Preparedness, Not Just Devolution

Iloilo City, widely regarded as a model for urban progress and an “investment haven,” is now grappling with a controversial 300% increase in real property tax (RPT). The city government has justified the hike by citing the devolution of national government functions to local government units (LGUs).

While the local leadership claims the city was caught “unprepared” because devolution happened “gulpi” (suddenly), this explanation rings hollow. The Local Government Code of 1991, which granted LGUs greater authority and responsibility, has been in place for over 30 years.

The “Devolution Disconnect” is a critical point of failure here. A city with Iloilo’s reputation for forward-thinking governance should have been planning for this fiscal shift for decades, not reacting to it with a massive, one-time tax burden on its citizens.

The Mandanas-Garcia Supreme Court ruling in 2018 and subsequent Executive Order 138 merely accelerated a process that was already in motion. The City Hall’s stand that the city was forced to “take it all at once” is a troubling admission of a lack of long-term strategic financial management. It raises a serious question: why was an investment-rich city so reliant on traditional revenue sources that it failed to prepare for a known, fundamental change in governance?

The core of the RPT controversy lies in the tension between the need for public funds and the principle that taxes should not “burden the public,” as former Finance Secretary Jesus Estanislao suggested.

While there’s no doubt that the city needs to fund its new responsibilities in health, education, and infrastructure, a 300% increase is undeniably steep even if it is said to be reasonable in the context of the long delayed postponement (such an oxymoron). This massive hike, the first in 18 years, has sparked an outcry from both homeowners and the business community, who fear it will stifle economic growth and make Iloilo less competitive.

The city’s response—offering a 40% discount on the tax increase until 2026 and now proposing to extend it until 2028—can be seen as a public relations maneuver. While these discounts provide temporary relief, they do not address the fundamental issue of the tax rate itself. By offering a discount on the increase, the city is effectively implementing a gradual hike while claiming it’s a one-time, albeit steep, adjustment. This approach risks eroding public trust and creates a sense of instability for businesses and residents trying to plan their finances. While the city’s tax base has grown with its property boom, the way it’s being monetized is creating friction.

What makes the current tax hike even more concerning is the new Real Property Valuation and Assessment Reform Act (RPVARA), which took effect in July 2024. This law, which establishes a single valuation base for property taxes, mandates that LGUs must revise property assessments and classifications every three years. This means the current RPT increase is not a one-time financial adjustment but merely the first wave of a new, recurring reality. After 2024, the next general revisions are scheduled for 2027 and 2030.

This triennial revision cycle, driven by law, provides the city with a built-in mechanism for future RPT hikes. It makes the claim of “gradual rollout” seem less like a voluntary, compassionate act and more like a simple compliance with a national mandate.

The central issue is what the city plans to do to mitigate the impact of these periodic increases. Will it continue to offer temporary discounts? Will it explore alternative revenue streams?

The RPVARA ensures that Iloilo City will have the fiscal capacity to fund its devolved functions, but it also places a significant, recurring burden on its citizens. The city must move beyond short-term fixes and implement a clear, long-term fiscal strategy that is both fair and sustainable for all Ilonggos.