Only two things are certain in this world – death and taxes.
In the case of Iloilo City, there is a third – loans.
Iloilo City’s recent move to secure a PHP 300-million loan for public market improvements raises questions about its fiscal strategies. While the redevelopment of markets in Jaro, La Paz, and Arevalo is undoubtedly a worthy endeavor, the timing and implications of this loan, along with a recent hike in real property taxes, are drawing scrutiny from residents and fiscal observers alike.
The city council’s decision to authorize this new loan follows on the heels of an earlier PHP 1.75 billion loan used for similar purposes, further deepening the city’s debt. The question begs: why raise real property taxes if loans are readily available? Even more troubling is the fact that City Hall’s reports to the Bureau of Local Government Finance indicate surplus funds for development projects. This leads to an uncomfortable truth—are loans and tax hikes necessary, or is this a sign of misaligned priorities?
Raising taxes is always a sensitive issue, especially when the city boasts excess cash for development. Borrowing money, while potentially reducing the immediate burden on the public, could be a deferred form of taxation. After all, these loans must eventually be repaid—with interest—by the very taxpayers who are already shouldering increased real property taxes. Could the city’s leadership have avoided this financial strain on residents through more efficient management of existing funds?
One might argue that the loans, with their 4% interest rates, are beneficial given the city’s debt servicing levels are below the mandated 20% ceiling. However, this doesn’t mean borrowing should be the first course of action. Good fiscal management is about balancing priorities and finding solutions that minimize long-term burdens on taxpayers. Borrowing can be a sound strategy, but only when necessary and not as a cover for fiscal mismanagement or political posturing.
As some economists have pointed out, “Every peso borrowed today is a future tax burden.” This is particularly troubling for low-income families already struggling with inflation and economic uncertainties.
Globally, best practices in local governance suggest that cities with strong financial health rely on a combination of borrowing and effective tax policies, paired with transparency and robust public consultations. In places like Singapore and Norway, governments manage resources prudently, focusing on long-term sustainability and maximizing returns on public investments. They prioritize infrastructure spending but ensure debts remain low and are matched by sufficient revenues without overburdening the public.
In the Philippines, cities like Valenzuela have demonstrated fiscal discipline by carefully managing their finances, investing in revenue-generating projects, and borrowing only when necessary. Valenzuela City, for instance, has consistently managed to improve public services without excessive borrowing, relying on efficient use of local funds and careful financial planning.
Iloilo City, on the other hand, should reconsider its fiscal approach. Borrowing should not be the go-to solution when the city’s financial reports indicate surplus funds. Raising taxes and taking out loans simultaneously suggest a lack of clear prioritization. Instead of adding to the public’s burden, City Hall should review its financial strategies and explore ways to optimize the use of available resources. Improving the city’s markets is important, but not at the cost of burdening future generations with unnecessary debt.
In the end, fiscal responsibility is about finding a balance between immediate needs and long-term sustainability. City leaders must act prudently, ensuring that today’s decisions do not become tomorrow’s liabilities.
