Bureau of Local Government Finance Opinion

November 4, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Honorable Laurencio P. Zuniega Municipal Mayor Cordon, Isabela Sir : This refers to your letter dated September 23, 2010, forwarding Sangguniang Bayan Resolution No. 72, series of 2010, embodying the request for reconsideration to reclassify that municipality to 2nd Class, alleging growth in its population and income. Under BLGF Memorandum Circular No. 01-M(35)-08, dated November 12, 2008, the Municipality of Cordon, Isabela was classified as 3rd Class on the basis of the certified Average Annual Income thereof for CYs 2004-2007, in the amount of P42.90M, and in accordance with the income bracket of " P35M or more but less than P45M " for 3rd Class municipalities, as provided under Department of Finance Order (DOF) No. 23-08, dated July 29, 2008. For your ready reference, we have enclosed herein copies of BLGF Memorandum Circular No. 01-M(35)-08 and DOF Order No. 23-08. Please allow us to clarify that by virtue of Executive Order (E.O.) No. 249, dated July 25, 1987, the Department of Finance through this Bureau reviews the income ranges of all provinces, cities, and municipalities once every four years, and accordingly adjusts the income benchmarks taking into account the increments of the Internal Revenue Allotment (IRA). Only actual regular income, inclusive of the IRA and other shares from national taxes and utilization of the national wealth but exclusive of non-recurring receipts, such as other national aids, grants, financial assistance, loan proceeds, sales of fixed assets, and similar others, for the last four (4) years immediately preceding the year of reclassification, are considered in the computation of the average annual income which is the basis for the reclassification using the adjusted income benchmarks. May we clarify further that population is not a basis for the income classification of provinces, cities, and municipalities. HCATEa In the implementation of E.O. No. 249, the aforecited DOF Order No. 23-08, was issued providing for the adjusted income benchmarks for the income reclassification covering annual regular incomes for CYs 2004-2007. Section 2 thereof states that the income reclassification of provinces, cities and municipalities shall be based on their Financial Statements for CYs 2004-2007, or the last four (4) years immediately preceding the year of re-classification, viz. : "Section 2. Classification of Provinces, Cities and Municipalities . As provided for under Section 1 and Section 2 of Executive Order No. 249, dated July 25, 1987, Provinces, Cities and Municipalities, except Manila and Quezon City which shall remain as special class cities, shall be divided into six (6) main classes according to the Average Annual Income actually realized during the last four (4) calendar years immediately preceding the year of re-classification. "Based on the Financial Statements of LGUs for CYs 2004-2007 of the Commission on Audit, the income brackets of Provinces, Cities and Municipalities which shall be used in their re-classification are ranged, . . . ." (emphasis supplied) In view of the foregoing and since all reported and certified regular incomes of that municipality covering CYs 2004-2007, appear to have been properly considered and included in the computation of the average annual income for the said period, this Bureau hereby affirms the classification of the Municipality of Cordon as 3rd Class per the aforementioned BLGF Memorandum Circular No. 01-M(35)-08. CAHaST Trusting that matters have been clarified herein. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director