The recent approval of Iloilo City’s PHP 4.134 billion budget for 2025 sparks crucial questions about the local government’s financial strategy.
On paper, the city’s fiscal health appears solid, with PHP 5 billion in cash reserves and a debt servicing ratio of just 5.62%, well below the 20% legal ceiling.
Yet, the average taxpayer faces a different reality. Real property tax (RPT) rates have surged by 300%, with the full weight of these adjustments taking effect in 2026. This disconnect between City Hall’s fiscal confidence and the burdens on taxpayers warrants scrutiny.
Why, for instance, does a city with billions in cash deposits still borrow money, incurring PHP 394.9 million in annual loan amortizations? City officials cite the need for liquidity and sustainable growth, but this approach raises fundamental questions about governance priorities and financial stewardship.
Loans can be powerful tools for local governments to fund infrastructure, social services, and economic development projects, particularly when revenues fall short. However, best practices dictate that loans should be taken only for projects with clear, measurable benefits to constituents. Market redevelopments are good, as long as vendors are not burdened by higher leases just to pay off City Hall’s debts.
The Local Government Code allows borrowing as long as annual debt servicing does not exceed 20% of regular income. This safeguard ensures that debt obligations do not compromise essential services. But with Iloilo City sitting on PHP 5 billion in cash reserves, citizens are right to ask if this borrowing is necessary, or if existing funds could be better utilized.
Effective borrowing by local governments is characterized by transparency, strategic allocation, and a direct link between projects and improved public welfare. Key best practices include:
- Project Prioritization: Loans should fund projects with a high return on investment, such as infrastructure that attracts business investments or social programs that reduce long-term costs.
- Public Consultation: Citizens should have a voice in deciding how borrowed funds are used, ensuring alignment with community needs.
- Debt-to-Income Balancing: While Iloilo City’s debt service ratio is low, excessive reliance on loans can strain future budgets, especially when coupled with rising tax rates.
- Alternative Financing: Before borrowing, local governments should explore grants, public-private partnerships, or revenue enhancements to minimize debt.
City officials point to visible improvements, such as plaza renovations and public housing projects, as evidence of fiscal responsibility. These are indeed commendable developments. However, the broader picture tells a more complicated story.
The newly adjusted RPT framework has generated significant additional revenue, but the steep 300% increase has drawn ire from taxpayers. While the city offered a temporary 40% discount on RPT payments, the relief is fleeting, and many fear what lies ahead in 2025 and beyond.
Moreover, maintaining large cash reserves while paying interest on loans raises questions about financial strategy. If the city can afford to hold PHP 5 billion in cash, why not allocate a portion of those funds to settle loans or reduce tax burdens?
Local governments must strike a delicate balance between saving for future needs, funding immediate projects, and keeping taxes reasonable. Fiscal health is not measured by how much money a government has in the bank but by how effectively it uses those funds to improve lives.
As Iloilo City moves forward with its 2025 budget, the administration must address the growing gap between financial metrics and the lived experiences of ordinary Ilonggos. Clearer communication, better prioritization of projects, and greater transparency in fund allocation are necessary to restore public trust.
For now, taxpayers deserve a straightforward answer: Why borrow and raise taxes when billions in cash are sitting idle?
