Group slams real-property tax cuts in Renewable Energy Act

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TUESDAY, 19 JULY 2011 20:11 FELIX N. CODILLA III / REPORTER

THE Association of Geothermal Energy Producing Local Government Units (Agepl) is urging President Aquino to suspend the implementation of the Renewable Energy Act of 2008 as this will affect the special education fund (SEF) of local government units (LGUs).

Specifically, the Agepl is opposed to the reduction of real-property tax (RPT) on power plants as provided for by Republic Act (RA) 9513, or the Renewable Energy Act of 2008, since RPT is a big source of LGUs SEF.

They said the President has sufficient powers to suspend the RPT provision almost in the same manner he postponed the election of the Autonomous Region in Muslim Mindanao.

RA 9513 provides incentives to renewable-energy (RE) developers like RPT and income-tax holidays. Section 2 C of its implementing rules and regulations reduces the 2.5-percent RPT to only 1.5 percent which is a big blow to the P100 million collected by Ormoc annually from Energy Development Corp. (EDC).

The SEF gets 40 percent of the RPT, while the rest is divided between the LGU (70 percent) and barangays (30 percent). Among the barangays, the host community gets the lion’s share of 50 percent, while the other half is divided by the rest of the villages.

Since 2006 when Ormoc began collecting RPT from EDC, it has spent P237,066,430 to build 183 classrooms, 32 two-unit comfort rooms, 66 perimeter fences, four covered courts, three stages, among others, in different schools. When before, Ormoc classrooms accommodated 85 to 115 students each, the ratio has gone down to 1:60.

The Ormoc LGU also established the country’s first e-learning center and plans to build 10 more similar facilities this year. It allotted P1 million in 2010 to finance 44 scholars and P1.2 million in 2011 for 37 scholars. It also provides school supplies to all elementary pupils in public schools every school year consisting of four notebooks, two pad papers and two pencils.

The generous SEF has helped improve Ormoc’s educational standards with its students clinching  topnotch slots at the National Achievement Test in Region 8. But all these are bound to change after the Bureau of Local Government Finance confirmed in a legal opinion that the intent of the RPT reduction is to reduce, if not do away with the SEF.

EDC’s RPT is expected to drop to P60 million if the law is implemented, which will adversely impact on  SEF. Expected to be hit first are the teachers’ allowances, hiring of city-paid job order teachers, and participation to sports events like the provincial meet, Eastern Visayas Regional Athletic Association and Palarong Pambansa.

Since RA 9513 is already enacted, Ormoc City Mayor  Eric Codilla said the best thing they can do is to “tweak” the law’s applicability so that the RPT reduction will be applied to host communities of newly developed RE sources. Applying the law on existing RE sources is unfair considering the RPT is already part of the developers’ production cost.

Power rates of existing plants are based on present tariffs. But reducing the RPT will not necessarily result to lower power rates, Mayor Codilla observes, because RA 9513 does not compel power plant owners to do so. This makes the law advantageous only to investors, and not to government and consumers.

The mayor also complained that Agepl, of which he is president, wasn’t consulted during the crafting of the law.

Mayor Codilla calls on Education Secretary Armin Luistro to join them in their lobby considering the seven LGUs under Agepl are expected lose approximately P500 million in SEF. This doesn’t include those from other LGUs hosting other forms of RE like hydro, wind and biomass.

SEF has helped the education sector so much that LGUs have become less dependent on projects from the Department of Education (DepEd). With the SEF reduction, Mayor Codilla said Luistro should expect more LGUs to bang on his door begging for projects. He said if DepEd officials are willing to defend their budget proposal in Congress, all the more should they lobby for the SEF’s retention as the money involved is automatically appropriated by law.

Ormoc reels from the P40-million reduction of its internal-revenue allotment after the Supreme Court upheld the conversion of eight new cities, and another P40 million lost from the RPT will greatly affect its delivery of social services. Member LGUs of Agepl are Ormoc City; Kananga, Leyte; Valencia, Negros Oriental; Sorsogon City; Manito, Albay; Kidapawan, Cotabato; and Tiwi, Albay.