‘WE WILL HAVE TO ADJUST’: Iloilo City Hall to Assess Impact of Extended 40% RPT discount

By Mariela Angella Oladive

Iloilo City’s recent extension of a 40% discount on Real Property Tax (RPT) payments until 2026 has prompted the local government to reassess its potential impact on the city’s financial health and development priorities.

The evaluation aims to determine how this policy will affect the city’s budget and its ability to fund essential services and infrastructure projects.

“At this time, the local finance committee is still studying whether the city can afford [to sustain] this reduction,” said Councilor Rex Sarabia, chair of the Appropriations Committee, during an interview on Thursday, December 5.

“Considering that we have already passed the budget for this year and the city’s budget trend is on the rise… we are doing our best to extend the reduction. If the city can afford it, we will make sure to accommodate the needs of both residents and the business sector,” he added.

Sarabia attributed the city’s positive budget trajectory to increased business registrations and renewals, as well as a projected increase in the National Tax Allotment (NTA) from the national government.

While the discount is intended to benefit residents and businesses, Sarabia acknowledged it poses a significant challenge to the city’s budget.

“Honestly, it’s very challenging—losing 40% is quite heavy. But this is the governance of participatory democracy. We are mere representatives of the people, voicing their sentiments and concerns. What they want should be heard,” he said.

He stressed the importance of balancing the interests of residents with the city’s long-term development goals.

“We’ll make it balanced so that the progress and development of the city, services, and key infrastructure projects are not compromised,” Sarabia assured.

Although the impact of the extended RPT reduction is still under study, Sarabia expressed confidence that the city’s property tax revenues would remain stable or even slightly increase due to sustained payments from specific sectors.

He clarified that the executive branch would handle budget adjustments and project prioritization, while the legislative branch’s role is to approve these adjustments.

“There are many factors that need to be studied. It’s a cause-and-effect scenario, and governance is multi-dimensional. We need to understand not only the immediate impact but also adjust our framework accordingly,” he explained.

Sarabia emphasized that while the city remains committed to maintaining basic services, it must also consider the rapid growth of Iloilo and rising expenses.

He also noted that demands for tax reductions require careful study due to their complexity.

“We have so many plans for the city. We will have to adjust,” he said.

In response to critics questioning the city’s fiscal management, Sarabia clarified that the city did not increase RPT taxes solely to pay off debts.

“Our loans are secure, and banks wouldn’t grant us loans if they knew we didn’t have the capacity to repay,” he explained.

The city’s 2025 budget, approved in November, totals PHP 4.134 billion—a 14.83% increase over the PHP 3.6 billion allocated for 2024. This includes PHP 232.3 million for contractual obligations, such as loan repayments.

Despite the challenges posed by the RPT discount, Iloilo City’s financial health remains robust.

The Committee on Appropriations report highlighted the city’s favorable debt servicing situation, noting that the 2025 debt servicing will account for only 5.62% of its regular income, well below the 20% cap set by the Local Government Code.

Additionally, the city maintains PHP 5 billion in cash deposits with the Development Bank of the Philippines, ensuring sufficient liquidity to meet its obligations.

According to the Bureau of Local Government Finance, Iloilo City’s debt profile is secure, with PHP 394.9 million allocated for annual loan amortization and PHP 285.1 million in net debt service ceiling for future borrowing. The city also has a borrowing capacity of PHP 2.675 billion, which remains largely untapped.

Why Loan Despite PHP 5-B Cash Stash?

Despite its substantial cash reserves, the city continues to take loans. Sarabia explained that borrowing allows the city to use external funds without tapping into its savings.

“If you take a loan, there has to be collateral. That PHP 5 billion is being rolled into high-value interest deposits. From a business perspective, it’s better to utilize funds from outside sources than to touch your savings. This way, we optimize funds that aren’t ours, and at the same time, the interest rate is lower compared to inflation,” he said.

Sarabia added that leveraging additional funds while maintaining cash reserves is an advantageous approach, as confirmed by the local finance committee and Mayor Jerry Treñas.

Details of the 40% RPT Discount

The 40% RPT discount for landowners and businesses was initially set for 2024 and 2025. Mayor Jerry Treñas announced its extension until 2026 during a Zoom meeting on Tuesday, December 3, providing relief amid a 300% increase in RPT rates.

The discount, however, does not apply to ad valorem taxes on idle lands.

In June 2023, the city implemented a revised valuation framework that raised the land levy rate from 1.5% to 2%. The ad valorem tax on idle lands also increased—from 1% to 2% for residential properties, and from 2% to 3% for agricultural, commercial, and industrial properties.

This tax hike has raised concerns among business owners, who fear its potential impact on their financial stability.