Bureau of Local Government Finance Opinion

June 25, 1997 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully returned, thru the Municipal Treasurer, to the Municipal Mayor, both of Aritao, Nueva Vizcaya. This refers to his letter dated May 27, 1997 requesting opinion regarding the proposed increase of rentals of public market stalls thereat. It appears that in the Tax Code Ordinance adopted in 1992 by that municipality the rental fixed per stall of 12 square meters was P265.00 per month. Hence, the following queries: 1. Whether or not the municipality can raise the rate of rentals to as much as P1,000 per month per stall considering, among others, that private stalls located adjacent to and opposite the public market are being rented at monthly rates of P1,500 to P1,800 per stall; and 2. Whether or not the provisions of Section 191 of the Local Government Code of 1991 (LGC) includes the increase of market rentals. On Query No. 1: In the case of Esteban et al . , vs . City of Cabanatuan , G.R. L-13662, May 30, 1960, 108 Phil. 374, the Supreme Court ruled that "When a municipal corporation fixes the fees for the use of its properties such as public markets, it does not assert governmental authority, or wield the police power or the power of taxation. It exercises merely a proprietary function, and, like any private owner, it is, in the absence of any constitutional or statutory limitation, fee to charge such sums as it may deem best, regardless of the reasonableness of the amount fixed, for the prospective lessees, are free to enter into the corresponding contract of lease. If they are agreeable to its terms or otherwise, not to enter into such contract." Accordingly, the Sangguniang Bayan thereat may enact an amendatory ordinance increasing or adjusting the existing rates prescribed under the Tax Code Ordinance of that municipality to P1,000 per month, or more or less, per market stall, provided, however, that pursuant to Section 187 of the LGC, a public hearing is held for the purpose. The conduct of such public hearing is mandatory and cannot be avoided as the lack thereof will nullify ab initio any amendatory ordinance enacted by the Sangguniang Bayan. SAHaTc On Query No. 2: Pursuant to Section 191 of the Code, local government units shall have the authority to increase/adjust tax rates over and above those prescribed in said Code but not oftener than once every five (5) years and in no case shall such increase exceed ten percent (10%) of the rates fixed in the Code for each tax subject. This provision of the Code, however, refers only to taxes but not to regulatory fees, service charges, and impositions made in the exercise by the municipality of proprietary functions, such as market fees and stall rentals. It is hoped that this will help clarify matters. (SGD.) LORINDA M. CARLOS Executive Director