ORDINANCE NO: 2015-348 (Sponsored by: Committee on Ways & Means) "AN ORDINANCE ADOPTING THE REVISED LOCAL INVESTMENT AND INCENTIVES CODE OF 2015" WHEREAS, City Ordinance No. 2002-206 entitled, "AN ORDINANCE PROVIDING FOR INCENTIVES TO PROSPECTIVE AND EXISTING INVESTORS AND FOR OTHER PURPOSES" was enacted twelve (12) years ago, thus, no longer fit and appropriate to be applied on different industries to be established in our City based on the current economic trends; WHEREAS, pursuant to the provision of the Local Revenue Code (LRC) and the Local Government Code (LGC), the Local Investment and Incentives Code of 2015 was formulated and drafted in consonance thereof and mainly based on the current economic trend and analysis on different industries fit and appropriate to be established in our City; WHEREAS, as a dynamic initiative in stimulating local economic growth and development to increase local capacities, enhance investment climate, promote productivity, generate employment, increase resources that will consequently improve the quality of lives of the locales. NOW THEREFORE, be it ordained by the Sangguniang Panlungsod (11th City Council) in session assembled that: I - TITLE SECTION 1. Title. - This Ordinance shall be known as the "The Pagadian City Investments and Incentives Code of 2015." II - DECLARATION OF INVESTMENT POLICY SECTION 2. Declaration of Policies. - It is the declared policy of the City Government of Pagadian to actively encourage the participation of the private sector in the promotion of economic growth, prosperity, and local economic development in the City of Pagadian. For the purpose, it shall create an environment conducive to business that shall encourage and attract new investors and promote retention and expansion of existing businesses. It shall enjoin the participation of all stakeholders to support endeavors to accelerate economic progress, generate employment opportunities, increase local revenues and income, reduce poverty, and improve the over-all quality of life for the people of Pagadian City. SECTION 3. Objectives. - This Code has the following objectives: To harmonize national and local investment policies; To establish organizational structures to guide the efficient and effective implementation of this Code; To set the guidelines, procedures and standards for identifying investment priority areas (IPA's) To identify the medium term investment priority areas (IPAs) of the Pagadian City. To provide the guidelines and procedures for the registration and availment of local incentives; To define the scope of incentives that Pagadian City may grant to attract and retain investments; To detail the conditions and rules for the grant and continued enjoyment of incentives; To promote the development of micro-small medium enterprises (MSMEs), utilization of local products and market for local products and ignite the ingenuity of the entrepreneurs and other stakeholders; and To encourage the participation of all Filipinos including OFWs, Balikbayans and other community stakeholders in investment undertakings. III - DEFINITION OF TERMS SECTION 4. Definitions. - For purposes of this Code, the following terms shall mean: "Barangay Micro Business Enterprise"/"BMBE" shall be as defined under the Barangay Micro Business Enterprises (BMBEs) Act of 2002 (Republic Act No. 9178), i.e., any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00). "Board" shall mean the Pagadian City Local Investment and Incentives Board created under this Code, the powers and composition of which shall be as provided under Section 8. "Board of Investments"/"BOI" shall refer to the implementing agency for Books One to Five of the Omnibus Investments Code (EO No. 226 dated 27 February 1987) as created under the latter. "Capitalization" refers to the total project cost which includes land, building, machineries, equipment, and working capital except where it pertains to a BMBE, in which case, the same shall be exclusive of the cost of the land; provided that in the case of corporations, capitalization shall refer to its paid-up capital. "City" shall mean the City of Pagadian covering all the areas within its territorial jurisdiction as provided for by law and its charter. "Code" shall refer to the Pagadian City Investments and Incentives Code of 2015 as promulgated pursuant to this Ordinance. "Date of Official Acceptance" refers to the date the application for registration was received by the receiving personnel of the LEIPC and recorded in a logbook for the purpose. Assist in: (1) securing licenses and permits; (2) identifying business or joint venture partners, raw materials suppliers and possible business sites; (3) sourcing skilled manpower and service providers; and (4) facilitating the resolution of issues and concerns encountered by business enterprises; Undertake investment promotions activities based on value added in relation to costs. Develop and disseminate investments promotion materials, (i.e. brochures, industry and project profiles, cost of doing business in the city); Respond to information needs of investors; Conduct of marketing and investment targeting strategies such as investment meetings, fairs, and missions; Conduct briefings of potential investors whenever necessary; Conduct follow through activities to convert potential investors to actual locators in the city; Receive, process and evaluate applications for registration and grant of local incentives for approval of the Board; Render after-care services to all investment/business locators particularly the registered enterprises; Recommend to the Board any modifications/amendments to existing legislation and procedures on local investments for its appropriate action; Establish cooperative undertakings with other local government units, the private sector, Non-Government Organizations, National Government Agencies and other institutions as may be necessary, useful, and incidental to the effective and efficient implementation of the LIIC; Monitor and supervise project implementation of registered enterprises; Represent the City in trade and investments meetings, conferences, conventions and other similar gatherings as maybe directed by the Board; Perform such other functions as may be necessary to implement the intent of the Code. SECTION 14. Local Economic and Investment Promotions Officer (LEIPO). - The LEIPC shall be headed by a Local Economic and Investment Officer (LEIPO) who shall be appointed by the City Mayor. The LEIPO must at least be a holder of a degree in law, accountancy, business, economics and/or other relevant disciplines. Experience in marketing, business development, and management of business is desirable. VI - INVESTMENT PRIORITY AREAS SECTION 15. Policies in the Identification of Investment Priority Areas (IPAs). - The Board through the LEIPC shall formulate the IPAs, consistent with the IPP, the CDP, and CLUP, Zoning Regulations and such other criteria that will ensure sustainable and equitable economic and social development. The following criteria may be considered in determining the IPAs of the City of Pagadian. Investment activities that are aligned to the national development thrusts and the development vision of the City of Pagadian; Significant potential contribution to the growth of a sizable number of existing businesses or to a vital industry in the City of Pagadian; Capacity to generate employment, whether direct or indirect, particularly for those within the City of Pagadian; Use of locally available materials and resources; Ability to promote the dispersal of business/commercial activities to less developed areas within the City of Pagadian; Ability to improve environmental conditions within the [Province/City/Municipality] including bio-diversity, or involves activities that promote sustainability of existing natural resources of the City of Pagadian; and Contribution to the infrastructure in the City of Pagadian through Public Private Partnership (PPP); Agriculture and Eco-Tourism. The LGU may encourage organic agriculture, including the production of organic fertilizers of plant and animal origin, production of microbial fertilizer with nitrogen fixing organism and the like, which are considered biodiversity-friendly businesses in accordance with the three (3) E's of sustainable development: ecology, economy and equity. SECTION 16. Categories of the IPA list. - The Investment Priority Areas (IPA's) to be considered by the Board shall consist of the MIPA List which are investment areas listed and granted incentives under the IPP and other Incentives Law and the LIPA List which are determined by the Board based on the criteria provided hereof. SECTION 17. Inclusion in the IPA list the basis for grant of incentives. - The investment activities listed in the Mandatory Investment Priority Areas (MIPA) and Local Investment Priority Areas (LIPA) shall be the basis for the grant of incentives. The MIPA list shall be limited to those granted and subject to the terms and conditions under the relevant Incentive Law while the LIPA shall be determined by the City of Pagadian and be limited to those industry, project or activity that satisfies the criteria set under Section 15 hereof. Said LIPA list shall be subject to approval by the Sangguniang Panlungsod. SECTION 18. Periodic Review of the IPA list. - The MIPA List shall be automatically amended upon the issuance of the revised Investment Priorities Plan (IPP) and/or the issuance of any other law granting incentives, fiscal or otherwise, at the national level. Investment activities in the MIPA List shall be dropped in accordance with applicable provisions of national law or the repeal of the law that granted local incentives to a particular business activity. No addition or deletion from the MIPA List shall be made in the absence of a corresponding statutory or other basis issued by the national government. The entitlement to incentives of applicants for registration whose business activity belong to the MIPA List shall be mainly governed by the national law or other issuance pursuant to such law. The Board shall undertake review of the LIPA list at least once every two (2) years taking into consideration the socioeconomic development plan and public investment plans formulated by the City Development Council and the preferred areas of investments as provided under pertinent national laws. The following factors may be considered for inclusion to the LIPA: Number of local residents to be employed by the enterprise; Use of local/indigenous raw materials High degree of value added features; Creation of linkages with local industries such as joint ventures with local investors; and Projects of historical or cultural value such as restoration of historical buildings, cultural revivals, among others, in accordance with the program for historical or cultural revival of the locality. SECTION 19. Amendment of the LIPA list. - The Board may recommend the amendment/removal of an investment activity from the LIPA List; (a) as soon as the sufficient investments in the area has been attained; (b) continued extension of incentives is no longer to the interest and benefit of the locality and (c) the investment area or activity cannot attract investors within a reasonable time, and the cost may result in unfavorable business climate. SECTION 20. LIPA List for the Period 2014-2015. - Subject to the confirmation of the Board and the Sangguniang Panlungsod, the LIPA List shall include the following: Sector 1: Agriculture, Agribusiness, and Fishery Specific Projects/Activities: This covers commercial production and commercial processing of agricultural, herbal and fishery products (including their by-products and wastes). Commercial production of agricultural crops, poultry, livestock, and fishery products - Crop production should involve new plantation, and fish pen/fish cage areas to qualify for registration, intercropping of high value crops as identified by the Department of Agriculture (DA). Commercial processing of agricultural and fishery products, their by-products and wastes, to a form ready for further processing or final consumption. Extraction of higher value substances from agricultural and forest-based raw materials through bioprocessing as endorsed by the concerned government agency. Production of animal and aqua feeds excluding those for game animals, fowls and other species for pet/leisure purposes. Processing of agricultural products should involve domestically produced raw or semi-processed agricultural products, unless the raw or semi-processed raw materials are not locally produced (NLP) or not in sufficient quantity (NISQ). If using imported raw or semi-processed agricultural products that are locally produced (LP) or in sufficient quantity (ISQ), the project may qualify for registration, provided that the finished/ final product is for export, or the project qualifies for pioneer status. Sector 2: Support facilities such as irrigation, post-harvest, cold storage, blast freezing, and the production of fertilizers and pesticides. Specific Projects/Activities: Irrigation. Irrigation system primarily intended to render service to agricultural farms to include water source, distribution lines and control mechanism. The system may also include prime mover, pump, generator and transformer. System capacity is expressed in terms of cubic meters of irrigation water per year. Harvesting Services. This covers mechanized harvesting services, establishment and operation of ice plants, cold storage, freezing, bulk handling, packing house, storage facilities and establishment of trading centers. Sector 3: Tourism Specific Projects/Activities: Tourist transport services whether for land, sea and air. Land transport covers the operation of brand new, world class buses and or mini buses/coasters. The number of units of vehicles that shall be allowed shall be based on the number of tourist arrivals in the area or the ratio of hotel/resort facilities/rooms. Tourist transport operators must have garage, hangar, or berthing/docking facilities . Accommodation facilities. Establishment and operation of establishments such as but not limited to hotels, resorts, apartment hotels, tourist inns, motels, pension houses, private homes for homestays, serviced apartments, and bed and breakfast facilities and similar structures, convention and exhibition facilities; amusement parks, adventure and eco-tourism facilities; sports facilities and recreation centers; theme parks; health and wellness facilities such as but limited to spas, tertiary hospitals and ambulatory clinics, agri-tourism farms and facilities; tourism and training centers and institutes. Development of retirement villages; and Restoration/ preservation and operation of historical shrines, landmarks and structures. The LEIPC shall determine the specific requirements for each area for its entitlement to the incentives benefits. Existing Local Investment Priority Areas (LIPA): 1) Agri-Business Sector - Feed Milling, Agricultural/Agri-processing services, Cold Storage Facilities, Packaging Products, Organic Fertilizer Production, Farm Equipment, Tools and Machinery Manufacturing, Agri-Marine Processing, Vacuum, Dehydrated And Spray-Dried Fruit Processing, Canned Specialty Vegetables, Fish or any Marine Products 2) Tourism Facilities - Tourism Estates / Zones, Tourist Accommodation Facilities, 3) Infrastructure - Business Parks, Malls, Mass Housing, Waste Recycling Facility, Industrial Estates, Logistics, Schools, Hospitals 4) Industrial Service Facilities - Common Centers, Testing and Quality Control Laboratories, Training and Demonstration centers, Tool shops and similar facilities, Metal Working, Furniture Ceramics, Food and Beverages / soft drinks processing for bottling and canning, Oil refinery /depot VII - REGISTRATION SECTION 21. Registration Requirement. - For the purpose of effective management, all enterprises listed in the IPAs and wanting to avail of local incentives shall be registered. Prior to registration the following requirements shall be complied: Those mandated under existing laws, rules and regulations for doing business in the Philippines; The activity engaged in by the enterprise must be listed in the IPAs of the city; The place of operation or production must be located within the territorial jurisdiction of Pagadian City; Specified percentage of its workforce must be bonafide residents of the city, giving equal opportunities for men, women, the poor, the indigenous people and the physically handicap; The activity engaged in must have safeguards against pollution and other environmental and health hazards; and The enterprise must secure from the Office of the National Commission on Indigenous Peoples a Free and Prior Informed Consent (FPIC) should the proposed site of investment be located within the ancestral domain claim of the indigenous people. SECTION 22. Types of Projects for Registration. - The following are the types of investment projects eligible for registration, provided they involve business activities included in the IPA List: New Projects; Expansion Projects; Modernization Projects and Diversification Projects. The projects shall likewise comply with the following additional requirements: Capitalization of at least: Micro Enterprise: Up to Php3,000,000.00 Small Enterprise: Php3,000,001.00 to Php15,000,000.00 Medium Enterprise: Php15,000,001.00 to Php100,000,000.00 Employ at least 80% of non-technical personnel who are residents of the LGU; Comply with existing labor laws; and 30% of the product component are indigenous materials are available in the LGU SECTION 23. Documentary Requirements. - The following documents shall be submitted to the Board through the LEIPC for evaluation: Single Proprietorship: Copy of Business Name Registration issued by the Department of Trade and Industry (DTI) Copy of Audited Financial Statements Copy of completed application form for registration under the LIIC Such other documents that may be required by the LGU For Partnership/Corporation: Copy of the Articles of Partnership or Incorporation Resolution authorizing the filing of application by the applicant's Board of Directors Copy of Audited Financial Statements (if existing) Evaluation/Approval of Application. Once an application is officially accepted, the project will be evaluated by the LEIPC. Whenever necessary, the LEIPC may conduct an ocular inspection at the premises of the business. The inspection shall be conducted during Office hours at a time convenient for both the applicant and the LEIPC which should not be later than two (2) weeks (ten (10) working days) after the official acceptance of the application. The evaluation of the application shall be submitted to the Board for action. If the application is approved, the LEIPC shall notify the applicant and inform the Treasurer and the Assessor of such approval for their guidance and appropriate action. If the application is denied, the LEIPC shall inform the applicant in writing. In both cases, a Board Resolution shall be entered in the minutes of the meeting of the Board. Failure of the Board to approve or disapprove an application within thirty (30) calendar days shall be construed as an approval of the application. Tax Exemption Privileges through ordinances duly approved pursuant to Section 192 of R.A. No. 7160 as defined in Article 282 of the LGC Implementing Rules and Regulations. 1. General Policies on Local Fiscal Incentives The incentive shall be granted only to new, expanding and/or modernizing projects locating in the City. Exemption under Section 133(g) of the Local Government Code (LGC) shall be for a period of six (6) years for pioneer and four (4) years for non-pioneer from the date of registration; Exemptions under the LIIC shall be in addition to the incentives provided under Executive Order No. 226 or the "Omnibus Investments Code of 1987". Incentives to Regional or Area Headquarters (RHQ) or Regional Operating Headquarters under Article 66, Chapter IV of RA8756 (Amending Book III of EO226). Regional or area headquarters and regional operating headquarters of multinational companies shall be exempt from all kinds of local taxes, fees, or charges imposed by a local government unit, except real property tax on land improvements and equipment. The exemption should not extend to regulatory fees which levied under the police power of the city as well as fees and charges imposed for services rendered by the City Government such as garbage fees, sanitary inspection fees, electrical inspection fees and similar other fees, as well as rental for use of public utilities owned and operated by the local government such as charges for actual consumption of water, electric power, and toll fees for use of public roads and bridges and the like, and those levied for the use of government facilities and properties. The grant shall apply to all businesses similarly situated subject to the pertinent provisions of this LIIC. The exemption granted shall take effect only during the next calendar year for a specified number of years unless specified herein. Article 61 of Republic Act (RA) 9520, otherwise known as "The Philippine Cooperative Code of 2008", and RA 7916, otherwise known as "The Special Economic Zone Act of 1995", provides for the tax incentives of cooperatives and locators of ecozones, respectively. In case of a change of ownership of the enterprise, the incentives shall continue to be enjoyed by the enterprise provided that the terms and conditions of the registration of the project are assumed by the new owner/s. No double availment of incentives/benefits under different laws and/or programs. SECTION 29. Non-Fiscal Incentives. - The Board through the LEIPC shall provide non-fiscal incentives to Registered Enterprises as follows: One stop documentation for simplified registration procedure; Assistance in resolving issues and concerns with NGA, NGOs and other service providers; Support for industrial peace through reconciliation and mediation; Assistance in securing electric power and water supply connection; Coordination in the negotiation of special rates for utilities for industries with a certain minimum load, if feasible; Networking with concerned national government agencies such as Technical Education Skills and Development Authority (TESDA) and other similar institutions for trainings of workers to enhance skills of manpower of the enterprise; Referral to existing technical and financial assistance programs available through government and non-government organizations. Facilitation of outbound and inbound missions of investors; Assist potential and existing investors in: (1) securing of business, construction, and other regulatory permits and licenses; (2) identifying business and joint venture partners raw materials suppliers; and (3) sourcing of skilled manpower and service providers ; Assistance in site selection and negotiation for right of way; Identification of joint venture partner as deemed necessary; Provide opportunities for micro and small enterprises to participate trade fairs and exhibits, entrepreneur development and training, and inclusion in business matching. Such other aftercare services that may be afforded to investors. SECTION 30. Continuing Eligibility for Registration. - A registered enterprise shall continue to satisfy whatever criteria rendered it eligible for registration under this Ordinance. Accordingly, if a local applicant was qualified for registration on account of the amount of manpower, nature of technology, or local raw material that it represented will be used in its production, the Board, through the LEIPC, shall have the authority to inspect the Registered Enterprise to verify that it is in fact using the technology or the local raw material that it represented will be used. If the Registered Enterprise ceases to meet the said registration criteria that rendered it eligible for registration under this Code, the Board shall have the authority to suspend all or some of the incentives of the registered enterprise or to revoke its registration. SECTION 31. Periodic and other Compliance Requirements. - Nothing under this Code exempts a Registered Enterprise from applicable requirements of the City of Pagadian on businesses, as generally applicable to all businesses or specifically applicable to the business activity or circumstances of the Registered Enterprise. Accordingly, Registered Businesses, except those specifically exempted under applicable law, shall secure and comply with all the requirements to secure a Business Permit and renew the same annually. Except as expressly provided under this Code or the Incentive Law under which they are likewise registered, registered enterprises shall comply with all applicable laws as other enterprises engaged in the same business as they are engaged in, are required to comply with. Other than as provided herein, Registered Enterprises shall not be required to comply with any other requirements that businesses not registered under this Code are not required to comply with. IX - CORPORATE SOCIAL RESPONSIBILITY (CSR) OF REGISTERED ENTERPRISES SECTION 32. CSR Requirement. - BOI-registered enterprises with projects under pioneer status must undertake CSR activities which shall be monitored starting on the fourth year of operation of the business enterprise. Those on non-pioneer status are encouraged, in the course of their operations, to undertake CSR activities in accordance with the development plan of the community where the registered project is located. Registered Local Applicants, on the other hand, are encouraged to pursue CSR projects as soon as they can afford to allocate resources for the purposes; however, it shall be mandatory for Registered Local Applicants to pursue CSR projects starting on their fourth year of operation if they enjoy local incentives for a term of more than three (3) years. SECTION 33. Eligible CSR Projects. - CSR projects which a Registered Enterprise may undertake include but shall not be limited to the following: Urban Renewal, Greening or Re-greening: Rehabilitation and restoration of buildings or other structures in accordance with the urban renewal or restoration plan of the City of Pagadian; Reforestation, rehabilitation, and urban greening or landscaping of major road sides; areas with historical or tourism value; areas in bio-geographic zones, especially key biodiversity areas; eroded slopes as technically appropriate based on assessment by competent authorities; public open spaces especially in residential and commercial areas including street islands, parks, promenades, parking area peripheries, and the like, provided that the enterprise takes care of the maintenance of the trees and plants. Otherwise, reimbursement of the incentive granted shall be due and demanded should the trees and plants die due to poor maintenance. Social Projects Housing for employees; Educational projects; Cultural revivals; Programs for women, children, elderly, disabled, out of school youth and indigenous people; Community infrastructure projects aligned with the development plan of the City of Pagadian; and Such other projects or activities based on the development needs of the community where the project is located or as identified by the National Anti-Poverty Commission (NAPC). X - ENVIRONMENTAL PROTECTION Environmental Protection Environmental Impact Assessment. - Environmentally critical projects or enterprises locating their activities or expansion projects in environmentally critical areas must comply with the requirements of Presidential Decree No. 1586 (Philippine Environmental Impact Statement System) and related issuances of the Department of Environment and Natural Resources (DENR). Hazardous Substances. - In addition to the above, projects involving the handling, transport, processing and storage of toxic, hazardous substances and/or nuclear waste shall be subject to strict regulations as provided under applicable local issuances and national laws. The Sangguniang Panlungsod shall have the option to exclude such projects from being entitled to local incentives except to the extent that they fall under the MIPA List. Specific Prohibitions. No industrial or manufacturing facility shall be operated without proper air pollution devices, wastewater treatment facilities, and solid waste management facilities. No industrial or manufacturing plant shall be operated at level beyond the operating capacity of their respective waste treatment facilities in order to maintain the effluent quality within the standards required by law. Violation of the provision of this Code and such other violations of laws, rules and regulation or ordinance; SECTION 44. Repealing Clause. - All ordinances, rules and regulations or parts thereof which are in conflict or inconsistent with the provisions of this Code are hereby considered repealed, amended or modified, accordingly. XV - DATE OF EFFECTIVITY SECTION 45. Date of Effectivity. - This Code shall take effect after its publication once a week for two (2) consecutive weeks in a newspaper of general circulation. ENACTED AND APPROVED by the 11th City Council of Pagadian City during its 67th Regular Session held on 10 March 2015 at the Sangguniang Panlungsod Session Hall, Pagadian City.