Introductory Course on

Comprehensive Development Plan (CDP) Preparation

SESSION 4.3
LDIP Stream 2: Determining Investible Funds

A. Duration

90 minutes (1.5 hours)

B. Learning Objective

By the end of this session, participants shall have learned how investible funds to finance
programs and projects are determined.

C. Contents and Session Flow

1. The Resource Person starts the session by recalling that the LDIP as defined in the
RPS Sourcebook is list of programs and projects that the LGU wants to carry out;
and that it should also contain a program for planned financing or for using the
investible portion of the local budget to finance the implementation of those programs
and projects.

A Local Development Investment Program and the resulting capital budget is only as
good as the financial plan for the proposed projects.

The Local Finance Committee (LFC) composed of the Local Planning and
Development Coordinator, the Budget Officer, and the Treasurer is charged under
the 1991 LGC with the setting of the “level of the annual expenditures and the
ceilings of spending for economic, social, and general services based on the
approved local development plans” (Sec. 316, c). As such, they should undertake the
required financial plan development in close coordination with the Local Development
Council (LDC) for consideration and approval of the Sanggunian. The LFC could be
expanded to include the Sanggunian appropriations committee chair, the Assessor,
the LGU accountant and a private sector representative (preferably an investment
banker), and a representative from civil society.

The number of public projects that the LGU can finance depends on the following:

a. Revenue level of the LGU

b. Level of recurring local government operating expenditures
c. Current public debt level
d. Statutory debt ceiling
e. Potential sources of additional revenue available for investment project financing

2. He/she then continues the lecture by explaining the steps to determine investible
funds listed as follows:

a. Collect revenue data and determine historical trends.

Revenue is any inflow of funds, regardless of whether the source is repayable or

not.

Revenue data include the following:

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 Introductory Course on
Comprehensive Development Plan (CDP) Preparation

i. Real property taxes

(The Resource speaker then shows a sample table showing a Time Series Record of
Property tax Revenue)

Time Series Record of Property Tax Revenue

(4) (5)
(1) (2) (3)
Coll. Total Revenue From
Assessed Valuation Tax Rate Tax Levy
Year As % Property Taxation
(a) (b) (a) (b) (c) (a) (b) of (a) (b)
Amount % Change General SEF Total Amount % Change Levy Amount % Change

INSTRUCTIONS:
For each year:
(1) Enter Assessed Valuation in Column (1a) and the Property Tax Revenue Collected in Column (5a).
(2) Enter the tax rates in Columns (2a) and (2b) and enter the total in Column (2c).
(3) Multiply the assessed Valuation (1a) by the Total Tax Rate Column (2c).
(4) Compute the Tax Collections as % of Levy, Column (4), by dividing the Total Property Tax Revenue
Column (5a) by the Tax Levy Column (3a).
(5) Compute the % Change over the preceding year and enter the results in the appropriate columns.
(6) The exercise will require 3 to 5 years of historical data to be used as the basis for a 3-year projection.

ii. Business fees & licenses

iii. Other taxes
iv. Service & Operations Income
v. Internal Revenue Allotment (IRA)
vi. All Others

(The Resource Person flashes on the screen a sample Table of a Time Series
Record of Revenues Other than Property Tax)

Time Series Record of Revenue Other Than Property Tax

(1) (3) (4)
(2) (5) (6) (7)
Bus. Fees & Svc. & Opns. Total Local
Other Taxes IRA All Others Grand Total
Year Licenses Income Revenue
(a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b) (a) (b)
Amt % ch Amt % ch Amt % ch Amt % ch Amt % ch Amt % ch Amt % ch

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 Introductory Course on
Comprehensive Development Plan (CDP) Preparation

INSTRUCTIONS:
For each year
(1) Enter the amount of revenue from each source in the appropriate column.
Note:
a. Operating & Service Income covers public markets, slaughterhouses and other LGU economic
enterprises.
b. IRA refers to the internal revenue allotment of the LGU.
c. All others include Other grants, and inter-government and inter-fund transfers.
(2) Compute the % Change over the preceding year and enter the results in the appropriate
columns.
(3) The exercise will require 3 to 5 years of historical data to be used as the basis for a 3-year
projection.

The analyses of current revenue levels must distinguish between:

i. recurring revenue sources (real property tax, business fees and licenses,
other taxes, service and operations income, and IRA) and non-recurring
ones such as:

 grants-in-aid from local and foreign sources,

 special appropriations or transfers from Congress or other units of
government;
 interfund and inter-local government transfers.

This is because a local development investment program needs a stable

source of financial resources that depend on revenue sources which are
assured of being collected every year. Thus, what is relevant for
investment planning purposes are projections of recurring revenue
sources.

The analysis must consider the following:

i. impact on revenue volume of changes in the tax base such as increases

in the number of taxable structures or businesses; and changes in tax
rates.

ii. the occurrence of an unusually large increase in a particular revenue

source for a particular year which may be attributed to:

1) a rate change,
2) new system of billing and collection, or
3) other procedural and system improvements.

Such an increase cannot be expected to continue into the future. The impact of
one-time procedural and system changes such as the granting of tax amnesties
and enactment of new tax laws and ordinances on revenue growth must,
therefore, be segregated in the analyses.

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 Introductory Course on
Comprehensive Development Plan (CDP) Preparation

b. Collect operating expenditure data including outstanding debt service and

determine trends.

Operating expenditures include personnel services (including social charges) and

maintenance and other operating expenses (MOOE) such as office supplies and
expenses, utilities (power, water, telecommunications), office equipment and
miscellaneous expenses.

(The Resource Speaker flashes on the screen a sample table showing a Time Series
Record of LGU Operating Expenditures)

Time Series Record of LGU Operating Expenditures

(1) (2) (3) (4) (5)
Gen. Public Services Social Services Economic Services All Others Grand Total
Year (a) (b) (a) (b) (a) (b) (a) (b) (a) (b)
Amount % Amount % Amount % Amount % Amount %
Change Change Change Change Change

INSTRUCTIONS:
For each year
(1) Enter the amount of operating expenditure in the appropriate column.
Note that debt and capital expenditures are excluded.
Column headings should reflect the major operating expenditure categories in the LGU.
Note:
a. General public services include LGU administration, peace and order, etc.
b. Social services include education, health, welfare, etc.
(2) Compute the % Change over the preceding year and enter the results in the appropriate
columns.
(3) The exercise will require 3 to 5 years of historical data to be used as the basis for a 3-year
projection.

Obligated Debt Service Expenditure

(1) (2) (3=2+1)
Year
Principal Interest Total

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 Introductory Course on
Comprehensive Development Plan (CDP) Preparation

INSTRUCTIONS:

This exhibit presents existing debt service requirements and, therefore, involves no projections.
Simply compile the total debt service requirements for local general obligation debt for each of the 3-
year projection period for all LGU obligations from existing accounting records and enter these
amounts in the appropriate columns.

Historical analyses need to be done on the following operating expenditure items:

i. General Public Services

ii. Social Services
iii. Economic Services

The amount of debt service payments for existing and other anticipated LGU
obligations must be established, and compared to the relevant (if any) statutory
debt service ceilings.

c. Project future recurring revenue & operating expenditure levels. Possible

assumptions include:

i. No change - This method may be used in two instances:

 if the historical trend analysis indicates little or no change, and

 if there is no reason to expect a change in this pattern to provide a

conservative estimate of an uncertain revenue source such as grants
and aid from the central government or from foreign sources.

ii. Change by constant amount - The technique assumes yearly changes

based on a constant amount.

iii. Change at constant rate - The technique assumes annual changes at a

constant rate based on the historical annual average percentage change
estimate.

iv. Change correlated with demographic or economic variable - This method

assumes a constant relationship between the financial variable and a
demographic or economic variable.

(At this point, the Resource Speaker flashes on the screen a sample table showing
projections of Property Tax Revenue)

Projection of Property Tax Revenue

(1) (2) (3) (4) (5)
Projected Tentatively Projected Tax Rate Projected Total Tax Projected Total
Assessed Levy Collection Revenue From
Year
Valuation (a) (b) (c) as Property Taxation
(a) General SEF Total (a) Percent (a)
Amount Amount of Levy Amount

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 Introductory Course on
Comprehensive Development Plan (CDP) Preparation

INSTRUCTIONS:
For each year:
(1) Enter the projected Assessed Valuation in Column (1) and the estimated Collection as % of
Levy in Column (4).
(2) Enter the tentatively projected tax rates in Columns (2a) and (2b) and enter the total in
Column (2c).
(3) Multiply the projected Assessed Valuation (1a) by the Total Tax Rate Column (2c) to obtain
the total Tax Levy, Column (3).
(4) Multiply Column (3) by the Collection as % of Levy, Column (4) and enter the result into the
Total Property Tax Revenue, Column (5).
In developing this revenue base for preliminary testing, different assumptions may be used
regarding the projected tax rate. For example, a) the current tax rate can be used for the entire
projection period; or b) some change in the tax rate can be assumed over the projection period
depending on the adopted LDIP financing package.

d. Compute funds available for financing new investments

After the future revenue inflows and corresponding expenditure outflows are
established, the new investment financing capacity of an LGU can be established
based on the following computational procedure:

3. The RP ends the session with an open forum.

D. Methodology

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 Introductory Course on
Comprehensive Development Plan (CDP) Preparation

1. Lecture – discussion/ demonstration

E. Resource Pool

1. Resource Person (RP) – the principal lecturer-presenter of the topics covered under
the session
2. Facilitator – assistant to the principal lecturer-presenter. He/she shall:

2.1 introduce the RP and give overview of the topic or activity;

2.2 assist in the preparation and organization of the electronic visuals before the
session starts;
2.3 prompts the RP about time limit of his/her lecture/presentation;
2.4 assist in operating the LCD Projector and laptop during the presentation; and

2.5 moderates discussion or open forum after the lecture/presentation.

3. Documentor – be responsible for recording the proceedings, paying particular

attention to issues raised and topics that needed further clarification/elaboration as
expressed by the participants, and for preparing a documentation report to be
submitted to the Resource Person and Facilitator.

4. Secretariat
4.1 ensures the readiness of the venue, sound system, materials and equipment
needed for the session, e.g., laptop, screen, LCD projector before the session
starts;
4.2 takes charge of the registration of participants;
4.3 coordinates with concerned venue personnel and ensures the security of
equipment, supplies and materials used before, during and after each day’s
session/s; and
4.4 prompts caterer or food servers for punctual serving of snacks and meals at
appropriate periods of the day.

F. Space and Materials Required

1. One large room that can accommodate 45 – 50 persons, set up in clusters, with each
cluster comprising of a rectangular table and chairs for about 10 – 12 participants;
with clear view from audience to presenters' stations; one (1) small square or
rectangular table for an LCD projector at the front section of the room facing a
screen; 1 rectangular table at the back section of the room, behind the clusters of
tables for the Secretariat.

2. LCD Projector
3. Laptop compatible with the LCD projector
4. Whiteboard
5. Whiteboard markers

G. Presentation Materials

1. Electronic visuals (Powerpoint presentation materials)

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