Baguio City Investments and Incentives Code (BCIIC)

April 28, 2008 PRESENT: Hon. Rocky Thomas A. Balisog Acting City Vice Mayor and Temporary Presiding Officer Hon. Betty Lourdes F. Tabanda Member Hon. Galo D. Weygan Member Hon. Perlita L. Chan-Rondez Member Hon. Nicasio M. Aliping, Jr. Member Hon. Antonio R. Tabora, Jr. Member Hon. Erdolfo V. Balajadia Member Hon. Isabelo B. Cosalan, Jr. Member Hon. Richard A. Cario Member Hon. Fred L. Bagbagen Member Hon. Elaine D. Sembrano Member Hon. Gloria Ysabel V. De Vera Ex-officio Member ABSENT: Hon. Joel A. Alangsab Ex-Officio Member (with prior notice) Introduced by Hon. Elaine D. Sembrano, Hon. Richard A. Cario, Hon. Rocky Thomas A. Balisong, Hon. Daniel T. Farias, Hon. Antonio R. Tabora, Jr., Hon. Perlita L. Chan-Rondez, Hon. Galo D. Weygan and Hon. Betty Lourdes F. Tabanda. BAGUIO CITY ORDINANCE NO. 035-08 ESTABLISHING THE BAGUIO CITY INVESTMENTS AND INCENTIVES CODE (BCIIC ) EXPLANATORY NOTE This is a consolidated ordinance entitled "THE BAGUIO CITY INVESTMENTS AND INCENTIVES CODE (BCIIC)." It has been previously proposed by the Baguio-Benguet Chamber of Commerce and Industry, Inc. (BBCCII) and the Baguio Small and Medium Enterprises Development Council (SMED-Council) and duly endorsed by the Department of Trade and Industry-Benguet (DTI-Benguet). It has been adopted by Hon. Elaine D. Sembrano, Hon. Richard A. Cario, Hon. Rocky Thomas A. Balisong, Hon. Daniel T. Farias, Hon. Antonio R. Tabora, Jr., Hon. Perlita L. Chan-Rondez, Hon. Galo D. Weygan and Hon. Betty Lourdes F. Tabanda. Briefly stated, the ordinance merits the appropriate consideration of everyone who shares the common aspiration for a holistic approach in attracting viable investments that are essential to City of Baguio's economic development in harmony with its environmental needs. Section 458 (a) (2) (xii), Chapter 3, Article Three, Book III of Republic Act No. 7160, otherwise known as The Local Government Code of 1991, mandates every Sangguniang Panlungsod to enact ordinances, and "with the concurrence of at least two-thirds (2/3) of all the members of the Sangguniang Panlungsod, grant tax exemptions, incentives or relief to entities engaged in community growth-inducing industries, subject to the provisions of Chapter 5, Title I, Book II of this Code." There is therefore a need for the passage of a Local Investment and Incentive Code, which will harmonize the provisions of various national investment and incentive laws for the efficient and effective implementation of the said laws, and for the proper guidance of both domestic and foreign investors. NOW THEREFORE, upon recommendation of the Acting City Vice Mayor and Temporary Presiding Officer, Hon. Balisong, and on motion of Hon. Tabanda, Hon. Sembrano, and Hon. Cario, seconded by Hon. Aliping and Hon. Chan-Rondez. BE IT ORDAINED BY THE SANGGUNIANG PANLUNGSOD (CITY COUNCIL) IN SESSION ASSEMBLED THAT: PRELIMINARY TITLE CHAPTER I Title and Declaration of Policy SECTION 1. Title . This Code shall be known as the "BAGUIO CITY INVESTMENTS AND INCENTIVES CODE" (BCIIC). SECTION 2. Declaration of Policy. It is hereby declared as a policy of the City Government of Baguio to catalyze the holistic economic development of its constituents through programs designed to: 1. Maintain and enhance the city's environmental resources and preserve ecological balance; 2. Promote the socio-economic life of every citizen critical to the realization of an image for the City of Baguio as a haven for productive investments and businesses that would spur sustainable development and expand livelihood opportunities by encouraging new enterprises that shall primarily be engaged in the advancement of preferred areas of investments, expansions, and diversifications more particularly for those that: a.) provide employment opportunities, especially to bona fide residents of Baguio City, in order for them to raise their standard and quality of living and to provide equitable distribution of wealth; b.) support the tourism program of the City of Baguio, by initiating tourism-oriented businesses and showcasing the city as a premier tourist destination. In this regard, new business shall be encouraged to establish mountain resorts, mid-range tourism hotels and local travel agency outlets which shall be manned and operated by trained Baguio-based tour guides; and c.) support the information technology and business outsourcing industry by encouraging their expansion with the core human resource drawn from local employable citizens. 3. Rationalize the systems and processes of investment accreditation and intensify promotional and business development activities that would highlight the viability of the city as a prime investment capital; 4. Forge partnerships with both foreign and domestic institutions that would be instrumental in strengthening the economic potential of the city's human resources through the creation of employment, the promotion of consumer interest, and the transfer of relevant technologies in agriculture, trade and commerce, industry and support services; 5. Promote the participation of nongovernmental organizations as active partners in the realization of the provisions on local autonomy expressly granted by the 1987 Philippine Constitution and the Local Government Code of 1991; and 6. Determine by way of clear policies which areas of investment may best accomplish the goals declared under this Code considering the need to foster a more stable economy, and to contribute to the enrichment of culture, the promotion of health and safety, the enhancement of balanced ecology, the improvement of public morals, the promotion of better business, the enhancement of social justice, the promotion of gainful employment and livelihood and the preservation of the environment. CHAPTER II Definitions of Terms SECTION 3. Definition of Terms . As used under this Code, the term: 1. "BCIIB" shall refer to the body constituted as such in which reside the powers and functions on policy formulation and implementation, subject to the provisions of this Code. 2. "Capitalization" shall mean the total or initial investment in a business by a paid-in corporation, cooperative or partnership, or invested in a single proprietorship, which may be in cash or in property. 3. "New Enterprise" shall refer to a prospective firm interested to engage in an economic activity within the city. 4. "Registered Enterprise" shall refer to a firm registered in accordance with the provisions of this Code. 5. "Existing Enterprise" shall refer to a firm whose places of operation or production are already within the territorial jurisdiction of Baguio City. 6. "Investment Priorities Plan" shall mean the overall plan formulated by the Board which pertains to the Investment Priority Area in the city. 7. "Investment Priority Area" shall mean the economic activities that stakeholders have identified in the Investment Development Plan of the city. 8. "Incentives" shall refer to the benefits and privileges granted to registered firms which may be classified as fiscal and non-fiscal as provided in this Code. 9. "Expansion" shall refer to business activities that include modernization, rehabilitation and increase of existing volume or value of production or the upgrading of the quality of the registered economic activity. 10. "IPU" shall refer to the Investment Promotion Unit, which is the body constituted to serve as the Secretariat of the Board, mandated to provide administrative research technical support and other services. CHAPTER III Baguio City Investment and Incentive Board (BCIIB) SECTION 4. Composition of Baguio City Investment and Incentive Board. A Baguio City Investment and Incentive Board is hereby created to implement policies and manage the regulatory provisions of this Code. The Board shall be composed of the following: Chairman - The City Mayor Co-Chairman - The City Vice Mayor Vice-Chairman - The Chairman of the Sangguniang Panlungsod Committee on Market, Trade and Commerce Members: - The Chairman of the Sangguniang Panlungsod Committee on Employment, Livelihood and Cooperatives; - The Chairman of the Sangguniang Panlungsod Committee on Health and Sanitation, Ecology and Environmental Protection, Handicapped and Differently-Abled Persons; - The Chairman of the Sangguniang Panlungsod Committee on Tourism, Special Events, Parks and Playgrounds; - The Chairman of the Sangguniang Panlungsod Committee on Urban Planning, Lands and Housing; - The City Administrator; - The City Planning and Development Coordinator; - The City Treasurer; - The City Budget Officer; - The Chairman, Baguio Tourism Council; - The Baguio-Benguet Director, Department of Trade and Industry-Cordillera Administrative Region (DTI-CAR); - The President or duly authorized representative of the Baguio-Benguet Chamber of Commerce and Industry, Incorporated (BBCCII); and - The President or duly authorized representative of the Small and Medium Enterprise Development Council (SMED Council). SECTION 5. Powers and Functions of the Board. The Board shall primarily be responsible in fostering a favorable climate towards economic development in the city by establishing policies that shall support, encourage, and develop private sector investments. The Board shall pursue the following functions, to wit: 1. Promulgate the Implementing Rules and Regulations of this Code including but not limited to the grant of incentives, subject to the approval of Sangguniang Panlungsod by a 2/3 vote of all its members; 2. Formulate the Investment Priority Plan which shall identify, among others, the investment priority areas; 3. Institutionalize the Investment Promotion Unit as its secretariat and implementing arm; 4. Approve or disapprove applications and issue the appropriate Certificate of Registration; 5. Conduct an annual inspection and require submission of annual financial statements and other pertinent documents within the period of incentive availment, including the inspection of books if necessary; 6. Suspend and/or cancel the registration or enjoyment of incentives of any registered enterprises for any violation committed against existing laws: Provided, That due process is observed; 7. Enter into agreement with other agencies and/or private organizations for the purpose of simplifying systems, procedures, and requirements in establishing new investments in the city; 8. Conduct short- and medium-term investment promotion activities such as missions, conferences and other related activities to attract investors and generate employment; 9. Secure additional funding and other resources to supplement the budgetary support provided by the City Government for the BCIIB's and IPU's sustained operations; 10. Formulate and implement rationalization programs for certain investments whose operation may result in dislocation, overcrowding or inefficient use of resources and other adverse effects that impede economic growth; 11. Formulate rules and regulations to facilitate the processing of the application and the prescribed criteria for evaluation, and to devise forms for applicants' use; 12. Establish a "One-Stop Action Center" and supervise the operation of the same; and 13. Exercise such other powers deemed necessary or incidental to attain the purposes and objectives of this Code. CHAPTER IV Investment Promotion Unit SECTION 6. Investment Promotion Unit (IPU) . The Investment Promotion Unit is hereby created to serve as the secretariat of the Board and provide key administrative, research and technical support services. SECTION 7. Creation of Position . There shall be created one (1) City Investment Promotion Officer whose rank and position is equivalent to salary grade 18-22, who shall serve as Executive Officer of the Investment Promotions Unit that will implement the administrative and other technical support and research functions of the Board. He shall be assisted by two (2) Economic Researchers and two (2) Administrative Aides. The Board may create other positions in order to effectively implement its objective, subject to available funds and in accordance with existing human resource policies and procedures. SECTION 8. Powers and Functions . The IPU shall provide the necessary secretariat, administrative, research and technical assistance to the Board in the implementation of the provisions of this Code. Specifically, it shall: 1. Formulate and recommend to the Board the Investment Priority Areas and Plan; 2. Integrate the different agencies' plans and programs related to investments promotion; 3. Accept and process applications verifying issues of completeness and applicability to the provisions of the Code and the City's Investment Priority Plan, and to make appropriate recommendation for Board action within 15 days from receipt; 4. Provide relevant and timely information on new laws and directions that may affect the implementation of the Code; 5. Provide the necessary support services to prospective investors and inbound mission delegates provided for under this Code; 6. Establish and maintain networking relations with other offices and agencies; 7. Recommend to the Board any modification/amendments to existing legislation and procedures on local investments; 8. Formulate and submit to the Board the Annual Plan and Report; 9. Exercise such other functions deemed necessary or incidental as may be directed by the Board; and 10. Formulate and submit the Annual Investment Priorities Plan to the Board, for evaluation and approval by the Sangguniang Panlungsod, after complying with the requirement mandated under the Local Government Code. CHAPTER V Investment Priorities Plan SECTION 9. Preferred/Priority Investment Areas . Incentives will be provided to new businesses, expansion and diversification projects for investments proposed in the following: 1. Employment Generating Enterprises; 2. Manufacturing Enterprises using indigenous materials; 3. Electronic Enterprises; 4. Tourism-Oriented Enterprises; 5. Pioneering Enterprises; 6. Service-Oriented Enterprises; 7. Water and Power Resource Development Enterprises; 8. Telecommunication Development Enterprises; 9. Agribusiness Enterprises; 10. Educational Enterprises; 11. Low-cost Mass Housing Development Enterprises; 12. Information Technology Enterprises; 13. Business Outsourcing Enterprises; 14. Energy Generating and Waste Management Enterprises; 15. Marketing Advertising and Public Relation Enterprises; 16. Enterprises to be established in identified growth centers in the city in accordance with the approved city physical framework plan. No project shall be included in the priorities plan nor declared a preferred area of investment, unless it is shown to be economically, technically, and financially viable after thorough investigation and analysis by the IPU and the Board, taking into account the need for business dispersal into new growth centers outside the Central Business District. The legal personality of newly registered enterprises shall be acquired only after the issuance of the Certificate of Registration, the concurrence or confirmation by the Sangguniang Panlungsod, and after compliance with the following requirements: a. is qualified to be registered; b. submits a duly accomplished registration form and pays the required fees; and c. is approved by the BCIIB. SECTION 10. Approval of the Investment Priorities Plan. The approval of the Investment Priorities Plan by the Sangguniang Panlungsod shall be required, either in whole or in part, for inclusion in the Medium-Term Development Plan of the city, or for return to the Board for revision. No government office or agency shall adopt any policy or take any course of action that is contrary to or inconsistent with the plan. SECTION 11. Amendments on the Investment Priorities Plan. The Board may, after due notice and proper consultation, recommend to the Sangguniang Panlungsod to amend the whole or any part of the plan, the alter any the terms of the declaration of an investment area or the designation of an investment of measured capacities, or to terminate the status of preference. In no case, however, shall any amendments of the plan impair whatever rights may have already been legally vested in the qualified/registered enterprises, which shall continue to enjoy such right to the full extent under this Code. The Board shall not accept any investment application prior to the approval of amendments by the Sangguniang Panlungsod. SECTION 12. Publication. Upon approval of the plan, in whole or in part, or upon approval of an amendment thereof, the plan or the amendment which may specify or declare the preferred areas of investment and their corresponding measured capacity, shall be posted in three (3) conspicuous public places and be published in at least one local newspaper of general circulation. CHAPTER VI Registration of Enterprises SECTION 13. Qualifications of Applicant under the Investment Priorities Plan . To be entitled to registration under the Investment Priorities Plan, an applicant must present proof to the satisfaction of the Board, such as: 1. That the applicant must be qualified to do business in the Philippines and must have complied with all the requirements mandated under existing local and national laws and is duly registered with appropriate government agencies, such as the Department of Trade and Industry (DTI), the Securities and Exchange Commission (SEC), and the Cooperative Development Authority (CDA); 2. That the applicant proposes to engage in a preferred project listed in the Investment Priorities Plan; 3. That the applicant is capable of operating on a sound and efficient basis with the end in view of contributing to the local development of the preferred area in particular and of the national economy in general; 4. That the applicant shall at all times take into consideration the provision set forth under Section 8; 5. New enterprises must have a capitalization at least P1,000,000.00 and P10,000,000.00 at most for small-scale businesses; at least P10,000,000.00 and at most P40,000,000.00 for medium-sized businesses: Provided, That the capital amount shall be based on the total project cost provided for in the investor's application as submitted to the Board; and 6. New enterprises will be required to have at least ten (10) Baguio-based workers in the case of small-sized businesses; at least twenty (20) in the case of medium-sized businesses; and at least one hundred (100) in the case of large-sized businesses. SECTION 14. Qualifications of an Existing Enterprise . An existing enterprise may avail of this Code subject to the following: a. The business must have complied with all the mandated requirements under local and national laws and the Constitution; b. The expansion/diversification must refer to the activities mentioned hereof as preferred areas of investments; and c. The business site for operation or production is located within the city's territory for the conduct of the following activities: i. to relocate its principal office from other places in the Philippines to Baguio City; or ii. to expand its existing production capacity or construct new buildings and other civil works for the installation of new machinery and equipment or improvements thereof which will result in an increase in production capacity: Provided, That the expansion/diversification must have a capitalization of at least P1,000,000.00 but not more than P10,000,000.00 in case of small-scale enterprise; at least P10,000,000.00 but not more than P40,000,000.00 in case of a large industry; Provided, further, That the amount of capitalization shall be based on the total project cost as stated in the investor's study submitted to and approved by the Board; Provided, furthermore, That the expansion/diversification will provide out of the labor force an employment of not less than ten (10) persons in case of a small-scale enterprise; twenty (20) persons in case of medium-scale enterprise; and at least one hundred (100) persons in case of a large industry, all of whom are bona fide residents of Baguio City. SECTION 15. Application Requirements. Application shall be filed with the Board through the Investment Promotion Unit to be recorded in a registration logbook and the date stamped on the application shall be considered the date of acceptance. A non-refundable filing fee of P25,000.00 shall be paid together with the following documents of registration, to wit: 1. Three (3) copies of accomplished application forms to be provided by the Board in accordance with this Code; 2. Three (3) copies of the project study stating the project's technical and financial viability, the proposed organization and management and the manpower requirements; and 3. A copy of its Articles of Incorporation and By-Laws and a resolution authorizing an officer to represent and sign in behalf of the corporation. Upon approval, the applicant shall be required to pay to the Office of the City Treasury an annual registration fee of 1/10 of 1% of the total amount of investment subject to existing auditing and accounting rules and regulations. SECTION 16. Certificate of Registration . A registered enterprise under this Code shall be issued a Certificate of Registration under the seal of the City Government of Baguio bearing the signature of the Chairman and/or such other responsible officers mandated by the Board. The certificate shall be in such form and style as the Board may determine and shall state, among others: 1. The name of the registered enterprise; 2. The preferred area of investment in which the registered enterprise is proposing to engage in; 3. The nature of the activity and its undertaking and the registered capacity of the enterprise; 4. The incentive privilege granted under the provisions of this Code; and 5. The other terms and conditions appurtenant to the registration. CHAPTER VII Incentives SECTION 17. Fiscal Incentives to Registered Enterprises . In addition to the incentives provided by law and by the Local Government Code of 1991, a registered enterprise qualified under this Code shall be exempt from Mayor's Permit fees, building permit fees, business sales taxes, real property tax due to the city, excluding the barangay share under the Tax Code, and other fees and charges imposed under existing city ordinances, on a graduated basis. For the first year of operation, an exemption from the taxes mentioned in the preceding paragraph at a rate of 100% will be granted, 80% on the second year, 60% on the third year, 40% on the fourth year and 20% on the fifth year. However, all participants to the Incentive Program shall be required to secure the Mayor's Permit and such other permits necessary to operate their business. CHAPTER VIII Final Provisions SECTION 18. Appropriations . The Sangguniang Panlungsod shall allocate an initial amount of P3,000,000.00 to serve as the Local Investment Promotion Fund, to be sourced from the 20% Local Development Fund of the city. Thereafter, the City Government shall appropriate annually, based on the budget presented by the Board, the necessary funding requirements for the continued implementation of these provisions. Said fund shall be used for investment development, administrative and promotional activities of the city as determined by the Board including the preparation of investment promotional collateral, the conduct of business conferences as well as trade and investment missions both local and foreign and the honorarium of the Board and the budget needs of the IPU, subject to existing accounting and auditing rules and regulations. SECTION 19. Exemption . This Code shall not apply to financing and banking institutions and other enterprises, which are governed by the Central Bank Act and which are under the supervision and control of the Bangko Sentral ng Pilipinas (BSP). SECTION 20. Employment . Any person, partnership, corporation, association and cooperative whose application has been granted under this Code must employ the required number of Baguio residents provided for in this Code. SECTION 21. Penal Clause . Violation of any of the provisions under this Code, or of the terms and conditions of registration, or the rules and regulations implementing this Code, or the act of abetting or aiding in any manner, the commission of any such violation, shall be punished by a fine not to exceed P5,000.00 or imprisonment for not more than 6 months, or both at the discretion of the Court. In addition, all the incentives and privileges granted to the enterprise shall be forfeited in favor of the City Government of Baguio and the violator shall be required to pay all the taxes, fees and charges due the same to be computed from the commencement of the business operation. In case the violation is committed by a partnership, a corporation, an association, or a cooperative, the manager or the president or chief executive officer, as the case may be, shall suffer the penalty provided herein. SECTION 22. Separability Clause . If for any reason or reasons, any part or provision of this Code shall be held to be unconstitutional or invalid, the other parts or provisions hereof which are not affected thereby shall continue to be in full force and effect. SECTION 23. Repealing Clause . All ordinances, resolutions and regulations or parts thereof which are inconsistent with this Code are hereby repealed or modified accordingly. SECTION 24. Implementing Guidelines . The Board is hereby authorized to formulate the implementing rules and regulations (IRR) for the efficient and effective implementation of this Code within 30 days from the effectivity hereof. SECTION 25. Transitory Provision . While the necessary funding for the implementation of this Code is being worked out from available budgetary sources, the City Planning and Development Office shall perform the functions of the Investment Promotion Unit. The members of the Sangguniang Panlungsod Committee on Market, Trade and Commerce shall comprise the Oversight Committee that shall undertake an information campaign on this Code to ensure the efficient and effective implementation of this Code. SECTION 26. Non-Liability Clause . In the formulation of the implementing rules and regulations provided under this Code, the Board shall see to it that the City Government of Baguio shall be exempt from any liability that may arise from any act, omission or occasion of the enforcement and implementation of this Code. SECTION 27. Effectivity Clause . This Code shall take effect in accordance with the provisions of the Local Government Code of 1991. Passed. Eight (8) voted in favor. Two (2) voted against. Two (2) abstained from voting. Hon. Daniel T. Farias was designated Acting City Mayor (effective 28 April 2008 to 02 May 2008) when this Ordinance was passed. CERTIFIED CORRECT: (SGD.) ROCKY THOMAS A. BALISONG Acting City Vice Mayor and Temporary Presiding Officer ATTESTED: (SGD.) PRUDENCIO M. PARNACIO Acting City Secretary APPROVED: REINALDO A. BAUTISTA, JR. City Mayor ATTACHMENT 1st Indorsement 19 May 2008 ORDINANCE Numbered 35, Series of 2008 , entitled "ESTABLISHING THE BAGUIO CITY INVESTMENTS AND INCENTIVES CODE (BCIIC)" is hereby RETURNED to the Honorable Sangguniang Panlungsod without the signature and/or approval of the undersigned City Mayor. The undersigned lauds the intent of the Ordinance to attract viable investments thru the grant of tax exemptions, incentives or relief to entities engaged in community growth-inducing industries. The undersigned likewise concurs with the Declaration of Policy as enunciated in Chapter I of the measure, particularly Section 2, paragraphs 1-6, thereof. However, while the Ordinance purports to provide for the establishment of a Baguio City Investments and Incentives Code with the formulation of an Investment Priorities Plan and the registration of enterprises pursuant to such Plan, it practically makes an undue delegation of powers both executive and legislative to the Baguio City Investment and Incentive Board (BCIIB) and its Investment Promotion Unit (IPU) therein created under Chapters III and IV. In the grant of powers and functions under Section 4 of Chapter III, the Board is empowered " to implement policies and manage the regulatory provisions " of the Code. Included under Section 5 of Chapter III are the powers of the Board to: " approve or disapprove applications and issue the appropriate Certificate of Registration"; " suspend and/or cancel the registration or enjoyment of incentives of any registered enterprises for any violation committed against existing laws"; and " enter into agreement with other agencies and/or private organizations for the purpose of simplifying systems, procedures, and requirements in establishing new investments." These powers and functions pertain to the chief executive of the local government unit. To delegate these powers and functions to the Board, even if the chief executive should be made to chair such Board, would diminish his powers and functions as conferred by the Local Government Code. In the same vein, the formulation of the Investment Priority Plan, a policy-determining therefore purely legislative function, is left primarily to the Board. Furthermore, the promulgation by the Board of the Implementing Rules and Regulations including the grant of incentives gives it a wide latitude of discretion limited only by the proviso that it shall be subject to the approval of the Sangguniang Panlungsod by a 2/3 vote of all its members. The undersigned is therefore constrained to return ORDINANCE Numbered 35, Series of 2008 , for amendment, revision or modification by the Sangguniang Panlungsod. (SGD.) REINALDO A. BAUTISTA, JR. City Mayor