Topic 7b – The Local

Development Investment
Program (LDIP)
 • Tool for utilizing the investable
portion of the local
development fund
Investment
Program
• Consists of: (a) final list of
priority projects and (b)
programming of financial
resources to fund identified
programs and projects
 • Principal instrument for
Local Devt implementing the CDP and to
Investment Plan some extent, the CLUP
(LDIP)
Annual Investment • It links the plan to the budget
Plan (AIP) pursuant to the LGC directive
that “local budgets shall
operationalize approved local
development plans” (Sec.305,i,
RA 7160)
 • Principal instrument for
implementing portion of the
budget that is not used to “oil”
the local gov’t machinery but is
returned to the people in the
Local Devt form of projects and or services
Fund • A portion of the LDF is used to
finance programs and projects in
the AIP
• Another portion goes into
financing the cost of
development services rendered
by key LGU offices
 • Investment refers to that portion
of the City/Municipal budget
Public which is used to pay for services or
to purchase commodities that
Investment have the following characteristics:
◦ They have a useful life that extends
beyond one year. In personal
finance, we call them “consumer
durables” or those things we acquire
which we can use over and over for
several years.
◦ They contribute to the total value of
our accumulated assets.
 • Assets are the things we own
which we can use further in the
creation of more wealth or to
create benefits for us and for
Public others. There are two types of
assets: hard and soft. Hard assets
Investment are physical infrastructures,
buildings, land, and the like. Soft
assets are people, technologies,
systems and procedures.
• Investment may involve
acquisition of new assets. It may
also involve spending to extend or
prolong the service life of existing
assets such as repair and
rehabilitation of old but still
serviceable structures.
 Investment in LGU Finance
• In private or household finance, • Similarly, in LGU finance,
investment is that portion of investment fund is what remains
income that is left after after deducting all expenses
satisfying all expenses and the necessary to run government
machinery, to satisfy claims of
claims of creditors and income creditors, and to comply with
taxes. statutory obligations.

• Savings must first be realized • Investment in public finance does

before they can be invested not have to be savings first.
Investment in the LGU budget is a
regular outlay that has to be
funded whether or not excess
over operations (savings) is
realized.
Local Funds for Development Investment

PERSONAL
SERVICES
STATUTORY
OBLIGATIONS
Office MOOE

Non-Office MOOE

Non-Office
CAPITAL OUTLAY
Office CAPITAL
OUTLAY
Local Funds for Development Investment
LDIP Process Links Development
Planning with Budgeting
LDIP STREAM 1 ACTIVITIES
Selecting And Ranking Priority Projects
 Streams in LDIP Preparation
Preparing the LDIP consists of three (3) streams:
• Stream 1 involves the preparation of a ranked list of
programs and projects with their individual and cumulative
cost estimates.

• Stream 2 has to do with determining available funds for

investment; and

• Stream 3 necessitates matching the fund requirements with

projected funds available and deciding on financing options
should the funds available are insufficient.
 Stream 1 Activities:
Ranking & Prioritizing Projects with Cost
Estimates
1. Each sector shall make a list of all projects categorized as “Urgent”,
“Essential” and “Necessary” or the first 5-10 ranked projects. Make
sure that these projects are really projects, not services; not
legislation. Make sure your projects are LGU-owned, or co-owned
with the national government or private sectors. (Refer to handout on
“Structuring Solutions”)
2. Prepare a project brief for each sector’s priority project list.
3. Put the estimated cost of each project as found in the project briefs.
The LDC, through the LPDO, shall collect the sectors’ priority projects
for possible inclusion in the LDIP.
 Stream 1 Activities:
Ranking & Prioritizing Projects with Cost
Estimates
4. The consolidated priority projects from the different sectors are co-
mingled in a long random list, disregarding the priorities of individual
sectors.
5. The randomly listed projects are then rearranged into a new over-all
ranking using any suitable ranking tool such as the Goal-Achievement
Matrix. This activity may be undertaken by the sectoral TWGs or by
the full membership of the LDC.
6. From the result of Activity 5 prepare a ranked list of all projects and
attach their individual costs. Prepare also a cumulative or running
cost from the top to the bottom of the list..
 LDIP STREAM 2
ACTIVITIES
Determining Investable Funds
Who is responsible for preparing
the financing plan of the LGU?

• The Local Finance Committee (LFC) is charged with

the setting of the “level of the annual expenditures
and the ceilings of spending for economic, social,
and general services based on the approved local
development plans” (Sec. 316, c, RA 7160).
• The LFC should undertake the required financial plan
development in close coordination with the City
Development Council (CDC) for consideration and
approval of the Sangguniang Panlungsod.
 Determining Investible
Funds

The number of public projects that the LGU can

finance depends on the following:
• Revenue level of the LGU
• Level of recurring local government operating
expenditures
• Current public debt level
• Statutory debt ceiling
• Potential sources of additional revenue available for
investment project financing
 Determining Investible Funds

1. Collect revenue data and determine historical trends.

Revenue is any inflow of funds, regardless of whether the
source is repayable or not.
Revenue data include:
a. Real property taxes
b. Business fees and licenses
c. Other taxes
d. Service and operations income
e. Internal Revenue Allotment
f. All others
 Time Series Record of Property Tax Revenue
(5)
(1) (2) (3)
(4) Total Revenue From
Assessed Valuation Tax Rate Tax Levy
Coll. As Property Taxation
Year
(b) % of
(a) (a) (b) (c) (a) (b) (a) (b)
% Levy
Amount General SEF Total Amount % Change Amount % Change
Change

INSTRUCTIONS:
For each year:
(1)Enter Assessed Valuation in Column (1a) and the Property Tax Revenue Collected in Column (5a).
(2)Enter the tax rates in Columns (2a) and (2b) and enter the total in Column (2c).
(3)Multiply the assessed Valuation (1a) by the Total Tax Rate Column (2c).
(4)Compute the Tax Collections as % of Levy, Column (4), by dividing the Total Property Tax Revenue Column (5a) by the Tax Levy Column (3a).
(5)Compute the % Change over the preceding year and enter the results in the appropriate columns.
(6)The exercise will require 3 to 5 years of historical data to be used as the basis for a 3-year projection.
 Determining Investible Funds

The analyses of current revenue levels must distinguish

between:

Recurring revenue sources

• real property tax
• business fees and licenses,
• other taxes
• service and operations income, and
• IRA
 Determining Investible Funds
Non-recurring ones such as:
• grants-in-aid from local and foreign sources,
• special appropriations or transfers from Congress or other
units of government;
• Inter-fund and inter-local government transfers.

What is relevant for investment planning purposes are

projections of recurring revenue sources.
 Determining Investible Funds
The analyses of current revenue levels must also consider
• the impact on revenue volume of changes in the tax base
such as increases in the number of taxable structures or
businesses; and changes in tax rates.
• the occurrence of an unusually large increase in a
particular revenue source for a particular year which may
be attributed to:
◦ a rate change,
◦ new system of billing and collection, or
◦ other procedural and system improvements.
 Time Series Record of Revenue Other Than Property Tax
(1) (3) (4)
(2) (5) (6) (7)
Bus. Fees & Svc. & Opns. Total Local
Other Taxes IRA All Others Grand Total
Year Licenses Income Revenue
(a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b)
Amt % ch Amt % ch Amt % ch Amt % ch Amt % ch Amt % ch Amt % ch

INSTRUCTIONS:
For each year
(1)Enter the amount of revenue from each source in the appropriate column.
Note:
a. Operating & Service Income covers public markets, slaughterhouses and other LGU economic enterprises.
b. IRA refers to the internal revenue allotment of the LGU.
c. All others include Other grants, and inter-government and inter-fund transfers.
(2)Compute the % Change over the preceding year and enter the results in the appropriate columns.
(3)The exercise will require 3 to 5 years of historical data to be used as the basis for a 3-year projection.
 Determining Investible Funds
2. Collect operating expenditure data and determine trends.
• Personnel services (including social charges)
• Maintenance and other operating expenses (MOOE) such as
office supplies and expenses, utilities (power, water,
telecommunications), office equipment and miscellaneous
expenses.
• Capital outlays – land acquisition, building construction, motor
vehicle purchase and other materials procurement by the LGU
that have a life that spans several years.
 Determining Investible Funds

Historical analyses need to be done on the following

operating expenditure items:
• General Public Services
• Social Services
• Economic Services
 Determining Investible Funds
2. Collect operating expenditure data and determine
trends.
• Outstanding debt service.

The amount of debt service payments for existing and

other anticipated LGU obligations must be
established, and compared to the relevant (if any)
statutory debt service ceilings.
 TIME SERIES RECORD OF LGU OPERATING EXPENDITURES
(1) (3)
(2) (4) (5)
GEN. PUBLIC ECONOMIC
SOCIAL SERVICES ALL OTHERS GRAND TOTAL
SERVICES SERVICES
Year
(b) (b) (b) (b) (b)
(a) (a) (a) (a) (a)
% % % % %
Amount Amount Amount Amount Amount
Change Change Change Change Change

INSTRUCTIONS:
For each year
(1) Enter the amount of operating expenditure in the appropriate column.
Note that debt and capital expenditures are excluded.
Column headings should reflect the major operating expenditure categories in the LGU.
Note:
a. General public services include LGU administration, peace and order, etc.
b. Social services include education, health, welfare, etc.
(2) Compute the % Change over the preceding year and enter the results in the appropriate columns.
(3) The exercise will require 3 to 5 years of historical data to be used as the basis for a 3-year projection.
 OBLIGATED DEBT SERVICE EXPENDITURE
(1) (2) (3=2+1)
YEAR
PRINCIPAL INTEREST TOTAL

INSTRUCTIONS:
This exhibit presents existing debt service requirements and, therefore, involves no projections. Simply compile the total debt service requirements for local
general obligation debt for each of the 3-year projection period for all LGU obligations from existing accounting records and enter these amounts in the
appropriate columns.
 Determining Investible Funds
3. Project future recurring revenue & operating expenditure
levels. Possible assumptions include:

• if the historical trend analysis

indicates little or no change
No change
• If there is no reason to expect a
change in this pattern
 Determining Investible
Funds

Change by • Assumes yearly changes based on a

constant amount constant amount

• Assumes annual changes at a

Change at constant rate based on the historical
constant rate annual average percentage change
estimate

Correlation with • Assumes a constant relationship

demographic or between the financial variable and a
economic variable demographic or economic variable
 Determining Investible Funds

PROJECTION OF PROPERTY TAX REVENUE

(2)
(1) Tentatively Projected Tax Rate (5)
(3)
Projected (4) Projected Total
Projected Total Tax
Assessed Collection as Revenue From
Year Levy
Valuation (a) (b) (c) Percent of Property Taxation
(a)
(a) General SEF Total Levy (a)
Amount
Amount Amount

INSTRUCTIONS:
For each year:
(1)Enter the projected Assessed Valuation in Column (1) and the estimated Collection as % of Levy in Column (4).
(2)Enter the tentatively projected tax rates in Columns (2a) and (2b) and enter the total in Column (2c).
(3)Multiply the projected Assessed Valuation (1a) by the Total Tax Rate Column (2c) to obtain the total Tax Levy, Column (3).
(4)Multiply Column (3) by the Collection as % of Levy, Column (4) and enter the result into the Total Property Tax Revenue, Column (5).
In developing this revenue base for preliminary testing, different assumptions may be used regarding the projected tax rate. For example, a)
the current tax rate can be used for the entire projection period; or b) some change in the tax rate can be assumed over the projection period
depending on the adopted LDIP financing package.
 Projection of Total Revenue

(1) (2) (3) (4) (5) (6) (7)

Projected Business Other Servce & Internal All Projected
Year Real Fees & Taxes Operations Reveue Others Total
Property Licenses Allotment Revenue
Tax

INSTRUCTIONS:
For each year:
Use the projection methods discussed in the text.
1. Get the RPT projection from Form 8.5.
2. Enter the sums of Columns 1 to 4 to get Column 5.
 Projection of LGU Operating Expenditure

(1) (3)
(2) (4) (5)
Year Gen. Pub. Econ.
Soc. Services All Others Grand Total
Svcs. Services

INSTRUCTIONS:
For each year:
Use the projection methods discussed in the text.
1. Enter the projected expenditures in the appropriate columns.
2. Enter the sums of Columns 1 to 4 in Column 5 to get the total Operating Expenditures.
 Determining Investable Funds

• Compute for Net Available Resources (NAR) and Total

Available Resources (TAR)
Account Name Amount
1. Estimated income from all sources Php
2. Less: Total estimated expenditures Php
3. Less: Contractual obligations (including loan payments) Php
4. Less: Statutory obligations (e.g. 20% of IRA share; 5% DRR fund; 5% Php
GAD fund; others)
5. Net Available Resources (NAR) Php
6. Add back 20% of IRA; 5% GAD fund; 70% of DRR fund; etc. Php

7. Total Available Resources (TAR) Php

Note: It is the TAR, not the NAR, that is matched with the total fund
requirement in Stream 1.
 LDIP STREAM 3 ACTIVITIES
Matching Fund Requirement with Total Available Resources
 Step 1: Match Fund Requirements with TAR
2024 2025 2026
1. ESTIMATED INCOME FROM ALL SOURCES: ₱ 3,806,549,195.96 ₱ 4,084,229,208.47 ₱ 4,456,019,869.47
Real Property Taxes( Basic & SEF ) 249,588,447.03 256,719,545.51 328,601,018.25
Tax on Business & Licenses 346,600,000.00 368,750,353.58 445,608,989.78
Other Taxes 22,800,000.00 23,094,654.85 27,908,273.76
Service/ User and Charges (Services & Operations
239,800,000.00 285,392,842.23 344,877,272.34
Income)
Other Receipts ( Other General Income) 1,500,000.00 7,819,935.75 9,449,844.96
Internal Revenue Allotment 2,946,260,748.93 3,142,451,876.55 3,299,574,470.38
Less: 3,464,720,362.51 3,654,758,517.49 3,844,630,625.98
2. Total Estimated Expenditures 2,181,294,860.58 2,299,217,589.22 2,425,181,688.53
3. Contractual Obligations – loans 96,074,374.16 88,949,064.37 71,093,768.29
4. Statutory Obligations: 1,187,351,127.77 1,266,591,863.90 1,348,355,169.16
From Internal Revenue Allotment
20% Development Fund 589,252,149.79 628,490,375.31 659,914,894.08
1% Local Council for Protection of Children 29,462,607.49 31,424,518.77 32,995,744.70
From Approved Budget
5% CDRRM 190,327,459.80 204,211,460.42 222,800,993.47
5% Gender and Development 190,327,459.80 204,211,460.42 222,800,993.47
1% SC / PWD 38,065,491.96 40,842,292.08 44,560,198.69
100% SEF 84,559,349.34 88,787,316.81 93,226,682.65
30% Barangay Share on RPT 50,735,609.60 53,272,390.08 55,936,009.59
40% Barangay Share on Quarry Products 8,800,000.00 9,240,000.00 9,702,000.00
 50% Barangay Share on CTC 3,485,000.00 3,659,250.00 3,842,212.50

Others-20% on Bldg Permit (DPWH-5%; Office of

2,336,000.00 2,452,800.00 2,575,440.00
Bldg. Official-15%)

5. Net Available Resources ( NAR ) 341,828,833.45 429,470,690.98 611,389,243.49

6. Add back: 980,336,930.89 1,047,916,668.88 1,116,232,526.38

20% Development Fund 589,252,149.79 628,490,375.31 659,914,894.08
1% Local Council for Protection of Children 29,462,607.49 31,424,518.77 32,995,744.70
70% of 5% of CDRRM Fund 133,229,221.86 142,948,022.30 155,960,695.43
5% Gender and Development 190,327,459.80 204,211,460.42 222,800,993.47
1% SC / PWD 38,065,491.96 40,842,292.08 44,560,198.69

40% Barangay Share on Quarry Products

7. Total Available Resources ( TAR ) ₱ 1,322,165,764.34 ₱ 1,477,387,359.86 ₱ 1,727,621,769.87

8. Total Funds Needed to Fund Projects 2,370,089,000 1,656,400,000 1,800,434,000
9. Surplus (Shortfall) (1,047,923,235.66) (179,012,640.14) (72,812,230.20)

TOTAL AVAILABLE RESOURCES = 4,527,174,894.07

TOTAL PROJECT REQUIREMENT = 5,821,000,000
TOTAL SURPLUS (SHORTFALL) = (1,293,825,105.93)
 Matching Fund Requirements with Project
Funds Available and Deciding on Alternative
Financing Options to Generate Additional
Funds

The total estimated cost of the projects proposed for

implementation for 2024 to 2026 reached PhP5.8 billion which is
unlikely to be covered by the available funds for investment. Given
this unbalanced situation, taking into account the phasing of
project implementation and projected maximum investible funds,
the LGU officials need to deliberate and decide on what financing
approach to take based on the following approaches:
 STEP 2: LFC deliberates on and decides
what financing approach to take.

Option 1: Conservative Approach - Only projects that can

be funded from regular sources will be implemented.
• When the total project cost exceeds funds available, the
C/MDC further trims down the project list, approves the
final list and submits the same to the Sanggunian for
approval.
 Under Option 1:
How to improve fiscal
management
Investigate the following strategies to determine their
impact on savings for the next two or three years:
• Increasing the collection efficiency
• Curbing some expenditures
• Look for taxable subjects within the authority of the
barangay and enact the necessary ordinance levying the
same to augment the financial resources of the barangay.
 STEP 2: LFC deliberates on and decides
what financing approach to take.
Option 2: Developmental Approach - The ranked list of
projects is taken as final and irreducible and additional
fund sourcing will have to be done.
• When the amount to be raised from other sources is known,
the LCE directs the local finance committee to make further
studies.
• Adopt certain fiscal measures to realize savings from
normal operations.
• Improve fiscal management
• Incur public debt
 Under option 2:
When the option is to incur public debt
The Sanggunian, by resolution, authorizes the LCE to contract
for loans, credits and other forms of indebtedness or enacts
ordinances to improve fiscal management to augment local
financial resources. The following modes of development
financing are allowed by law:
• Contract for loans, credit & other forms of indebtedness
(Sec. 297, RA 7160)
• Deferred payment & similar financing schemes (Sec. 298, RA
7160)
 Under option 2:
When the option is to incur public debt

• Issuance of bonds, debentures, securities, collaterals, notes

& other obligations (Sec. 299, RA 7160)
• Contract for loans with other LGUs (Sec. 300, RA 7160)
• Borrowing from the national government through its re-
lending institutions (RA 301, RA 7160)
• Pre-financing by the private sector (Sec. 302, RA 7160 & RA
6957)

The Sanggunian, by resolution, authorizes the LCE to contract

for loans, credits and other forms of indebtedness or enacts
ordinances to improve fiscal management to augment local
financial resources.
 Option 3: Pragmatic Approach
• A combination of the first two approaches
• Being conservative in the initial years
• Becoming developmental as status of local finances improve
• Recognizing the urgency of the prioritized projects, the LGU can
opt for the Pragmatic Approach. This approach is a combination of
the Conservative and Developmental Approaches which entails
being conservative during the initial years and eventually
becoming developmental as the status of the city’s finances and
sources improved. The LGU can phase the implementation of the
projects and needs to resort to tapping other fund sources to
augment available funds by other financing options such as public
borrowing or public-private sector partnership. Hereunder are
some strategies/activities viewed to help improve the LGU’s fiscal
management and sources:
Implement improvement policies such as:
• Adopt Proposed Schedule of Fair Market Values (Schedule of Base
Unit Market Values for Lands and Schedule of Base Unit
Construction Cost for Buildings and Other Structures) and conduct
general revision every three (3) years;
• Operationalize Internal Audit Service Unit
• Operationalize Local Economic Development and Management
Unit
• Update Investment Code
• Full implementation of Financial Management Information System
(FMIS) data base management system of business establishments
• Implement Property Monitoring System
• Develop new revenue sources/new economic enterprises such as:
◦ Designated pay parking areas
◦ Rentals on government-owned facilities
◦ Public Market, Bus and Jeepney Terminal, and BPO Building
• Undertake Tax Mapping of Business Establishments by Inspectorate
Team;
• Formulate and implement Strategic Revenue Generation Improvement
Plan (SRGIP)
• Implement Presumptive Income Level Assessment Approach (PILAA)
• Fine-tune the procedure of business application and renewal
• Address bottlenecks of ETRACS 2.5 and upgrade hardware equipment
• Develop competency courses or working knowledge for executives on
revenue-enhancing systems;
• Review staffing pattern critical to resource mobilization and public
financial management of the city
 LOCAL DEVELOPMENT INVESTMENT
PROGRAM
Rank Project Title Sector 3-Year Budget 2024 2025 2026 Total
1.00 Road Development Project Infra 2,000.00 500.00 720.00 770.00 1,990.00
Improvement of Flood Control
Sewerage and Drainage and
2.00 Infra 1,000.00 200.00 300.00 500.00 1,000.00
Upgrading of River walls and
Pumping Station
Riverine Rehabilitation and
3.00 Environme 600.00 110.00 220.00 270.00 600.00
Development Project
nt
Construction of Kindergarten
4.00 Rooms for preparation for K+12 Infra 20.00 10.00 20.00 30.00
program
Traffic and Security Facilities
5.00 Infra 10.00 10.00 10.00
Improvement
Community-based Mangrove
6.00 Rehabilitation and Protection Envi 10.00 10.00 10.00
Project
Housing Projects (Completion
of Tanza Socialized Housing and
7.00 Infra 500.00 100.00 200.00 200.00 500.00
proposed Medium-rise storey
building along R-10 road)
Improvement of Navotas Public
8.00 Cemetery Facilities Infra 60.00 60.00 60.00
(Construction of Crematorium)
Ecological Solid Waste
9.00 Envi 20.00 20.00 20.00
Management Program
Construction of Hall of Justice
10.00 Infra 50.00 50.00 50.00
Building
Construction of Navotas
10.00 Infra 250.00 250.00 250.00
Museum
Total 4,520.00 1,320.00 1,460.00 1,740.00 4,520.00