did — and did not do — about the transition.

The law caps any RPT increase at 6 percent during the first year a new SMV takes effect. After that, the cap vanishes. Section 55 of the implementing rules allows city and municipal councils to legislate their own caps for subsequent years — but the keyword is allows. There is no mandate, no default phase-in schedule, and no fallback if a local council fails to act. Congress wrote a one-year shield and handed the rest of the problem to 1,642 cities and municipalities, most of which lack the fiscal modeling capacity to even quantify the cliff their taxpayers are about to walk off.

Iloilo City is ahead of the curve only because ICE ran the numbers. Mayor Raisa Treñas-Chu has proposed a conservative 2 percent RPT adjustment — well below the 6 percent statutory cap — to signal restraint during the consultation period. It is a politically shrewd move, and a welcome one. But it covers only the first year. The 2029 cliff remains intact unless the City Council passes an ordinance under Section 55 to extend caps into subsequent years. With council elections in 2028, there is a real risk that a new legislative body inherits — and ignores — a transition plan it had no hand in drafting.

And the timing could hardly be worse. ICE’s paper documents what many Ilonggo business owners already feel: the city’s economy is decelerating under a compound squeeze. Growth slid from 10.4 percent in 2023 to 7.1 percent in 2024, and the institute projects a further slowdown to 4.5 to 5.0 percent. Local enterprises are already absorbing a 300 percent property tax hike from 2024, a PHP 550 daily minimum wage — among the highest regional floors in the country — and energy costs that ICE estimates add a hidden 4 to 7 percent surcharge per worker. A near-70 percent RPT spike on top of all that is not a stress test. It is a breaking point.

The city’s temporary 40 percent property tax relief discount — the last remaining cushion — is set to expire before the 2028 revaluation even takes effect. So the safety net disappears just before the tightrope gets thinner.

What makes the ICE paper genuinely useful, though, is that it does not stop at the diagnosis. It offers a concrete menu: extend the RPT cap beyond 2028 through a local ordinance, reduce the base tax rate, spread excess charges over several years, or waive them outright. Most compelling is its proposal for conditional relief — a 20 to 30 percent tax credit for commercial landlords, but only if they commit to capping rent increases for small business tenants at 5 to 7 percent annually. Pair that with a city-funded utilities subsidy for energy-burdened MSMEs, conditioned on retaining at least 90 percent of their workforce, and you have a framework that ties public money to actual outcomes instead of blanket giveaways that drain the treasury without guaranteeing downstream relief.

That is the kind of thinking the City Council should be taking up right now — not after the SMV is certified, not after the 2028 elections, and certainly not after the cliff arrives.

But let us be clear about where the larger failure lies. A national law that mandates market-value revaluation for every LGU in the country but provides only a single year of transition cushion — then expects each of those 1,642 local councils to independently legislate their own remedy — is not reform. It is an unfunded mandate dressed up as fiscal modernization. Iloilo has an independent think tank doing the impact modeling. What about the hundreds of fourth- and fifth-class municipalities with no policy infrastructure, no independent economists, and no political incentive to cap their own revenue before an election cycle?

The fix is straightforward, even if the politics are not. Congress should amend RA 12001 to require a mandatory multi-year phase-in — or at the very least, the DOF should issue an administrative order setting default transition schedules that LGUs can adopt or adjust. Waiting for every local council in the archipelago to independently solve this is a formula for wildly uneven outcomes, with the poorest jurisdictions and the least-informed taxpayers absorbing the worst shocks.

Iloilo City, to its credit, is not sleepwalking into 2029. The consultations have started, the data exists, and the mayor has planted a flag. But a 2 percent adjustment in year one means nothing if the council does not lock in a binding glide path for the years that follow. The toolkit is on the table. The window is closing.