RPT Surge: ‘Good’ Law, Missed Nuancing

The surge in Iloilo City’s real property tax (RPT) has drawn mixed reactions, especially after Vice Chairman of the Committee on Ways and Means Councilor Rex Sarabia again defended the necessity of the increase due to the city’s growth and an 18-year delay in property value reassessments.

As a lawyer, Sarabia raised solid legal points, but the broader issue demands more nuance from economists and urban planners to properly address the complexities of this tax hike.

The legal framework of the increase is sound. The law does indeed prescribe regular adjustments in property valuations, and Sarabia is correct in pointing out that 18 years of delayed recalibration means the city missed out on significant revenues.

The Commission on Audit (COA) has consistently urged local governments to update their fair market values (FMVs) to reflect the actual growth and inflationary changes in the economy.

But just because the law supports such an adjustment doesn’t mean the law imposes strict or drastic actions.

Legal, But Flexible

It’s worth noting that while Republic Act No. 7160 requires updates to real property assessments every three years, the Bureau of Local Government Finance (BLGF) and the COA do not impose punitive or rapid hikes to FMVs.

Local government units (LGUs) are encouraged to conduct tax impact assessments before making any drastic moves, precisely because taxes have inflationary effects.

Iloilo City’s sharp RPT increase threatens to trigger inflationary pressure on rents, which in turn will hit consumers and renters—an inevitable pass-through of tax burdens.

For a city whose primary economic drivers are service-based sectors and consumerism, not high-income models like manufacturing or IT-based industries, the capacity of residents to absorb such a drastic surge is highly questionable.

Already, the 300 percent increase in taxes has diluted the purchasing power of residents, effectively erasing whatever gains were made from higher incomes in previous years.

Economic Nuancing Missing

Analysts and economists who have been studying the fiscal performance of Iloilo City agree that a comprehensive study should have been done prior to the passage of the ordinance that adjusted the RPT.

The very economic growth that Sarabia and other city officials cite should have been a signal to delay or at least scale down the tax hike.

Economic growth, as seen in the city’s real estate boom and the 19.7 percent rise in business taxes in 2023, should have mitigated the need for such a large jump in RPT.

If businesses are flourishing, they generate higher revenues that can fill city coffers without needing to levy taxes heavily on property owners. The decision to proceed with the hike despite these revenue streams raises serious questions about the city’s fiscal management.

Questionable Fiscal Management

The real puzzle here lies in the disconnect between Iloilo’s growing revenues and the seeming lack of corresponding public spending. The city enjoys substantial surpluses, which makes the timing and magnitude of the RPT increase even more baffling. These surpluses are also contained in COA reports on the city’s finances, and we wonder why the city council missed this part.

There is little visible improvement in public services or infrastructure to justify why the city needs to tighten the fiscal noose further. And if ever, ongoing projects could have been funded by excess and unspent cash in the city hall coffers, as COA has repeatedly pointed out.

Despite increases in income from both business and property taxes, the city still opts to acquire bank loans to fund various projects—an action that seems contrary to sound fiscal management practices.

So far, the city’s loans total more or less P2 billion, according to reports from City Hall itself.

Growth vs. Inflationary Pressure

Yes, the property boom has driven up valuations, and yes, it reflects economic progress. But property owners and consumers alike must grapple with the inevitable consequence of higher property taxes: price inflation across the board. As taxes increase, so will rents, grocery prices, and the overall cost of living—at a time when many are already stretched thin. This doesn’t bode well for Iloilo’s middle and lower-income brackets, the primary consumers of the city’s service-driven economy.

Councilors should heed these realities. There’s no question that the law justifies periodic tax increases, but legal justification alone doesn’t make for sound economic policy. Sarabia, while correct in his legal arguments, may need input from economists and urban planners to ensure that the city’s fiscal health remains strong without unduly burdening its residents.

Limited Critique from Council Allies

Another point that cannot be overlooked is the political dynamics within the City Council. Since the Council is dominated by allies of Mayor Jerry Treñas, it is possible that the RPT adjustment only underwent token analysis, critique, and examination. With little to no opposition and a political structure that tends to prioritize loyalty over critical debate, the ordinance may have sailed through without the thorough scrutiny it deserved. This lack of robust discussion only adds to the concerns of residents who feel blindsided by the drastic tax increase.

Councilors should heed these realities. There’s no question that the law justifies periodic tax increases, but legal justification alone doesn’t make for sound economic policy. Sarabia, while correct in his legal arguments, may need input from economists and urban planners to ensure that the city’s fiscal health remains strong without unduly burdening its residents.

Growth Doesn’t Equal Tax Hikes

Perhaps the most critical point is that economic growth doesn’t automatically necessitate an increase in real property taxes. As seen in Iloilo’s 19.7 percent business tax hike, growth in one sector can compensate for slowdowns in another. With better fiscal planning, the city could have harnessed its business tax windfall to ease the impact of property tax hikes.

What the city needs is a more comprehensive economic strategy, one that balances growth with inclusivity and sustainability. The ultimate goal should be to ensure that Iloilo’s economic boom benefits all sectors of society—not just those who can afford higher property taxes. By doing so, the city can maintain its trajectory of progress while keeping a close watch on inflationary pressures that could undermine its very success.