UNIT I

LOCAL GOVERNMENT CONCEPTS

AND
BASIC POLICIES UNDERLYING THE
LOCAL GOVERNMENT CODE

Introduction
To set the tone for your proper appreciation and clear understanding of
this unit, key concepts on local government and administration are hereby
defined or explained. These concepts include local government,
decentralization, devolution, local autonomy, and municipal corporation,
among others. It is important that these and other concepts on local
government and the basic principles concerning the Local Government Code
are stated clearly to forestall any confusion that may arise out of a
miscomprehension of these terms.

Objectives of
the Unit
At the end of this unit, you should be able to:
Define the basic concepts appertaining to local government;
.

Explain and distinguish the two (2) schools of thought on local

government and the public and proprietary nature of local
governments; and
Recite the declared policy of the State on local governments,
determine the application of the Code, and enumerate the rules
for its interpretation.

Suggested
Timeframe: 5 hours
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Lesson 1. Local Government

Concepts

Lesson 1
Objective
At the end of this lesson the student should be able to:
1. Define political law, municipal cooperation, local government, local
autonomy, decentralization and devolution; and

2. Distinguish public corporation from private corporation, devolution

from decentralization, and de jure and de facto local governments.

Local Government Concepts

Political Law
The highest court of the land in People v. Perfecto (43 Phil. 887)
defines political law as that branch of public law which deals with the
organization and operation of the government organs of the state with the
inhabitants of its territory. Political law covers such subdivisions as
Constitutional Law, Administrative Law, Law of Public Officers, and Law of
Public Corporations. The fourth subdivision, (Law of Public Corporations) is
the concern and focus of this module.

Public and Private Corporations

The Corporation Code of the Philippines (Sec. 2) defines a corporation
as an artificial being created by operation of law, having the right of succession
and the powers, attributes and properties expressly authorized by law or
incident to its creation. Corporations are generally classified as either public or
private. Some experts include quasi-public corporation as a third classification.
A public corporation is one that is created by the State either by general or
special act for purposes of administration of local government or the rendering
of service in the public interest. On the other hand, a corporation is private if it
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is formed for some private purpose, benefit, aim or end (Sec. 3, Act No. 1459).
Public corporations and private corporations are distinguished from each other
on three grounds, namely: purpose of creation, will under which it is created,
and nature of act of creation. Public corporations are created for the
administration of civil or local governments, while private corporations are
established for private aim or benefit. On the basis of the will under which
corporations are created, public corporations are created by the will of the State
either by special or general act, whereas a private corporation is formed
through the will of the incorporators. As regards the nature of the act of
creation, public corporations are the involuntary consequence of legislation.
On the other hand, private corporations result from the voluntary agreement or
act by and among its members or incorporators.

Public corporations are classified either as quasi- or semi-public or

municipal. Quasi-public corporations are those created as agencies of the State
for limited or specific purposes devoid of the powers and liabilities of self-
governing corporations. The definition of municipal corporation is supplied by
the discussion below.

Municipal Corporations
and Local Governments
What is a municipal corporation? Citing Dillon (Mun. Corp., Vol. 1:
58-59), Martin (1970: 5) defined municipal corporation as a body politic and
corporate constituted by the incorporation of the inhabitants of a city or town
for the purpose of local government thereof; it is established by law partly as
an agency of the State to assist in the civil government of the country, but
chiefly to regulate and administer the local and internal affairs of the city (or)
town which is incorporated. A municipal corporation is considered as a
subordinate branch of the government of the State performing powers and
functions which have been duly delegated. It is a political unit of the State and
has been variedly regarded as its agent and instrumentality (Martin, citing
McQuillin, Mun. Corp., Third Edition: 456).

A municipal corporation is a public corporation created by the

government for political purposes or reasons and having powers of local
legislation.

What are the requisites for the creation of municipal corporations?

There are four requirements for the creation and existence of a municipal
corporation as follows: (1) charter; (2) corporate name; (3) people; and (4)
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place or territory. Charter is the law creating, incorporating or legalizing the

incorporation of a municipal corporation. Its corporate name is the title by
which the legal personality of the municipal corporation is known and on the
basis of which all corporate acts are performed. The people are the inhabitants
constituting the population who are invested with the ultimate political and
corporate powers and functions acting directly or through duly constituted
delegates or representatives within their territorial limits.

What about local government? Local government is defined as a

political unit or subdivision of a nation or State having substantial control over
local affairs including, but not limited to, the power to impose and collect taxes
(De Guzman and Tapales 1990 citing the United Nations). Humes and Martin
(1973: 1) view local government as having a defined area, a population, a
continuing organization, and the authority to undertake and the power to carry
out public activities within its jurisdiction as defined or prescribed in its
charter. The preceding definition is an attempt to prescribe the attributes of
local government. Much earlier, Alderfer (1964: 2) proposed to draw the extent
of the application of local government when he said that local government
consists of all units of government under national and state levels in federal
systems.

Supplementing and clarifying the extent of application of local

government earlier drawn by Alderfer, De Guzman and Tapales (1990)
proposed two schools of thought on local government, namely: the traditional-
legal school of thought and the modern school of thought. Under the first, local
governments are viewed as political subdivisions of the national government,
excluding the field offices of the line agencies geographically located within
the jurisdiction of the local government units. The second concept looks at
local government as the geographic area where all government units,
including the field offices of the line agencies of the national government, are
considered as part of the local government. Under this model, the offices of
the line agencies decentralized in various administrative regions, including the
personnel thereof stationed or assigned in the field offices are part and parcel
of local government, but which under the traditional-legal model are excluded.
The traditional-legal view considers only the political subdivisions of the
national government as constituting local government.

Under the 1987 Constitution, local government refers to provinces,

cities, municipalities, and barangays and the autonomous regional government
in Muslim Mindanao and Autonomous Region in the Cordilleras (Sec. 1, Art.
X).
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In political jurisprudence, local governments are also referred to as

municipal corporations.

Local Autonomy and

Decentralization
The subordinate nature of local governments in the Philippines is a
result of the unitary nature of our system of government where local
governments occupy a position of dependence on and inferiority to the central
government. Unlike in a federal system, the state governments enjoy almost
absolute, if not absolute, independence from the federal government. In a
unitary state like ours, the powers to create subordinate political units of
government, define their structure, powers, responsibilities, and to determine
their very existence rest upon the national government.

From mere administrative conduits providing administrative support

and backstop to the national government in the performance of its multifarious
functions, local government units now command a great amount of control
over local affairs from recruitment of personnel to budgetary outlay, resource
allocation, and taxation, inter alia (among others). Many of the functions of the
central government have already been devolved to the local governments
courtesy of the Local Government Code of 1991. The Constitution directs that
territorial and political subdivisions enjoy local autonomy (Sec. 2, Art. X and
Limbona vs. Conte Mangelin, G.R. No. 80391, March 28, 1989).

What is local autonomy then? Autonomy is either decentralization of

administration or decentralization of power. There is decentralization of
administration when the central government delegates administrative powers to
political subdivisions to broaden the base of governmental powers, and in the
process, make local government more responsive and accountable thereby
ensuring their fullest development as self-reliant communities. They also
become effective partners in national development and social progress. On the
other hand, decentralization of power involves the abdication of political
power in favor of local government units declared to be autonomous. In the
second case, the autonomous government is free to chart its own destiny and
shape its future with only a modicum of supervision from the central
government in the management of its activities.

What about decentralization, what does it mean? Through the process

of decentralization, the basic powers of the national government are transferred
to local governments to permit the citizens to actively participate in
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governmental and community affairs. The degree of autonomy granted to and

enjoyed by local governments is largely dependent upon the expanse of powers
and functions of the national government devolved to the local governments.
Akin to decentralization are the concepts of devolution and deconcentration.
Devolution is the act by which the national government confers power and
authority upon its various local government units to perform specific functions
and responsibilities (Sec. 12 (a), LGC). While devolution deals with the
conferment of powers and responsibilities to the local government units,
deconcentration is the distribution of requisite and necessary authority and
power to the appropriate regional or field office whose major functions are not
devolved to local government units (Sec. 528, LGC).

Is decentralization beneficial? Decentralization has been held to be

advantageous for various reasons. One advantage is the sharing of
responsibility which accords the people greater involvement in the decision
making process. This, in turn, encourages and fosters self-reliance which
entices the people to release their energies to undertake things commonly
beneficial to them. Decentralization likewise shatters the capital city syndrome
and weans the local units from their dependence on the central government.
Subsequently, the local areas develop the initiative to be innovative and
entrepreneurial.

The decentralization program under the Code involves the transfer of

responsibility for the provision of basic services and facilities, transfer of
regulatory functions, improved national government-local government
relations, and institutionalization of local governmentnon-governmental
organization/private sector relations. The responsibility for the provision of
basic services and facilities shall be devolved to local government units within
six (6) months after the effectivity of the Code on January 1992.

De Jure and De Facto Local

Governments
Municipal corporations created by the operation of law are de jure
while those which exercised their powers from time immemorial with a charter
which by lapse of time is presumed as either lost or destroyed are de facto.
Where the people have, for years, been imposing and collecting revenues and
exercising governmental powers, a de facto municipal corporation has existed.

A municipal corporation is de facto if it possesses the following

requisites, namely:
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a valid law authorizing its incorporation;

an attempt in good faith to organize under that valid law;
a colorable compliance with that law; and
an actual assumption of corporate powers.

Public and Proprietary Nature of

Local Governments
Local governments and municipal corporations have dual nature:
governmental or public and proprietary. In their public character, they serve as
instrumentalities of the State in carrying out the functions of the government.
In their private aspect, they act as agencies of the community in the
administration of local affairs. It is in their private character that they act as
business corporations and as separate entities for the furtherance of their own
interests and not as subdivisions or units of the State (Lidasan vs. COMELEC,
G.R. No. L-280890, October 25, 1967). As private corporate entities, local
governments manage public utilities, like electric service and waterworks,
public markets, cemeteries, canteens, etc.

But what is the ultimate test in determining whether a corporation is

public or private? The ultimate and true test in determining whether a
corporation is public or private lies in its relation with the State. If the
corporation is created and acts as a State agency or instrumentality carrying out
its governmental functions, then it is public. Otherwise, it is private (Martin
citing Elliot, Municipal Corporation, Third Edition and Cooley, Municipal
Corporation).

Activity

Distinguish public corporation from private corporation by filling in

the boxes/blank spaces in the matrix below with the appropriate information
or data.

After performing this activity, tear off the sheet/page which

contains the matrix and submit it to your tutor/instructor for evaluation.
Print your name on the upper right hand corner of the page.
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Distinguishing Features

Type/Nature Purpose of Will Under Which Nature of Act of

of Corporation Creation it is Created Creation

Public

Private
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Lesson 2. Policies Underlying the

Local
Government Code

Lesson 2
Objective
At the end of this lesson the student should be able to:
1. Recite the declared policy of the State concerning local governments;
and
2. Enumerate the rules of interpretation of the Code and the laws
governing local governments.

Policies Underlying the Local

Government Code
Declaration of Policy
It is the declared policy of the Philippines that its territorial and
political subdivisions of the State shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the attainment of
national goals. In order to achieve this end, the State is mandated to provide
for a more responsive and accountable local government structure made
possible through a system of decentralization (Sec. 2(a), Chapter 1, LGC of
1991 and Sec. 3(a), Rule 1, RRI of the LGC). Decentralization is to proceed
from the national government to the local government units.
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The Code has also declared that:

The State shall ensure the accountability of local government units by

instituting effective mechanisms of recall, initiative and referendum;

The State shall require all national government agencies and offices to
conduct periodic consultations with local government units and
concerned sectors of the community like non-governmental
organizations, peoples organizations, etc., before any project or
program is undertaken or implemented in their respective jurisdictional
areas; and

Every local government unit shall exercise the powers that are
expressly granted to them, those that are implied from such powers, and
also those powers that are necessary, appropriate or incidental for its
efficient and effective governance, including those that are essential to
promote the general welfare (Ibid., pars. b, c, and d).

Scope and Application

The Code and the IRR of the Code apply to all provinces, cities,
municipalities, barangays and such other political and territorial subdivisions
of the Philippines as may be created by law; local government units in the
Autonomous Region in Muslim Mindanao and other autonomous regions or
political units that may be created; and national governmental agencies and
offices, government-owned and-controlled corporations and their officials to
the extent provided in the Code (Ibid., Sec. 4).

Rules of Interpretation
The Code itself enumerates the rules that will be applied in the
interpretation of its provisions. These rules, which are set forth in Sec. 5 of the
Code and the IRR, are the following:
The general welfare provisions of the Code, any provision of the Code
on the powers of local government units, and any question or doubt
regarding the devolution of powers to local government units shall be
liberally interpreted and resolved in favor of local government units.

Any fair or reasonable doubt on the powers of local government units

shall be liberally interpreted and resolved in their favor. Cases
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involving lower level and higher level local government units shall be
resolved in favor of the former.

In case of doubt, any tax ordinance or revenue measure or action shall

be interpreted or construed strictly against the local government unit
enacting or passing the measure, and liberally in favor of the taxpayer.
Any tax exemption, incentive, or relief granted by any local
government unit according to the Code shall be construed strictly
against the person claiming it.

The customs and traditions in the place where controversies arising

from the Code may be applied or resorted to where no legal provision
or jurisprudence applies.

Rights and obligations existing on the date of effectivity of the Code

and arising or growing out of contracts or any source of prestation
involving a local government unit shall be governed by the original
terms and conditions of said contracts or law in force at the time such
rights were vested.

Laws Governing Local

Governments
The Constitution (Sec. 3, Art X) mandates the enactment of a local
government code which provides among others, for:

A more responsive and accountable local government structure;

A system of decentralization with effective mechanisms of recall,
initiative, and referendum;
The allocation among the different local government units of their
powers, responsibilities, and resources;
The appointment and removal, term of office, and salaries of local
government officials;
The powers and functions and duties of local officials; and
All other matters relating to the organization and operation of the local
government units.
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In view and in furtherance of the objective of the abovecited

constitutional mandate, the Congress of the Philippines enacted into law
Republic Act Numbered 7160, otherwise known as the Local Government
Code of 1991. To facilitate the implementation of the will of the law, the Rules
and Regulations implementing the Code have likewise been promulgated.
These implementing rules and regulations prescribe the procedures and
guidelines for or underlining the implementation of the Local Government
Code of 1991 to facilitate compliance therewith and achieve the objectives
thereof. The national government, through its executive department, may from
time to time, issue orders and directives augmenting the implementing rules
and regulations under the doctrine of subordinate legislation.

Activity

Find out how the Local Government Code could be improved.

Interview local government officials and get their suggestions on this.

Report your findings in the class.

Unit Summary
Having been introduced to the key concepts on local government and
the basic principles underlying the Code, you now have a better grasp of the
subject of local government. Knowledge of the key terms on local government
and the basic policies governing the Code will be very useful to you as you
progress from this unit to the other units.