Police power exists to promote the common good, not to confer unwarranted commercial advantages on the government or its private partners.
Police power is the inherent authority of the state to enact laws and regulations that protect public health, safety, morals, and general welfare.
Lawful subject, lawful means
Local government units (LGUs) exercise delegated police powers under the Local Government Code through the general welfare clause. However, every exercise of police power must satisfy two well-established constitutional tests.
First is the lawful subject requirement. The regulation must address a legitimate public interest, such as traffic management, public safety, environmental protection, or public convenience.
Second is the lawful means requirement. The measures adopted must be reasonably necessary to achieve that public purpose and must not be unduly oppressive, arbitrary, or confiscatory of private rights.
These principles were recently reaffirmed by the Supreme Court in City of Koronadal, et al. v. Yellow Bus Lines Inc. (G.R. No. 265769, August 12, 2025).
Constitutional limits
The court ruled that while reducing traffic congestion is a legitimate governmental objective, the city could not prevent a private company from using its own private terminal and compel it to use the city’s integrated transport terminal.
The court held that requiring operators to abandon their private terminals, without demonstrating that the restriction was necessary and that no less restrictive alternatives were available, constituted an oppressive and unreasonable exercise of police power.
The measure unlawfully interfered with the company's constitutionally protected property rights and therefore failed the lawful means test.
Key takeaway
The decision carries an important lesson for PPP practitioners and policymakers. The government cannot invoke police power merely to increase the revenues or commercial viability of a PPP facility.
Even where a public terminal, market, port, or similar facility has been developed through a PPP arrangement, private businesses cannot automatically be compelled to patronize that facility solely for the financial benefit of the project.
PPPs should therefore be founded on sound project preparation, realistic demand forecasts, efficient service delivery, and fair competition, not on coercive regulation.
Police power remains an indispensable tool of governance, but it must always be exercised within constitutional boundaries.
In PPPs, public welfare is the objective, while respect for private rights remains an equally important constitutional command. —Ed: Corrie S. Narisma
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