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									Guidelines on Provincial/Local Planning and
    Expenditure Management (PLPEM)




   Investment Programming
    and Revenue Generation

               (Volume 3)
Outline

                                                                            Investment
1 Introduction                             Planning     PPAs               Programming
                                                                               Revenue
                                                                               Generation
   •   Overview
   •   Guiding Principle, Approach                                      PDIP/
                                                        Project
   •   Structure and Organization    Implementation   Evaluation &
                                                                         AIP


                                      Monitoring &    Development
                                       Evaluation
2 Overview of PDIP                                            Locally-funded
                                                                 projects

3 The PDIP Preparation Process                         Budgeting

                                                      Expenditure
   •   Setting Up                                     Management
   •   The Seven Step Process
Introduction: Overview

Outputs                                                                               Investment
                                                      Planning       PPAs            Programming
                                                                                     Revenue
•   Provincial Development Investment                                                Generation
    Program (PDIP)
                                                                                  PDIP/
     - Key influence in linking municipal and                       Project        AIP
       component city investment projects with   Implementation   Evaluation &
                                                  Monitoring &    Development
       provincial, regional, national PPAs
                                                   Evaluation
                                                                         Locally-funded

•   Annual Investment Program                                               projects


•   process ends in time for the budget call —                     Budgeting

    July                                                          Expenditure
                                                                  Management


Historical coverage

•   Six Year PDIP
•   First three years: firm
Introduction: Overview

Key Inputs

                                       PPAs
                                       vision,                Investment
                                       objectives            Programming
                 Planning
                                                               Revenue
                                                              Generation

                                                            PDIP/
                                                             AIP
                                         Project
             Implementation            Evaluation &
              Monitoring &             Development                    Historical projections:
               Evaluation                                             revenues & expenditures
                              Locally-funded   Analyses &
                                 projects      proposals

                                        Budgeting

                                      Expenditure
                                      Management
Introduction: Guiding Principles, Approach

Basic guiding principle:

The use of public money requires obtaining the greatest possible value for each invested
peso, thus maximizing economic and social results.



Characteristics of Approach:

•   Coherent and unified methodology including financial management tools.

•   Properly constituted and well organized PDIP Committee and clear working
    procedures.

•   Meaningful involvement of citizenry in the PDIP process.

•   Regular and responsive review of the PDIP.
Introduction: Guiding Principles, Approach

Other significant characteristics of the PDIP Guidelines


•   PDIP process is a combined technical and political process.

•   Prioritization of PPAs: basis for project implementation and thus a critical influence on
    the local economy.

•   Investment funds are scarce resources and new PPAs give rise to long term
    maintenance and operational costs: PDIP must take a reasonable and long term
    financial perspective.

•   Provincial planning needs to be backed by enhanced provincial capacity to exercise
    its powers to generate revenues (traditional and non-traditional).
Introduction: Guiding Principles, Approach

Seven Step Process

1. Establish PDIP policies.

2. Develop and define the prioritization approach.

3. Formalize and rank the list of development investment projects.

4. Analyze the development investment financing capacity.

5. Iteratively develop the PDIP financing plan and finalize the investment
   schedule.

6. Legally adopt the PDIP.

7. Update the PDIP.
Introduction: Structure of the Guidelines

 Introduction                                        Part I

 Overview of the PDIP                                Part II

 Setting Up

 Seven Step Process

 1.   Establish PDIP policies                        Part III
 2.   Develop and define prioritization approach
 3.   Formalize and rank list of projects            PDIP Preparation Process
 4.   Analyze investment financing capacity
 5.   Iteratively develop financing plan, schedule
 6.   Legally adopt PDIP
 7.   Update PDIP

 Annexes

 Case Studies
Overview

What is a Development Investment?
All LGU expenditures: Capital investment or Operating expenses.


                             •   Expensive
                             •   Do not recur annually
                             •   Last a long time (a multi-year service life)


 Development                 •   Hard assets (e.g. roads, bridges, buildings)
                             •   Soft assets (e.g. HR programs)
 Investments


 Note:
 • Direct costs of a capital investment usually exceed the cost of the actual physical investment.
   They may include financing and engineering costs, preparation costs, land acquisition, and other
   costs.
 • Large capital projects will affect a number of annual budgets.
Overview

What is a Development Investment?

Sample list of capital projects that may be included in the PDIP:

1.   New or expanded facilities (such as police and fire stations, government offices and
     facilities, water and wastewater treatment facilities, public works facilities, etc.);

2.   Large-scale rehabilitation or replacement of facilities (repaved streets, remodeled
     buildings, etc.);

3.   Major pieces of equipment (such as fire engines, trucks, backhoes, etc.);

4.   Costs of land acquisition, engineering and/or architectural work related to new or
     rehabilitated facilities; and

5.   Soft capital-type LGU-wide human resource, employment and business development
     program like credit facilities and livelihood programs.
                                                                           PPAs
     Concern
                                             “Hard”                                                 “Soft”
Financial Resource                                                            Assessment of properties subject to appraisal
Mobilization                                                                  Business tax mapping
                                                                              Formulation of 5-year development plan.
                                                                              Reward system: achievers in income generation
Administrative        LGU computerization program/e-governance                LGU computerization program/e-governance
Support Services      (hardware component)                                    (software and training component)
                      Construction of a covered quadrangle for use of LGU     Promotion of a client friendliness program
                      clients                                                 Employee competency assessment program
Public Information    Setting up of information and advisory billboards       Printing and dissemination of LGU brochures
and Education                                                                 Development and upgrading of LGU website
                                                                              Development of Interactive Information Booth
Economic              Public market                                           Launching of LGU product caravans
Enterprises           Sports complex                                          Printing of LGU postal stamps
                      Livelihood training center                              Launching of regular job fairs
Public Safety and     Public Safety Center (including acquisition and         Promotion of a home safety program
Security              installation of modern equipment)                       Year round training of public safety personnel
                      River flood watch towers, public warning system         Community watch program
Health and            Sanitary land fill                                      Waste segregation/reduction program
Environment           Diagnostic Center for Specialized Medical Services      Health privilege cards
                      Senior Citizens Healthy Lifestyle Center                Dog vaccination
                      Public toilets                                          Anti- smoke belching campaign
                                                                              Rounding-up stray animals
Urban Utilities and   New roads and bridges                                   Anti-jaywalking campaign
Transportation        River dike                                              Driver education campaign
                      Road traffic signalization with signages
                      Drainage improvements (e.g. pumping stations)
                      Transport terminal
                      Artesian wells
Citizens’ Affairs     Women’s Center                                          Fast tracking CMP projects
                      Public housing to informal dwellers                     Updating homeowners’ associations directory
Overview
What is a PDIP?


• A document that formalizes and ranks PPAs and matches the prioritized
  project list with the investment financing capacity of the province.

• A multi-year (a 6-year period time frame with the first 3 years firmed up along
  the priorities of the LCE) planning tool used to identify needed capital projects
  and to coordinate the financing and timing of investments

• Not limited to PPAs funded out of the 20% of the IRA. It covers all
  development investments to be implemented within the province, including
  those to be financed from national funds and other external sources.

• A rolling program, because subsequent year projects are moved up with each
  new program year.
Overview
What are the benefits of a PDIP?

1. Improves the coordination of development investments with the PDPFP.

2. Provides a structured mechanism for development investment decision making at the
   provincial level.

3. Serves as a key provincial financial management tool.

4. Improves LGU credit rating.

5. Improves LGU administration.

6. Promotes intra-provincial cooperation.
      Level                         Body                      Major Outputs
                                                                                     What is the role of
     National         National Economic and Development      Medium-term Public      PDIP in the
                                   Authority                 Investment Program
                                                                   (MTPIP)           hierarchy of
                                                                                     investment
                                                                                     programs?
     Regional           Regional Development Council        Regional Development
                                                             Investment Program      MTPIP: NG PPAs funded from
                                                                   (RDIP)            national budget, GFIs, private
                                                                                     sector/LGUs, etc (e.g. grants)

                                Alignment,
                             reconciliation, and                                     RDIP: NG-funded PPAs including
                                integration
                                                                                     those of GOCCs located in region,
                                                                                     LGU-funded projects with regional
                                                                                     impact and inter-provincial projects
Provincial/ Highly   Provincial               City          Provincial Development
urbanized and        Development              Development    Investment Program
Independent          Council                  Council               (PDIP)
component cities                                                                     PDIP: NG-funded and implemented
                                                                                     projects located in province,
                                                                                     provincial-funded projects, and inter-
                                Alignment,                                           municipal projects funded and
                             reconciliation, and
                                integration                    City Development      implemented by LGUs concerned or
                                                             Investment Program      through external assistance. (NG
                                                                     (CDIP)          projects may be generated and
                                                                                     identified in PDIP but are to be
Municipal/           Municipal                City          Municipal Development    included in corresponding NG
Component City       Development              Development    Investment Program      agency budget.)
                     Council                  Council              (MDIP)

                                                                                     Serves as framework for the MDIP
                                                               City Development      of municipalities and CDIP of
                                                             Investment Program      component cities of province.
                                                                     (CDIP)
PDIP Process: Setting Up

Starts with the formation by the Governor of an organization that will be directly
responsible for the preparation of the PDIP.

• PDIP Committee
   – To lay out policies, directions and action plan that will guide PDIP preparation; working with a
     technical secretariat, the Committee will be responsible for the actual preparation of the PDIP;
   – To include a PDIP Finance Subcommittee responsible for financial recommendations (multi-
     year revenue and expenditure forecasts, investment financing capacity, financing strategies)

• PDIP Technical Secretariat
   – To provide technical and administrative support to the Committee;
   – Recommended: PPDO staff act as PDIP Technical Secretariat

• PDIP Coordinator
   – To coordinate and monitor the PDIP process on behalf of the Committee.
   – Recommended: PPDC act as PDIP Coordinator
PDIP Process: Setting Up

Recommended composition of the PDIP Committee:

a.   The Executive Committee (EXECOM) of the Provincial Development Council (PDC) --
     empowered to represent the PDC and act as its implementing arm as provided for in
     the 1991 LGC

b.   The Provincial Finance Committee (PFC)

c.   Other local officials who could provide substantive inputs to the formulation of the PDIP

d.   Other members of the PDC who could provide substantive inputs to the formulation of
     the PDIP
PDIP Process: Setting Up

    Sample PDIP Action Plan

               Activity                      Output                       Principal Actors                Duration
                                                                                                         (example)
     1. Establish PDIP policies    Formal provincial                PDIP Committee                   March to mid-
                                   development investment                                            March
                                   policies
     2. Develop and define the     Project screening and            PDIP Committee                   Mid-March to Mid-
     prioritization approach       prioritization criteria                                           April
     3. Formalize and rank the     Formalized list of prioritized   All department heads             Mid- April Mid-May
     list of development           projects based on the            PDIP Committee
     investment project.           consolidated list of             PDIP Secretariat
                                   identified projects from
                                   PDPFP
     4. Analyze the investment     Initial investment financing     Finance Group of PDIP            Mid-April to Mid-
     financing capacity analysis   capacity analysis                Committee                        May

     5. Develop the PDIP           Investment schedule for          PDIP Committee                   Mid-May to end-
     financing plan and finalize   PDIP                             PDIP Secretariat                 May
     the investment schedule
     6. Legally adopt the PDIP     Duly enacted PDIP                PDC en-banc                      June
                                                                    Provincial Legislative Council

     7. Update the PDIP            Updated PDIP                     PDIP Committee                   April to June of the
                                                                    PDIP Secretariat                 succeeding years
                                                                                        “Without PDIP”
                                                                                         revenue and
                                Development                                               expenditure
                                 Goals and                  PPAs from                projections using the
Inputs
                               Objectives from               PDPFP                  Tools and Techniques
                                  PDPFP                                                    for BPEM



                                    Step 2                    Step 3                       Step 4
              Step 1
                              Develop and define    Formalize and rank the list   Analyze the development
Process   Establish PDIP
                               the prioritization   of development investment       investment financing
             Policies
                                  approach                   projects                     capacity


                                 Prioritization            Fully Costed           Initial Annual Investment
Output     PDIP Policies         Approach &              and Ranked List              Financing Capacity
                                    Criteria                of Projects                    Estimates




                Step 5
              Iteratively
             develop the           Step 6                    Step 7
          PDIP Financing        Legally adopt              Update the
          Plan and finalize       the PDIP                   PDIP
           the investment
              schedule



          PDIP Financing
            Plan and
                                     PDIP                 Updated PDIP
           Investment
            Schedule




                                    Current
                                   year slice
                                       for
                                  integration
                                      into
                                    annual
                                    budget
                                                                   PDIP Process Flow Chart
                                                                   Steps 1, 2
Step 1: Establish PDIP Policies

•   Investment policies guide the whole PDIP process.

•   Key policy issues:

     – Methods of financing
     – Criteria for prioritization

•   Policies developed within overall planning, financial, institutional and legal
    framework governing operations of LGUs, especially the 1991 LGC.

     – E.g. LGUs must continuously operate within framework of a balanced budget;
       borrowings not allowed for LGUs with deficits.
Step 1: Establish PDIP Policies

Examples of PDIP Policies


•   Prioritization criteria limited to development objectives in PDPFP.

•   Approximately 60% of annual regular revenues of province allocated for PDIP project
    financing.

•   Amount from annual regular revenues available for PDIP projects will be leveraged via
    direct loans or bond flotation.

•   Alternative PDIP financing tools evaluated based on total financing costs including all
    financial and time-related transaction costs.

•   Land re-adjustment and special assessment will be major cost recovery tools for urban
    road and drainage projects.

•   Full cost recovery for economic enterprise projects under the PDIP.
Step 2: Develop and Define Prioritization Approach



 The screening and prioritization process aims to arrive at a cohesive and
 transparent screening and ranking of PPAs proposed for investment by province.

 •   In general, prioritization criteria should be consistent with PDPFP objectives and
     PDIP policies (Step 1).

 •   The suggested approach is a variant of the Goals Achievement Matrix (GAM)
Step 2: Develop and Define Prioritization Approach

Process Flow for Development of PDIP Ranking Criteria
 Get               Assign weights      Define specific     Assign weights     Determine
 development       (Wo) to each        criteria to         (Wc) to each       each criterion
 objectives from   objective.          assess              criterion          weight (W)
                                       objectives          representing
 PDPFP                                                                        W = Wo * Wc
                                                           contribution to
                                                           each objective




Chosen criteria should:

• Provide information that is clear both to participants and to users of the process.

• Minimize double-counting of evaluative criteria.

• Be practical in terms of cost, time, and personnel available.
Step 2: Develop and Define Prioritization Approach

  Sample Project Evaluation Criteria and Criteria Weights
                  PDPFP Objective                       Weight      Criteria against which objective can be       Weight of     Criteria
                                                       assigned              assessed (in yy areas)                Criteria   Weight (W)
                                                          to                                                       within     W = W0 * Wc
                                                       objective                                                  objective
                                                         (Wo)                                                       (Wc)
   Provide employment to xx households in yy             0.30      Increase in employment                           0.60         0.18
   areas.                                                          Increase in household income                     0.40         0.12

   Objective Total                                                                                                  1.00         0.30

   Improve school retention in yy areas                  0.25      Decrease in no. of drop-outs                     1.00         0.25


   Objective Total                                                                                                  1.00         0.25
   Provide affordable housing for xx households in       0.20      No. of houses built                              0.70         0.14
   yy areas                                                        Decrease in number of homeless                   0.30         0.06

   Objective Total                                                                                                  1.00         0.20
   Prevent unnecessary agricultural land                 0.10      Prime agricultural land area maintained          1.00         0.10
   conversion in yy areas

   Objective Total                                                                                                  1.00         0.10
   Protect xx households in yy areas from flooding;      0.10      Reduction in number. of families affected by     1.00         0.10
   relocate population in critical areas                           flooding

   Objective Total                                                                                                  1.00         0.10
   Significantly reduce industrial discharge into yy     0.05      Reduction in pollution levels                    0.70         0.035
   areas                                                           Reduction in pollution-related diseases          0.30         0.015

   Objective Total                                                                                                  1.00         0.05
   Total                                                 1.00                                                                    1.00
                                                                                        “Without PDIP”
                                                                                         revenue and
                                Development                                               expenditure
                                 Goals and                  PPAs from                projections using the
Inputs
                               Objectives from               PDPFP                  Tools and Techniques
                                  PDPFP                                                    for BPEM



                                    Step 2                    Step 3                       Step 4
              Step 1
                              Develop and define    Formalize and rank the list   Analyze the development
Process   Establish PDIP
                               the prioritization   of development investment       investment financing
             Policies
                                  approach                   projects                     capacity


                                 Prioritization            Fully Costed           Initial Annual Investment
Output     PDIP Policies         Approach &              and Ranked List              Financing Capacity
                                    Criteria                of Projects                    Estimates




                Step 5
              Iteratively
             develop the           Step 6                    Step 7
          PDIP Financing        Legally adopt              Update the
          Plan and finalize       the PDIP                   PDIP
           the investment
              schedule



          PDIP Financing
            Plan and
                                     PDIP                 Updated PDIP
           Investment
            Schedule




                                    Current
                                   year slice
                                       for
                                  integration
                                      into
                                    annual
                                    budget
                                                                   PDIP Process Flow Chart
                                                                   Steps 1, 2, 3, 4
Step 3: Formalize and Rank the List of Projects

•   PPAs proposed in the PDPFP are translated into a formal list of investment
    requirements by estimating corresponding time-phased cost estimates and identifying
    sources of funding based on information supplied by project proponents.

     – Initial list:
           • All PPAs proposed in the PDPFP for implementation during the proposed period of PDIP coverage
           • Other projects deemed important but were not included in the PDPFP (e.g. sequel of previous project
             that needs to be completed, projects arising from emergency situations, etc.)--as much as possible
             consistent with PDPFP objectives.

     – PDIP Committee may decide to review the basis for or the estimated amount of a proposed
       PPA investment.
           • This may also involve refining estimates through a capital needs assessment analysis. In these cases,
             some pointers for conducting the review are provided in Annex B (Assessment of New Development
             Investment Needs).

•   The individual formalized projects are scored and ranked using the criteria and weights
    developed in Step 2.
Step 3: Formalize and Rank the List of Projects


Formalization Process

•   Status review             •   Status review by PDIP Committee of previously
                                  approved projects
•   Project information and
    proposals                 •   To weed out projects already or scheduled to be
                                  implemented
•   Technical review
                              •   To identify new PDPFP PPAs submitted but not yet
                                  implemented or scheduled.
Step 3: Formalize and Rank the List of Projects


Formalization Process

•   Status review

•   Project information and   •   Project proponents (i.e. provincial govt
    proposals                     departments) submit formal project proposals to
                                  confirm PPAs identified in PDPFP.
•   Technical review
                              •   Project information:
                                   –   Department
                                   –   Project name
                                   –   Location and Description
                                   –   Purpose
                                   –   Justification of need
                                   –   Costs and Expenditure by year
                                   –   Schedule of planning and implementation
                                   –   Required operating and maintenance costs
                                   –   Effect on revenue
                                   –   Recommended financing sources
  Step 3: Formalize and Rank the List of Projects

            Project Title                                             Submitted by
Sample:
            Date of Submission                                        Contact Person
Project
            Department
Proposal
            1.                         Total Estimated Project Cost
Form
            2.                         Project Description
(Table 4)
            3.                         Project History
            4.                         Project Justification
            5.                         Beneficiaries
            6.                         Financing Sources

                    Proposed Source                        Amount                        Out of which
                                                                       2007      2008   2009       2010   2011   2012
            Local Sources
            IRA
            Borrowings
            Grants
            Total
            7.                         Projected Revenues                               Operating Year
                                      Annual Revenues                  2007      2008   2009       2010   2011   2012 >
            Capital Revenues (from sale or lease of LGU assets
            Current Revenues (Service Income or sale of products)
            Total Revenues
  Step 3: Formalize and Rank the List of Projects

                    8.          Project Photo or Location Map           9.             Schedule of Project Activities and Capital Costs
Sample:
                                                                               Activity                   From-to Dates          Amount
Project
                                                                    Project prep activities
Proposal
                                                                    Site Acquisition
Form
                                                                    Detailed eng’g design
Cont’n
                                                                    Construction
(Table 4)                                                           Equipment & Furnishing
                                                                    Other costs
                                                                    Total Capital Costs
                                                                      10.                     Annual Current (Recurring) Costs
                                                                    Personnel Services
                                                                    MOOE
                                                                    Minor Capital Outlays
                                                                    Total Annual Costs
             11.               Please provide a summary to explain how the requested project would move the province toward achieving
                               goals identified in the PDPFP:




Note: NEDA Board ICC Proejct Evaluation Forms 1-6 may also be used.
  Step 3: Formalize and Rank the List of Projects

                1.   Need or problem addressed by project
Sample:
                2.   Extent to which the project meets the need or solve the problem
Checklist of
Project         3.   Number of people or area benefiting (province-wide, municipality, district, barangay

Justification   4.   Specific benefits to be derived
Information     5.   Volume of work, services or clients to be served
(Table 6)       6.   Relationship to other projects
                7.   Savings produced
                8.   Revenues generated
                9.   Availability of outside funding
                10. Time restrictions on funding availability
                11. Extent of economic development stimulated and jobs created
                12. Positive and negative environmental consequences
                13. Operating and maintenance costs implications
                14. Cost recovery opportunities
                15. Consistency with LGU plans and capital policies
                16. Project planning and construction period
                17. Level of public or stakeholder support or opposition
                18. Alternatives considered and reasons for rejection
                19. Consequences of deferring the project
Step 3: Formalize and Rank the List of Projects


Formalization Process

•   Status review

•   Project information and
    proposals

•   Technical review          •   Project proposal reviewed for completeness and
                                  accuracy. Inputs from:
                                   – PDIP Finance SubCommittee
                                   – Provincial planning, finance, engineering,
                                     architecture staff specialists
                                   – May include field visits and hearings

                              •   Project proposals with incomplete or questionable
                                  entries referred back to proponents.

                              •   Project proposals that pass formalization process
                                  are registered for prioritization.
 Step 3: Formalize and Rank the List of Projects

Sample:     1. Have all the items in the project proposal form been completed?
Project     2. Is the information complete and accurate?
Proposal
            3. Are all mathematical calculations accurate?
Review
            4. Is the project need identified and supported with appropriate data?
Checklist
            5. Are the cost estimates accurate and reasonable?
(Table 7)
            6. Have all the costs (including MOOE) been identified?
            7. Are the cost projections accurate and realistic?
            8. Is the cash flow projection for the proposed project sufficient to finance the project?
            9. Are the financing recommendations accurate and feasible?
Step 3: Formalize and Rank the List of Projects


Formalization Process

•   Status review

•   Project information and
    proposals

•   Technical review



Ranking of Project Proposals

•   Rate

•   Score

•   Rank
Step 3: Formalize and Rank the List of Projects

Ranking of Project Proposals (using evaluation criteria illustrated in Table 3)

Rate          •   Discuss each project proposal in relation to each of the selected criteria,
                  and give each project a rating of 1 to 10 based on how effectively it
Score             satisfies each criterion. Treat the ratings as the raw scores for each
                  criterion.
Rank
              •   Depending on the extent to which the project under consideration meets
                  the criteria, points could be assigned, for example:

                  To a great extent                             7 - 10 points
                  To somewhat great extent                      4 - 6 points
                  To a little extent                            1 - 3 points

              •   Multiply the project raw score for each criterion by the weight for that
                  criterion to arrive at the net score for the project for each of the criterion.
                  Total the net scores for each of the project.

              •   Rank the projects based on total net scores with the highest score
                  getting rank 1, the next highest with rank 2, etc.
 Step 3: Formalize and Rank the List of Projects

Sample Project Scoring Table (Table 8)




                                                          Rate




                                                   Rank

                                         Score
Step 3: Formalize and Rank the List of Projects

Sample Development Investment Project Summary Form (Table 9)
Step 4: Analyze Financing Capacity

•     Determine ability of province to fund proposed PDIP projects; based on historical and
      projected trends in revenues, expenditures, debts.

    Projection of LGU New Development Investment Financing Potential (Table 10)
    •Based on the “without PDIP” revenue and expenditure projections developed in these guidelines’ Volume 4 (Tools and
    Techniques on Budgeting and Public Expenditure Management).

                                      Item                                                 Projection Year
                                                                        2007      2008       2009       2010      2011    2012
     1.0      Projected Total Revenues
              Less:
     2.0      Projected Mandatory Expenditures                          1.0 and 2.0 derived from the revenue
              2.1 Personal Services
                                                                        and expenditure projections developed
                                                                        using Tools and Techniques on
              2.2 MOOE
                                                                        Budgeting and Public Expenditure
              2.3 Committed Capital Outlays
                                                                        Management.
              2.4 Obligated Debt Service
              2.5 5% Calamity Fund
     3.0      New Development Investment
              Financing Potential (3.0 = 1.0 – 2.0)
Step 4: Analyze Financing Capacity

•     Determine ability of province to fund proposed PDIP projects; based on historical and
      projected trends in revenues, expenditures, debts.

    Projection of LGU New Development Investment Financing Potential (Table 10)
    •Based on the “without PDIP” revenue and expenditure projections developed in these guidelines’ Volume 4 (Tools and
    Techniques on Budgeting and Public Expenditure Management).

                                      Item                                                 Projection Year
                                                                        2007      2008       2009       2010      2011    2012
     1.0      Projected Total Revenues
                                                                        1.0 (Total Revenues) includes all local
              Less:                                                     provincial revenue items, such as tax
     2.0      Projected Mandatory Expenditures                          revenues, i.e., business tax revenues,
              2.1 Personal Services                                     fees and charges, revenues from
              2.2 MOOE                                                  existing economic enterprises, etc., all
              2.3 Committed Capital Outlays                             external revenue items like IRA, shares
              2.4 Obligated Debt Service
                                                                        from national wealth, borrowings, other
                                                                        local/foreign grants, especially those
              2.5 5% Calamity Fund
                                                                        channeled through ODA facilities.
     3.0      New Development Investment
              Financing Potential (3.0 = 1.0 – 2.0)
Step 4: Analyze Financing Capacity

•     Determine ability of province to fund proposed PDIP projects; based on historical and
      projected trends in revenues, expenditures, debts.

    Projection of LGU New Development Investment Financing Potential (Table 10)
    •Based on the “without PDIP” revenue and expenditure projections developed in these guidelines’ Volume 4 (Tools and
    Techniques on Budgeting and Public Expenditure Management).

                                      Item                                                 Projection Year
                                                                        2007      2008       2009       2010      2011    2012
     1.0      Projected Total Revenues
              Less:
     2.0      Projected Mandatory Expenditures                          2.0 (Mandatory Expenditures) includes
              2.1 Personal Services                                     personal services, MOOE, already
              2.2 MOOE                                                  committed capital outlays outside of the
              2.3 Committed Capital Outlays                             proposed PDIP, obligated existing debt
              2.4 Obligated Debt Service
                                                                        service, and the 5% calamity funds.
              2.5 5% Calamity Fund
     3.0      New Development Investment
              Financing Potential (3.0 = 1.0 – 2.0)
Step 4: Analyze Financing Capacity

•     Determine ability of province to fund proposed PDIP projects; based on historical and
      projected trends in revenues, expenditures, debts.

    Projection of LGU New Development Investment Financing Potential (Table 10)
    •Based on the “without PDIP” revenue and expenditure projections developed in these guidelines’ Volume 4 (Tools and
    Techniques on Budgeting and Public Expenditure Management).

                                      Item                                                  Projection Year
                                                                        2007       2008       2009       2010       2011      2012
     1.0      Projected Total Revenues
              Less:
     2.0      Projected Mandatory Expenditures
              2.1 Personal Services
              2.2 MOOE
                                                                        3.0 (New Development Investment
                                                                        Financing Potential) is the difference
              2.3 Committed Capital Outlays
                                                                        between the projected total revenues
              2.4 Obligated Debt Service
                                                                        and the projected mandatory
              2.5 5% Calamity Fund                                      expenditures that can be regarded as a
     3.0      New Development Investment                                must for the province.
              Financing Potential (3.0 = 1.0 – 2.0)

    Note: some projects may require more detailed financial-economic studies. For this purpose, tools provided in the PED guidelines may be
    utilized. (PED guidelines also provide pointers for packaging projects to be funded from external sources.)
                                                                                        “Without PDIP”
                                                                                         revenue and
                                Development                                               expenditure
                                 Goals and                  PPAs from                projections using the
Inputs
                               Objectives from               PDPFP                  Tools and Techniques
                                  PDPFP                                                    for BPEM



                                    Step 2                    Step 3                       Step 4
              Step 1
                              Develop and define    Formalize and rank the list   Analyze the development
Process   Establish PDIP
                               the prioritization   of development investment       investment financing
             Policies
                                  approach                   projects                     capacity


                                 Prioritization            Fully Costed           Initial Annual Investment
Output     PDIP Policies         Approach &              and Ranked List              Financing Capacity
                                    Criteria                of Projects                    Estimates




                Step 5
              Iteratively
             develop the           Step 6                    Step 7
          PDIP Financing        Legally adopt              Update the
          Plan and finalize       the PDIP                   PDIP
           the investment
              schedule



          PDIP Financing
            Plan and
                                     PDIP                 Updated PDIP
           Investment
            Schedule




                                    Current
                                   year slice
                                       for
                                  integration
                                      into
                                    annual
                                    budget                       PDIP Process Flow Chart
                                                                 Steps 1, 2, 3, 4, 5, 6, 7
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule
Matching Process
                             From Step 3                             From Step 4


• Results in PDIP
  Financing Plan and         Total Project
                                                                   Initial Investment
  Investment Schedule         Cost ( incl.
                              additional
                                                                        Financing
                                                                        Capacity
                            MOOE required
                                                                        Estimates
                               by PDIP)
• Iterative process to                                                                                  Finalize PDIP
                                                                                                       Financing Plan
  balance investment                                                                                   and Investment
                                                             Yes                                          Schedule
  requirements (project
  costs) from Step 3,                         Equal on an
                                              annual basis                                             PDIP Financing
  with funding capability                          ?                                                      Plan and
                                                                                                         Investment
  from Step 4.                                                                                            Schedule
                                             No




                                            Identify additional                         Estimate New
                                           revenue measures                              Investment
                                           including revenues                             Financing
                                                from PDIP                                 Capacity



                                                                                    New Investment
                                           Additional revenue
                                                                                      Financing
                                               measures
                                                                                       Capacity
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule
Matching Process
                               From Step 3                             From Step 4


Iterations:
Investment                     Total Project
                                                                     Initial Investment
Requirements                    Cost ( incl.
                                additional
                                                                          Financing
                                                                          Capacity
                              MOOE required
                                                                          Estimates
                                 by PDIP)
Re-examine project list                                                                                   Finalize PDIP
                                                                                                         Financing Plan
generated in Step 3 to                                                                                   and Investment
consider:                                                      Yes                                          Schedule


                                                Equal on an
•   Scaling down                                annual basis
                                                     ?
                                                                                                         PDIP Financing
                                                                                                            Plan and
•   Phasing, or                                                                                            Investment
                                                                                                            Schedule
•   Deferring projects,                        No


with the objective of
                                              Identify additional                         Estimate New
reducing project cost for                    revenue measures                              Investment
the appropriate year(s) in                   including revenues
                                                  from PDIP
                                                                                            Financing
                                                                                            Capacity
which the deficit(s) occur.
                                                                                      New Investment
                                             Additional revenue
                                                                                        Financing
                                                 measures
                                                                                         Capacity
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule
Matching Process
                                 From Step 3                             From Step 4


Iterations:
Funding Capability               Total Project
                                                                       Initial Investment
                                  Cost ( incl.
                                                                            Financing
                                  additional
                                                                            Capacity
Relax investment budget         MOOE required
                                                                            Estimates
                                   by PDIP)
constraint by:
                                                                                                            Finalize PDIP

• Raising additional                                                                                       Financing Plan
                                                                                                           and Investment
                                                                 Yes                                          Schedule
  revenues (taxes, fees
  charges),                                       Equal on an
• Borrowing capital funds                         annual basis
                                                       ?
                                                                                                           PDIP Financing
                                                                                                              Plan and
  through loans, bonds or                                                                                    Investment
                                                                                                              Schedule
  joint venture and BOT-type                     No
  arrangements), or
• Re-allocating funds from
                                                Identify additional                         Estimate New
  the operating budget to the                  revenue measures                              Investment
                                               including revenues                             Financing
  investment budget.                                from PDIP                                 Capacity



                                                                                        New Investment
                                               Additional revenue
                                                                                          Financing
                                                   measures
                                                                                           Capacity
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule

Developing the PDIP              • Current regular provincial revenues (local taxes, fees
Financing Plan                     and charges, reserves, surpluses, IRA);

PDIP Committee investigates      • Borrowings (loans, lease financing, bond proceeds);
financing options and fiscal
feasibility of funding various   • Foreign and local grants including congressional funds
project requests. Some             allocated to House and Senate members;
important considerations:
                                 • Capital income from sale or use of provincial assets;
• Funding sources
                                 • Cost recovery elements for individual projects and the
• Revenue mobilization
                                   potential for the public investment to be revenue
• Process of formulating
                                   generating including user fees and charges, special
  financing plan
                                   levies, tax of future benefits;
• Resource mobilization
  tools
                                 • Cost sharing with other LGUs or national govt;
• Credit financing
                                 • Public-private partnerships; or

                                 • Combinations of the above.
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule

Developing the PDIP              • First priority is to collect revenues that are due from the existing
Financing Plan                     tax and service fee structure through:
                                     − Improved local revenue collection and tax admin.
                                     − Increasing the local tax base by improved mapping and
PDIP Committee investigates
                                       assessment procedures.
financing options and fiscal
feasibility of funding various
project requests. Some           • Enact enabling laws to tap new revenue sources and provide
important considerations:          flexibility to establish cost-effective tax & fee rates, e.g. tax on
                                   transfer of real property ownership; franchise tax; professional
                                   tax; amusement tax; special levies.

• Funding sources                • Permit and clearance fee rates should be sufficient to cover
• Revenue mobilization             actual cost of evaluation and issuance of permits.
• Process of formulating
  financing plan                 • Facility user fee levels should be increased and indexed to
• Resource mobilization            cover incremental costs of service delivery.
  tools
• Credit financing               • Through consultation, the province should know what and how
                                   much investment the community is willing to finance
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule

Developing the PDIP              Four Step Procedure
Financing Plan
                                 1. PDIP project services are categorized into the following to
PDIP Committee investigates         identify cost recovery potential.
financing options and fiscal        − General urban services
feasibility of funding various      − Public utilities and local services,
project requests. Some              − Social services
important considerations:
                                 2   Potential cost recovery sources are identified.

                                 3   Appropriate financing strategy is identified:
• Funding sources                    − Pay-as-you-use
• Revenue mobilization               − Pay-as-you-go
• Process of formulating
  financing plan                 4   Appropriate financing instrument is selected based on:
• Resource mobilization              − Legality
  tools                              − Characteristics of the sources
                                     − Adequacy of the funds
• Credit financing
                                     − Impact on the province including budgetary impact
                                     − Political and administrative feasibility
          Step                                                       Option

    Costed & ranked
    PDIP projects



    Categorize project      General urban services            Public utilities & local               Social services
1   services                                                         services


                         Local Taxes                      - Fees & Charges                 - SEF
2   Identify cost
    recovery source
                         - Existing                       - Special Assessment             - LGU share in nat’l wealth
                         - Anticipated                    - Development Charges            - IRA
                                                          - LGU subsidy                    - Other grants



3   Select investment     Hard           Pay as you use    Hard        Pay as you use
    financing strategy                                                                                Pay as you go

                          Soft           Pay as you go     Soft        Pay as you go


    Select investment    Pay as you use                   Pay as you use                   Pay as you go
4   financing
                         - Loans from private and govt,   - Loans from private and govt,   -   IRA
    instrument from
                           domestic/intern’l financing      domestic/intern’l financing    -   Congressional funds
    Local Revenue
                           institutions and lending         institutions and lending       -   LGU savings
    Tool Kit
                           windows                          windows                        -   Other local, national and
                         - Supplier/contractors’ credit   - Supplier/contractors’ credit       foreign grants
                         - Other deferred payment         - Other deferred payment
                           schemes                          schemes
                         - Equipment lease-to-own         - Equipment lease-to-own
                           arrangements                     arrangements
                         - Bond floats                    - Bond floats
                         - Infrastructure and             - Infrastructure and
                           development grants               development grants             PDIP Investment
                                                                                           Financing Plan
                         Pay as you go
                         - LGU savings
                                                                                           Formulation Process
                         - LGU current tax revenues                                        and Financing Options
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule

Developing the PDIP
Financing Plan

PDIP Committee investigates
financing options and fiscal
feasibility of funding various
project requests. Some
important considerations:



• Funding sources
• Revenue mobilization           •   Land-based tools
• Process of formulating
  financing plan                 •   Community activity-based tools
• Resource mobilization
  tools                          •   Infrastructure-based tools
• Credit financing
                                 •   Debt-based tools

                                 •   Revenue sharing tools
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule

Developing the PDIP
                                 • Direct loan from private or govt financing institution:
Financing Plan                      – To finance projects that are not self-liquidating or directly income-
                                      generating.
PDIP Committee investigates         – Wants full borrowing predictability of fixed loan terms.
financing options and fiscal        – No capability to engage financial advisors to prepare FS and related
feasibility of funding various        project packaging requirements.
                                    – Willing to pay higher interest, less flexible terms.
project requests. Some              – Willing to suffer opportunity losses and project escalation from
important considerations:             delayed loan approval periods.

                                 • Municipal bond float
• Funding sources                   – To finance self-liquidating, directly income generating projects.
                                    – Wants option of anticipated interest rate down trend.
• Revenue mobilization              – Wants discretion in project design, financing terms.
• Process of formulating            – Has capability to engage financial advisors to prepare FS and related
  financing plan                      project packaging requirements.
                                    – To encourage citizen participation and increased citizen savings
• Resource mobilization               through bond retail sales.
  tools
• Credit financing               • BOT-type
                                    – Has no funds for counterpart or equity requirements.
                                    – To maximize private sector participation.
                                    – To avoid political pressures in setting rates and use of facility.
Step 5: Develop PDIP Financing Plan and Finalize Investment
Schedule

Finalizing the
Investment
Schedule                   Some Considerations:

The annual balance         • Projects should be phased to take maximum advantage
between PDIP project         of alternative financing opportunities.
costs and expected
available funds for PDIP   • Certain projects may be coordinated and combined
financing will generally     during implementation to maximize cost savings and
determine the final          minimize inconvenience and disruptions.
investment schedule.
                           • Adequate time must be provided for preparing plans and
                             specifications, arranging financing, and the public
                             competitive bidding process.
Step 6: Legally Adopt the PDIP

Preparing the Draft   PDIP document should include:
PDIP
                      • Message from Governor, including mandates.

                      • Summary of PDIP projects grouped by sector (Table 12):
                         –   Project title
                         –   Annual estimated costs
                         –   Priority order
                         –   Implementation Period
                         –   Recommended methods of financing
                         –   Supplementary charts, tables and/or maps

                      • Investment budget summary providing total investment
                        expenditures by year for road improvements, water system, sewer
                        system, etc. (Table 13)

                      • Listing of revenue sources for each year. (Table 14)

                      • List of projects that require more detailed studies and project
                        packaging. (PED Guidelines).

                      • Summary AIP based on the appropriate current year slice of the
                        PDIP for consideration in annual budget. (Table 15)
Step 6: Legally Adopt the PDIP

Legally Adopting the   • Once draft PDIP has been prepared, it is presented to the PDC
PDIP                     en banc for review and official endorsement to the Sangguniang
                         Panlalawigan (SP).

                       • The SP then deliberates on the PDIP and legally adopts the six-
                         year PDIP with tentative approval of the project scheduling in the
                         second year and thereafter through an appropriate resolution.

                       • The current year slice or AIP should be endorsed for
                         consideration in the annual provincial budget.

                       • Since adoption of the PDIP by the SP is not a binding
                         commitment to fund programs beyond the first year, the
                         succeeding years’ slices will be subjected to review and updating
                         during the annual pre-budget period.
Step 7: Update the PDIP

                            Sources of PDIP Updates
Rationale for Updating      • AIP projects left out of the current year capital budget during the
the PDIP                      budget hearings because of reduced budget allocation.

• There is a need to        • Projects included in the current year capital budget that were not
  maintain a ready 6-year     implemented during the year because of revenue short-falls or
  development investment      unforeseen delays.
  portfolio attuned to
  needs of province.        • Occurrence of emergencies such as calamities, unforeseen
                              circumstances, and unanticipated revenue shortfalls.
• PDIP allocation may
  change over time.         • Projects included in latter years’ PDIP implemented in the current
                              year.

                            • Projects which have already been subjected to the PDIP
                              evaluation process but were left out of the current six-year PDIP
                              because of lack of funds.

                            • New projects or changes in existing PDIP projects arising from
                              adjustments/changes in the PDPFP.
Step 7: Update the PDIP

                                                                                                                     Portfolio of Stand-by PPAs


                                    PPAs                               New PPAs from PDPFP Updating                         New PPAs
                                    from
                                   PDPFP
                                                                                PDIP Process                            PDIP Left-out PPAs


                                Emergencies,
                                 Unanticipated
                               circumstances &                                                                                        PDIP
                              Revenue shortfalls                                                                                     Process




                                                            AIP1     AIP2      AIP3     AIP4        AIP5      AIP6
       Budget Left-out PPAs




                                         LGU Budget                  Firm                         Tentative



                                    Implementation                          6-Year Rolling PDIP




                              Tracking                Monitoring &
                                                       Evaluation
                                                                                               Six-Year Rolling PDIP
END

								
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