PROVIDING FOR A NEW CLASSIFICATION OF PROVINCES, CITIES AND MUNICIPALITIES AND FIXING MAXIMUM AMOUNTS EXPENDABLE FOR SALARIES AND WAGES, AMENDING FOR THE PURPOSE REPUBLIC ACTS NUMBERED FORTY-FOUR HUNDRED SEVENTY-SEVEN, TWENTY-THREE HUNDRED SIXTY-EIGHT AND FORTY-THREE HUNDRED FIFTY-EIGHT.

• Number: Presidential Decree No. 465
• Sections: 11

Preamble

WHEREAS, pursuant to Section 2 of Republic Act No. 4477,

provinces and cities shall be classified by the Secretary of Finance

every four fiscal years on the basis of the average annual income of the

local units as certified by the Auditor General (now the Chairman,

Commission on Audit) ;

WHEREAS, the Secretary of Finance shall likewise classify

all municipalities every four fiscal years pursuant to Section 4 of

Republic Act No. 2368 and subclassify all first class municipalities

under Section 2 of Republic Act No. 4358;

WHEREAS, the minimum annual income of P1.5 million fixed

under Republic Act No. 4477 for first class provinces and cities; and

the minimum annual income of P2.5 million fixed under Republic Act No.

4358 for first class-1 municipalities, as well as the maximum and

minimum ranges fixed for the other classes are no longer in proportion

to the present income of the local government;

WHEREAS, in view of new issuances and changes in fiscal

policies, there has been a marked and significant increase in the

collection of local revenues; and

WHEREAS, the classification of provinces, cities and

municipalities serves, among other purposes, as basis for fixing the

maximum tax ceilings imposable by the local governments under the Local

Tax Code, as amended by Presidential Decree No. 426;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution,

in order to provide a more equitable system of classifying provinces,

cities and municipalities that will be commensurate with their

respective revenue-raising capacities, hereby adopt and fix, as it is

hereby adopted and fixed, the following income classifications of

provinces, cities and municipalities:

Section 1 Classification of Provinces and Cities.

SECTION 1. Classification of Provinces and Cities.—

Provinces and cities, except Manila and Quezon City, are divided into

five main classes according to their average annual income during the

last four fiscal years, as follows:

First Class.—The provinces and cities that have obtained

an average total revenue of three million pesos or more per annum;

Second Class.—The provinces and cities that have

obtained an average total revenue of one million five hundred thousand

pesos or more but less than three million pesos per annum;

Third Class.—The provinces and cities that have obtained

an average total revenue of one million pesos or more but less than one

million five hundred thousand pesos per annum;

Fourth Class.—The provinces and cities that have obtained

an average total revenue of five hundred thousand pesos or more but

less than one million pesos per annum; and

Fifth Class.—The provinces and cities that have obtained

an average total revenue of less than five hundred thousand pesos per

annum.

Revenue, as used herein, shall be interpreted to mean all

income and receipts accruing to the province or city except

unappropriated balances, proceeds from bond issues, proceeds from or

repayment of loans, aid from National Government, private contributions

or donations, return of advances to economic enterprises, sales of fixed

assets, income from sale of real property, prior year's adjustment, and

other receipts not regularly recurring each fiscal year.

Section 2 Classification under this Decree.

SEC. 2. Classification under this Decree.—Upon

the effectivity of this Decree, and for each period of four consecutive

fiscal years thereafter, the Secretary of Finance shall classify all

provinces and cities, except Manila and Quezon City, which shall remain

as special class cities, on the basis of the average total revenues of

each province or city derived during the last four consecutive fiscal

years immediately preceding such classification according to the

provisions of this Decree as certified by the Chairman, Commission on

Audit: Provided, That the first classification shall take effect

July first, nineteen hundred and seventy-four: Provided, further,

That a province or city which has been in existence for a period of

less than four full fiscal years immediately preceding the initial

classification herein provided shall be classified on the basis of its

average income during such lesser number of full fiscal years or year

immediately following its organization as such province or city: And

provided, finally, That no readjustment of classification shall be

made oftener than once in four consecutive fiscal years after the first

classification provided in this Decree, except in cases of diminishing

revenues when the Secretary of Finance may order at any time the

readjustment to the classification of any province or city in accordance

with the foregoing schedule.

Section 3 Subclassification of first class provinces and cities.

SEC. 3. Subclassification of first class provinces

and cities.—Upon the effectivity of this Decree and after each

period of two consecutive fiscal years thereafter, the Secretary of

Finance shall subclassify all first class provinces and cities according

to their average annual income actually realized from regular sources

during the last two fiscal years immediately preceding the

subclassification, as follows:

First Class-A.—The provinces and cities that have

obtained an average total revenue of seven million pesos or more per

annum;

First Class-B.—The provinces and cities that have

obtained an average total revenue of five million pesos or more

but less than seven million pesos per annum; and

First Class-C.—The provinces and cities that have

obtained an average total revenue of three million pesos or more but

less than five million pesos per annum.

Section 4 Classification of municipalities.

SEC. 4. Classification of municipalities.—Municipalities

are divided into six main classes according to their average annual

income during the last four fiscal years, as follows:

First Class.—Municipalities that have obtained an average

total revenue of one million five hundred thousand pesos or more per

annum;

Second Class.—Municipalities that have obtained an

average total revenue of one million pesos or more but less than one

million five hundred thousand pesos per annum;

Third Class.—Municipalities that have obtained an average

total revenue of five hundred thousand pesos or more but less than one

million pesos per annum;

Fourth Class.—Municipalities that have obtained an

average total revenue of three hundred thousand pesos or more but less

than five hundred thousand pesos per annum;

Fifth Class.—Municipalities that have obtained an average

total revenue of one hundred thousand pesos or more but less than

three hundred thousand pesos per annum; and

Sixth Class.—Municipalities that have obtained an average

total revenue of less than one hundred thousand pesos per annum.

Revenue, as used herein, shall be interpreted to mean all

income and receipts accruing to the municipality except unappropriated

balances, proceeds from bond issues, proceeds from or repayment of

loans, aids from the National Government, private contribution or

donations, return of advances to economic enterprises, sales of fixed

assets, income from sale of real property, prior year's adjustment, and

other receipts not regularly recurring each fiscal year.

Section 5 Classification under this Decree by the Secretary of Finance.

SEC. 5. Classification under this Decree by the

Secretary of Finance.—Upon the effectivity of this Decree, and for

each period of four consecutive fiscal years thereafter, the Secretary

of Finance shall classify all municipalities on the basis of the average

total revenue of each municipality during the last four consecutive

fiscal years immediately preceding such classification according to the

provisions of this Decree as certified by the Chairman, Commission on

Audit; Provided, That the first classification shall take

effect July first, nineteen hundred and seventy-four; Provided,

further, That a municipality which has been in existence for a

period of less than four full fiscal years immediately preceding the

initial classification herein provided shall be classified on the basis

of its average income during such lesser number of full fiscal years or

year immediately following its organization as such municipality; And

provided, finally, That no readjustment of classification shall be

made oftener than once in four consecutive fiscal years after the first

classification provided in this Decree, except in cases of diminishing

revenues when the Secretary of Finance may order at any time the

readjustment of the classification of any municipality in accordance

with the foregoing schedule.

Section 6 Subclassification of first class municipalities.

SEC. 6. Subclassification of first class

municipalities.— Upon the effectivity. of this Decree and after each

period of two consecutive fiscal years thereafter, the Secretary of

Finance shall subclassify all first class municipalities according to

their average annual income actually realized from regular sources

during the last two fiscal years immediately preceding the

subclassification, as follows:

First Class—A.—Municipalities that have obtained an

average total revenue of five million pesos or more per annum;

First Class-B.—Municipalities that have obtained an

average total revenue of three million five hundred thousand pesos or

more but less than five million pesos per annum; and

First Class-C.—Municipalities that have obtained an

average total revenue of one million five hundred thousand

pesos or more but less than three million five hundred thousand pesos

per annum.

Section 7 Maximum Amount Expendable for Salaries and Wages.

SEC. 7. Maximum Amount Expendable for Salaries and Wages.—That

total annual appropriations for salaries and wages of provincial, city

and municipal officials and employees for one fiscal year shall not

exceed forty-five per cent (45%), in the case of all first and second

class provinces, cities and municipalities, and fifty-five per cent

(55%) in the case of those lower than second class, of the total annual

income actually realized from regular sources during the next preceding

fiscal year or the current fiscal year estimates from the same sources

certified as collectible by the provincial or city treasurer concerned,

which ever is lower. The appropriations for salaries and wages of

officials and employees in the public schools, hospitals, health and

agricultural services, public utilities, markets and slaughterhouses and

other economic enterprises, owned, operated and maintained by the

province, city or municipality, as well as representation and emergency

cost-of-living allowances, shall not be included in the computation of

the maximum amount expendable for salaries and wages.

The Secretary of Finance, however, may authorize

appropriations in excess of the percentages hereinabove fixed subject to

such conditions as he may impose, but in no case shall the excess in

appropriations for salaries and wages me more than twenty-five per cent

(25%) of the maximum expendable amounts nor shall such exemption be

granted in case of overdraft or imminence thereof.

Section 8 Fixing of the Maximum Annual Salary Rates of Local Elective and Appointive Officials.

SEC. 8. Fixing of the Maximum Annual Salary Rates of

Local Elective and Appointive Officials.—Notwithstanding the new

classification provided for in this decree, the annual salary rates of

local elective and appointive officials shall be determined and fixed

according to the maximum rates prescribed in the salary scales provided

for in Republic Act No. 4477 in the case of provinces and cities and

Republic Act No. 6414 in the case of municipalities on the basis of the

official classification by the Secretary of Finance of provinces, cities

and municipalities as of June 30, 1973.

Section 9 Repealing clause.

SEC. 9. Repealing clause.—Section 5 of Republic

Act No. 4477 and Section 4 of Republic Act No. 2368 are hereby expressly

repealed.

This Decree shall form part of the laws of the land and all

laws, executive orders, administrative orders, rules or regulations or

parts thereof, contrary to or inconsistent with any of the provisions of

this Decree are likewise hereby repealed and/or modified accordingly.

Section 10 Effectivity.

SEC. 10. Effectivity.—This Decree shall take

effect on July 1, 1974.

Done in the City of Manila, this 20th day of May, in the year

of Our Lord, nineteen hundred and seventy-four.

(Sgd.)

FERDINAND E. MARCOS

President of the Philippines

By the President:

(Sgd.)

ALEJANDRO MELCHOR

Executive Secretary