By Jejomar C. Binay
Former Vice President
In 1948, when the development of the Makati Central Business District (CBD) was just in its planning stage, the local government collected some P500,000 in taxes. In 1970, it collected P35 million. Tax collections continued to rise especially during the long spell of martial rule.
So it was only logical to assume, as many did during that time, that the municipal government had the funds to continue implementing programs and projects.
But during my first few days in February, 1986 as the appointed mayor of Makati, I decided to conduct an inventory first. I had to know the real score and I had to know it firsthand. Basing decisions solely on submitted reports is not always the way to go since, in most cases, these reports have been dressed up. I personally reviewed the books of accounts, the list of properties and equipment, visited schools, classrooms, government offices. I checked the list of employees against warm bodies.
I discovered that the municipal government was bankrupt. And there was a real possibility that the local government would not be able to provide basic services.
For the first year, my administration had to run the local government on an empty treasury with outstanding debts amounting to more than P200 million. This was the result of years of financial mismanagement and the failure to remit contributions to the Government Service Insurance System (GSIS) and pay phone and electricity bills. The previous administration even had food bills totaling half-a-million pesos at a popular Makati restaurant.
If we were to pay all the obligations, it would mean not paying the salaries of all municipal employees, closing down the Makati High School and the then Makati Polytechnic College, and foregoing any street repairs. At that time, the annual income was around P190 million, or P10 million short of the total debts and obligations.
What caused the drain? There were 3,000 reasons. After reviewing the municipal payroll, we identified some 3,000 “ghost employees,” mostly relatives and supporters of the previous administration. All in all, they were siphoning off P2.4 million a month, or P28.8 million a year, from the municipal coffers. That was more than enough to repair school buildings and construct toilets for our students.
The municipality’s precarious financial situation was aggravated by the decision of a large number of real property taxpayers to deduct 10 percent from their payments for the year. They claimed they were entitled to the discount in 1985 but the municipal government failed to credit it. As a result, our collection of real property taxes for 1986 decreased by more than P4 million.
We had to do something drastic to save the municipality, something that had never been done before. We arrived at a revolutionary, yet common sensical solution: talk to the private sector.
In the past, the private sector and Makati’s local political elite had engaged in a tug-of-war of sorts over who should decide the future of the entire municipality. There should be no arguing that the local government should set the direction, but in the years before the 1986 EDSA Revolution, the local government and the private sector went their own separate directions.
As a result, you had large swatches of urban squalor surrounding the CBD. For the majority of Makati’s residents, the CBD could have been another town. The discrepancies in the social, economic and even physical landscape were so glaring.
So when I met Makati’s business leaders in August, 1986, I told them that the municipal government was bankrupt. I showed the books of accounts and allowed them to examine it (I believe it was the first time a municipal government had opened its books to its taxpayers). The business leaders were still caught up in post-EDSA euphoria, and the dialog was a sobering experience.
I made a simple proposition: My administration would make sure that business would prosper in Makati. We would improve our tax collections, improve our services, streamline the bureaucracy, and do everything within our power and authority to guarantee that Makati remains the financial and commercial capital. But I asked them to help the local government by paying the proper taxes. They should also be prepared when we started adjusting taxes. I also emphasized that unlike my predecessors, I would not compete with business. You take care of business, I told them, and I will take care of governance.
Involving stakeholders in the shaping of policy was one of several innovations to local governance that we introduced in Makati. But at that time, we were going by gut feel, rather than shuffling through management books for the applicable management concept. Involving Makati’s various stakeholders or customers seemed liked the right thing to do.
By involving stakeholders, public managers are provided the opportunity to minimize if not remove doubts and even opposition to specific policies or strategies that at first would seem inimical to the interests of these stakeholders. We are given the chance to present to them the big picture, and emphasize that while these strategies may hurt them in the short-term, they would benefit in the long run, along with the rest of the community.
In the case of the business sector, while paying the proper taxes, and much later, adjusted taxes, to the municipal government would hurt them initially, they would stand to gain tremendously from a better bureaucracy, efficient services, better public order, and an improved climate for business. In short, they stood to gain from a local government more concerned with the business of governance, than governing the conduct of business.
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