A recent visit at the slaughterhouse of San Fernando, Pampanga has re-underscored the need for local government units (LGUs) to find creative ways of sourcing funds for local development. There are certainly good practices on this yet most of our LGUs are still grappling with modalities to allocate scarce financial resources to finance daily operations and fulfill their public service mandate.
Local governance research literatures suggest that nearly two decades after the enactment of the Local Government Code of 1991, most of our LGUs are still highly dependent on their Internal Revenue Allotment (IRA) to finance everything. This is true both with small and big LGUs.
The same studies show that most of our local government leaders have not utilized, much less optimized, the economic powers they’ve been vested with by the Code. They have lingered much in the realm of political power and have failed to move beyond it, forgetting that money – a great deal of it – is needed in the exercise of political powers. When an LGU relies heavily on its IRA, it can only do so much, which is not enough to yield meaningful impacts on the lives of constituents and in the local community in general.
In our region, the Galing Pook-awarded San Carlos City in Negros Occidental has demonstrated that in addition to the IRA, an LGU may generate additional income by effectively managing its public economic enterprises such as the bus terminal, the public cemetery, the public market, the slaughterhouse, etc. Seeing this through requires political will and innovative thinking that applies the principles of management and entrepreneurship and corrects the traditional thinking that government is there to provide needs for free.
Yet until today, many LGUs still subsidize the operations of their public markets or slaughterhouses, where the monthly collection is not even enough to pay for utilities and salaries. Worse, the subsidy has to be taken from the already limiting IRA, thus sacrificing more dimensions of development.
The slaughterhouse of San Fernando, Pampanga used to be a public economic enterprise – owned, managed and operated by the LGU, with losses averaging 300,000 pesos a month. In 2005, a year after Mayor Oscar Rodriguez assumed office, the city administration realized that running the slaughterhouse is draining its finances because of so many factors, among which is the fact that it is not within the LGU’s core competence. The city government then decided to improve its slaughterhouse under the Build-Operate-Transfer (BOT) scheme. It entered into a 25-year BOT agreement with the private group, the Philippine Abattoir Development Corporation (PADC), which has been managing the operations of the slaughterhouse since 2006.
There have been encouraging developments subsequent to the sealing of this public-private partnership. The physical facilities were greatly improved and the slaughterhouse was given Double A (“AA”) accreditation by the National Meat Inspection Commission, expanding the areas it could serve. Today, the San Fernando slaughterhouse generates a gross income of more than one million pesos a month, contributing more than 200,000 pesos a month to the city government income. By extension, this means that the local government is able to source additional funds to finance its development initiatives and at the same time concentrate its efforts on areas within its core competence.
The case of San Fernando’s slaughterhouse is an illustration of good governance, which is central to the discussions in the Institute for Solidarity in Asia (ISA) Associates Boot Camp I’m attending now here in Pampanga. The Camp is an intensive training in the use of the Performance Governance System (PGS), an adaptation of Kaplan and Norton’s Balanced Scorecard, which the Harvard Business Review described as “one of the most important management ideas in the past 75 years.”
I’ll write about the PGS in the next blog.
