Local Government Code of 1991
Section 531. Debt Relief for Local Government Units. -
(a) Unremitted national collections and statutory contributions. - All debts owed by local government units to the national government in unremitted contributions to the Integrated National Police Fund, the Special Education Fund, and other statutory contributions as well as in unremitted national government shares of taxes, charges, and fees collected by the local government units, are hereby written off in full.
(b) Program loans. -
(1) Program loans secured by local government units which were relent to private persons, natural or juridical, shall likewise be written off from the books of the local government units concerned: Provided, however, That the national government agency tasked with the implementation of these programs shall continue to collect from the debtors belonging to the private sector concerned.
(2) Program loans granted to local government units by national government agencies and which were utilized by the local units for community development, livelihood, and other small-scale projects are hereby written off in full.
(c) Settlement of debts due to government financing institutions (GFIs), government-owned and controlled corporations (GOCCs), and private utilities. The national government shall assume all debts incurred or contracted by local government units from GFIs, GOCCs, and private utilities that are outstanding as of December 31, 1988, in accordance with the following schemes:
(1) Debts due GFIs. - The national government may buy outstanding obligations incurred by local government units from government financing institutions at a discounted rate.
(2) Debts due GOCCs. - The national government may settle such obligations at discounted rate through offsetting, only to the extent of the obligations of local governments against the outstanding advances made by the National Treasury in behalf of the government-owned and controlled corporations concerned.
(3) Debts Due Private Utilities. - The national government may settle these obligations at a discounted rate by offsetting against the outstanding obligations of such private utilities to government-owned corporation. GOCCs may in turn offset these obligations against the outstanding advances made by the National Treasury in their behalf.
In the case of obligation owed by local government units to private utilities which are not indebted to any GOCC or national government agency, the national government may instead buy the obligations of the local government units from the private utilities at a discounted rate, upon concurrence by the private utilities concerned.
(d) Limitations. - Obligations to the Home Development and Mutual Fund (Pag-ibig), Medicare, and those pertaining to premium contributions and amortization payments of salary and policy loans to the Government Service Insurance System are excluded from the coverage of this Section.
(e) Recovery schemes for the national government. - Local government units shall pay back the national government whatever amounts were advanced or offset by the national government to settle their obligations to GFIs, GOCCs, and private utilities. The national government shall not charge interest or penalties on the outstanding balance owed by the local government units.
These outstanding obligations shall be restructured and an amortization schedule prepared, based on the capability of the local government unit to pay, taking into consideration the amount owed to the national government.
The national government is hereby authorized to deduct from the quarterly share of each local government unit in the internal revenue collections an amount to be determined on the basis of the amortization schedule of the local unit concerned: Provided, That such amount shall not exceed five percent (5%) of the monthly internal revenue allotment of the local government unit concerned.
As incentive to debtor-local government units to increase the efficiency of their fiscal administration, the national government shall write off the debt of the local government unit concerned at the rate of five percent (5%) for every one percent (1%) increase in revenues generated by such local government unit over that of the preceding year. For this purpose, the annual increase in local revenue collection shall be computed starting from the year 1988.
(f) Appropriations. - Such amount as may be necessary to implement the provisions of this Section shall be included in the annual General Appropriations Act.