In a legal challenge, the Supreme Court of the Philippines scrutinized ordinances imposed by Quezon City, specifically the Socialized Housing Tax (SHT) and a garbage fee. The Court upheld the constitutionality of the SHT, finding it consistent with the Urban Development and Housing Act (UDHA) as a valid exercise of the city’s power to fund socialized housing programs. However, it declared the garbage fee unconstitutional and illegal, citing its discriminatory nature and inconsistency with the Local Government Code (LGC) and the Ecological Solid Waste Management Act of 2000. The Court’s decision emphasizes the importance of balancing local government autonomy with constitutional limitations to protect the rights of citizens.

Quezon City’s Double Burden: Can Local Taxes Fund Basic Services?

The case of Jose J. Ferrer, Jr. v. City Mayor Herbert Bautista, et al., G.R. No. 210551, decided on June 30, 2015, revolved around two Quezon City ordinances: Ordinance No. SP-2095, S-2011, which imposed a Socialized Housing Tax (SHT), and Ordinance No. SP-2235, S-2013, which mandated an annual garbage fee for domestic households. The petitioner, a Quezon City property owner, challenged the constitutionality and legality of these ordinances, arguing that they represent an excessive and unjustified burden on taxpayers. This legal battle essentially questioned the extent to which local government units (LGUs) can impose taxes and fees to fund basic services, balancing local autonomy with constitutional and statutory limitations.

The Quezon City Council enacted the Socialized Housing Tax of Quezon City via Ordinance No. SP-2095, S-2011. Section 3 of this ordinance stipulates the imposition of a special assessment equivalent to one-half percent (0.5%) on the assessed value of land in excess of One Hundred Thousand Pesos (Php100,000.00). This assessment is collected by the City Treasurer and allocated to the Socialized Housing Programs of the Quezon City Government, accruing to the General Fund under a special account established for this specific purpose. The ordinance outlines several projects for which the SHT revenue will be utilized, and provides for a tax credit after five years of continued payment.

On the other hand, Ordinance No. SP-2235, S-2013, was enacted on December 16, 2013, mandating the collection of garbage fees from residential properties. According to Section 1 of the Ordinance, the collected proceeds are exclusively deposited into an earmarked special account under the general fund, dedicated solely to garbage collections. The schedule and manner for the annual collection of garbage fees varied depending on the land area for domestic households and floor area for condominium units and socialized housing projects/units in Quezon City. Non-payment of the garbage fee would incur a penalty of 25% of the amount due, in addition to a 2% monthly interest.

The Court first addressed procedural matters raised by the respondents. Regarding the propriety of a petition for certiorari, the Court clarified that the enactment of the ordinances was a legislative act, not a judicial or quasi-judicial function. The Court emphasized that the power to impose taxes and fees is explicitly delegated to the Sangguniang Panlungsod by the Local Government Code. However, recognizing the transcendental importance of the issues, the Court treated the petition as one for prohibition, over which it exercises original jurisdiction.

The Court also addressed the issue of litis pendentia, raised by the respondents, which argued the existence of a similar pending case. However, the Court dismissed this argument, stating that the respondents failed to demonstrate the identity of rights asserted and reliefs prayed for, as well as the identity of the two cases such that judgment in one would amount to res judicata in the other. Finally, the Court justified its assumption of jurisdiction despite the failure to exhaust administrative remedies, considering the pure question of law involved and the substantive matters at stake.

Turning to the substantive issues, the Court upheld the constitutionality and legality of the Socialized Housing Tax (SHT) imposed by Ordinance No. SP-2095. The Court emphasized that the Constitution explicitly endorses the concept that property ownership carries a social function, requiring all economic agents to contribute to the common good. Citing Section 43 of the Urban Development and Housing Act (UDHA), the Court recognized that the SHT is a valid source of funds for urban development and housing programs. The tax is not a pure exercise of taxing power but also an implementation of police power for the general welfare.

Moreover, the Court found that Ordinance No. SP-2095 does not violate the equal protection clause. The Court reasoned that the distinction between real property owners and informal settlers constitutes a reasonable classification based on substantial differences. The SHT rate is below what the UDHA authorizes, and it provides for a tax credit after six years, further demonstrating its reasonableness. Therefore, the SHT was deemed a lawful and valid exercise of local government authority.

However, the Supreme Court declared Ordinance No. SP-2235, which collects an annual garbage fee from domestic households in Quezon City, as unconstitutional and illegal. The Court recognized that the authority of a municipality to regulate garbage falls within its police power to protect public health, safety, and welfare. In this jurisdiction, Section 16 of the LGC empowers local government units to enact ordinances and appropriate funds for the general welfare, which includes solid waste disposal.

Despite recognizing the city’s authority, the Court found that Ordinance No. SP-2235 runs afoul of the equal protection clause and the provisions of the LGC requiring equitable and non-oppressive taxes and fees. The garbage fee’s rate depends on land or floor area. The Court found no substantial distinction between occupants of a lot and occupants of a condominium unit, socialized housing project, or apartment for garbage collection purposes. This differentiation was deemed unjust and inequitable.

The Court also noted that the penalty clause of Ordinance No. SP-2235 lacked the limitation required by Section 168 of the LGC, which specifies that the total interest on unpaid amounts should not exceed 36 months. By including an unlimited penalty, the ordinance further deviated from legal requirements. The Court pointed out that a city’s authority to impose fees is limited to the collection and transport of non-recyclable and special wastes, but the ordinance imposed a general garbage fee without distinguishing the types of wastes collected.

In summary, while local governments have the power to impose taxes and fees, such power is not absolute and must be exercised within constitutional and statutory limitations. As such, Quezon City was authorized to impose the Socialized Housing Tax. Conversely, the imposition of garbage fees based on arbitrary classifications without considering the actual amount of waste generated was deemed unconstitutional.

FAQs

What was the key issue in this case?	The central issue was whether the Quezon City ordinances imposing a Socialized Housing Tax and a garbage fee were constitutional and legal exercises of local government power.
What is the Socialized Housing Tax (SHT)?	The SHT is a special assessment equivalent to 0.5% on the assessed value of land exceeding Php100,000.00, intended to fund socialized housing programs in Quezon City.
Why did the Court uphold the SHT?	The Court upheld the SHT because it is consistent with the Urban Development and Housing Act (UDHA) and serves a public purpose by funding socialized housing programs. It does not violate the equal protection clause.
Why was the garbage fee declared unconstitutional?	The garbage fee was deemed unconstitutional because it was based on arbitrary classifications (land or floor area) that did not reflect the actual amount of waste generated and imposed unjust and inequitable rates.
What is the basis for garbage fee?	Rates for the garbage fee under Ordinance No. S-2235 depend on land or floor area and on whether the payee is an occupant of a lot, condominium, social housing project or apartment
What factors should be considered when imposing a garbage fee?	Factors that should be considered include household size, accessibility to waste collection, population density, capacity to pay, and the types and volume of waste generated.
What does R.A. No. 9003 say about waste management fees?	R.A. No. 9003 (the Ecological Solid Waste Management Act) authorizes municipalities and cities to impose fees only for the collection and transport of non-recyclable and special wastes. Barangays can impose fees for biodegradable, compostable, and reusable wastes.
What is the Local Government Code?	The Local Government Code (LGC) delegates certain powers to local government units, including the power to tax, but it also imposes limitations to ensure fairness and adherence to national policies.
What does this ruling mean for other LGUs?	This ruling provides guidance for other LGUs in imposing taxes and fees, emphasizing the need for reasonable classifications, consistency with national laws, and adherence to constitutional limitations.
Are LGUs bound by the Constitution?	While LGUs have autonomy in certain areas, they are still subject to the Constitution and must not overstep their boundaries.

This case underscores the importance of balancing local autonomy with constitutional safeguards. While LGUs have the power to generate revenue, they must exercise this power reasonably and equitably. The decision provides valuable guidance for LGUs in crafting ordinances that promote the general welfare while respecting the rights of their constituents.

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Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Jose J. Ferrer, Jr. v. City Mayor Herbert Bautista, et al., G.R. No. 210551, June 30, 2015