Metropolitan Arrangements - Philippine Institute for Development ...

4 Managing UrbanizationUnder a DecentralizedGovernance Framework
The immediate cause of the shortage and, sometimes near
absence, of basic public services in large cities is the inability of
governments to fund the delivery of the right quantity and quality of
these services. At the national level, central governments may be so
preoccupied with stabilization issues and the need to deal with the
problem of large central government fiscal deficits to have enough
time and resources to address unmet needs in the urban sector.
Moreover, central governments may not be in the best position to
levy and/or collect taxes and user charges that are suitable at
mobilizing public resources from the growth in urban fiscal capacity.
At the local level, the growth of local government revenues may be
dampened by centrally imposed constraints on their revenue-raising
powers, and limited by low revenue effort and inappropriate
intergovernmental fiscal relations.
How can cities and other urban areas capture the fiscal benefits
of urbanization so that they can then increase supply of public services
in their respective jurisdiction For this to happen, cities should be
empowered to levy and collect taxes and fees that can better exploit
thei r gains from urbanization. There should be no disincentives arising
from the grant system against improvements of local government
revenue effort. Also, there should be appropriate credit institutions
and mechanisms that will enable subnational governments to finance
investments of a relatively large scale.
In the conduct of any study on urban management, one is always
confronted with the difficulties of delineating which are "urban areas."
This study tried to resolve this issue by defining its coverage to include
all cities plus non-city regional growth centers This decision was borne
more out of convenience than out of rigorous analysis. Admittedly,
some cities will not qualify as "urban" under most definitions. However,
this option is a a convenient way of categorizing most urban areas
without getting bogged down by the definition problem. Also, the
focus on city local government units (CLGUs) is motivated by a desire
to study urbanization in the context of the more decentralized
governance framework that is engendered with the passage of the
Local Government Code (LGC) of 1991. Note that the fiscal gap (the
di_rence between expenditure requirements/needs and revenues)
of urban LGUs tend to be magnified by the recent devolution of
fianctions from national government agencies.
1The municipal regional g_ovcth centers included in this study ate Santiago in Isabela, San Feriaando
in La Un_-on, _ad S',m P'e_nando in Pampanga,