RATES POLICY FOR THE CITY OF JOHANNESBURG

1
RATES POLICY FOR THE CITY OF JOHANNESBURG

• Background on Valuations Roll process and
  compilation
• 12 October 2007

2
Introduction

• On 1 July 2008,Council will implement the
  Municipal Property Rates Act, that was approved
  by Parliament during 2005. Municipalities have a
  four year period to implement.

3
Introduction

• Business as major contributor to City
• 7,4 of all properties
• 29,8 of land values
• 46,1 of current rates payable
• Major nodes are the largest generators
• 2 of City Area
• 35 of current rates payable
• Nodes are the most complex in terms of valuation
  process, technique, base information required and
  it can vary the most
• Avoid approach that is time consuming in Appeals
  and reduce billing difficulties

4
The Process of Community Participation

• Draft Rates Policy Community Participation
  Sessions
• Written comments may be submitted to Council
  until 31 October 2007.

5
The Process of Community Participation

• Provisional Valuation Roll open for inspection
  during February, March and April 2008
• Individual written objections may be submitted
  the Municipal Manager during this period.

6
The Process of Community Participation

• Tariff setting Council determines its tariff of
  charges for ensuing financial year during March
  of each year.
• Tariffs open for written comment during April of
  each year.
• Council to consider objections to tariffs during
  May of each year.

7
Key Changes ito New Legislation

• There is no differentiation between land and
  improvement value. Rates will now be levied on
  the market value of the property
• Sectional Title properties are to be individually
  valued and rates levied on the market value of
  each individual sectional title unit
• The first R15 000 of residential property value
  is not ratable. City to consider and amend this
  threshold in terms of market values of properties
  in Johannesburg currently Johannesburg exempts
  properties with a land value less than R20 000.

8
Key Considerations

• The Rates Policy is required to satisfy
  conflicting calls for rates relief-
• Create an environment for local economic
  development
• Promote first time home ownership
• Provide relief to welfare related organisations
• Provide relief to the primary and secondary
  educational system and
• Provide short term relief to a property owner in
  respect of market value property rating where
  the growth in market value has outpaced the
  potential benefits of a reduction in the rate in
  the Rand.

9
Key Considerations

• Source finance to support the ongoing municipal
  service delivery program of the City
• Recognising that property rating is the only
  legally enforceable source of revenue to a
  municipal council
• Recognising that the municipal property rate is a
  tax on the ownership of fixed property and
• Recognising the benefits of home ownership to
  senior citizens and the less well off members of
  the community

10
Usage of Revenue

• Reliable source for service delivery
• Most important basic revenue source 22 revenue
  of Council
• Municipal rates are set, collected and used
  locally no national intervention
• The revenue for rates is used for community
  halls/centres, parks, grass cutting, emergency
  services, clinics etc

11
Land Value and the Rate in the Rand

• Over the corresponding period, the land value,
  being the tax base, and the annual rate in the
  Rand, were as follows

12
Categorisation of Property

• The Act requires that property be grouped
  according to category.
• Categories may follow the permitted use of the
  property, which we refer to as the zoning of the
  property.
• Property within a particular geographical area
  may also be considered as a category.

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Categories of Property

• Business , commercial and industrial
• residential property
• residential property with additional rights
• municipal property not rateable
• municipal property rateable
• property owned by the State or an organ of state

14
Categories of Property (contd)

• farming land used for bona fide farming
• public service infrastructure
• property used for multiple purposes
• agricultural holdings used for agricultural
  purposes
• vacant land irrespective of zoning and
• mining property.

15
Different rates tariffs

• Different rates tariffs will be levied on the
  different categories of property. However, there
  can only be one rate in the Rand per property
  category i.e. one tariff for business

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Ratios per Category
Assumed ratios Residential used as
base 1 Residential with consent 12 Business /
industrial 13 Vacant land 14 Government 11
,2 Public Worship Exempt Public Service
Infrastructure Exempt
Minister to publish regulations to regulate
ratios and capping on rates increases
17
Assessment Rate Tariff (CIR)

• The rate in the Rand can only be determined
  after the Valuation Roll has been completed and
  the Council has considered its funding
  requirements for the ensuing financial year. This
  will be during March 2008.

REVENUE NEUTRAL ON CURRENT RATES BASE As the
total value of property increases and the
required revenue remains constant the cent in
the rand tariff will decrease. This can only be
determined when the draft valuation roll is
available with market values for all properties.
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Category of ownership

• The policy will propose that a full rebate
  applies where the market value falls below the
  threshold (yet to be determined) and the property
  is zoned and used for residential purposes. (The
  prevailing threshold is R20 000 on land value
  only).

• Many new properties will be included in the tax
  base as improvements (market value) will exceed
  the threshold

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Further Rebates

• The policy further proposes that a category of
  ownership be recognised for property owned by
  natural persons who are not pensioners but who
  have limited income (current indigent policy).
• Criteria will have to be determined by Council
  i.e. the maximum income of the owner.

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Pensioners

• 2 Categories of pensioners defined in the
  proposed policy
• Pensioners dependent on National Security Grant
  100 rebate
• Pensioners who are not on National Security Grant
  but whose gross monthly income falls below
  threshold to be determined by Council, policy
  proposes R5000 75 rebate to be applied

21
Inner City and High Density Accommodation

• The policy proposes that 40 rebate be allowed
  in the Inner City where property has been
  re-developed to allow for 80 residential and 20
  commercial.
• In addition, provision is made for a rebate where
  more than three dwelling units are erected on an
  erf, provided that these dwelling units are in
  the same building i.e. flats

22
Promotion of Development Objectives

• Encourage Development of Land
• Remove sliding scale for properties larger than
  10 000m²
• Tariff applied to category of vacant land higher
• Rate properties according to permitted use
  (zoning)
• Bona Fide agricultural land to retain benefit of
  55 rebate

• Special Rating Areas
• Provision is made of the determination of special
  areas where different rating may be applied
• To be motivated on individual basis indicating
  need, tariffs, benefit and financial
  implications.
• Need to develop criteria to be applied i.e.
  majority of land owners to agree

23
Social Support Organisations

• Provision is also made in the policy for rebates
  to CBOs and NGOs that are recognised in terms
  of Section 32 of the Income Tax Act and who
  provide the type of services referred to in Items
  1, 2 and 4 of Part 1 of the ninth schedule to
  that Act.
• These are
• Welfare and Humanitarian Services
• Health Care Services
• Educational and Development Services

24
Private Sports Clubs

• Subject to successful application to the Council,
  a private sports club may be allowed a rebate up
  to 20 on its current monthly rates
• Depends on contribution to social development of
  citizens and the availability of access by public

25
Property owned by Religious Bodies

• As at present, no rates will be levied on
  property owned by religious bodies. However, the
  property has to be registered in the name of the
  religious community and be used primarily as a
  place of public worship.
• This relief from rates is extended to the
  official residence owned by the religious body
  and occupied by the person who officiates at
  services at that place of worship

26
Schools

• The policy proposes that the rebate in respect of
  all primary and secondary schools be accorded the
  same level of rebate. The proposed rebate is 50
  in relation the business tariff.
• In the case of the private schools that are
  presently exempted from assessment rating, a
  three years phasing in period will apply in the
  levying of rates with no rates being levied in
  the first year.

27
Phasing in period

• The Policy makes provision for a phasing in
  period where a potential increase in the rates is
  in excess of a percentage growth over the
  prevailing rates. The policy is open to proposals
  regarding the level of increase above which
  phasing in is warranted.
• Because the lifespan of the valuation roll is
  limited to four years, the phasing in has to be
  completed within four years

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Newly Rateable Property

• Where a property is not being levied rates such
  property is deemed to be newly rateable. Rates
  on such property will be phased in over a three
  years period e.g. private schools that are
  current exempt i.t.o Ordinance

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Challenges

• No clarity with regard to regulations from
  National Govt in relation to
• the ratios to be implemented between the various
  categories and
• capping of maximum increase in the rates.
• Availability of data to do valuations i.e. public
  service infrastructure and sectional title
• Although the total revenue requirement will
  remain revenue neutral, there will be a shift in
  incidence between rate payers and categories,
  especially where the improved value relative to
  the land value is higher that the reduction in
  the rand. The rates burden will also shift
  between various categories, based on the ratios
  to be prescribed

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Way Forward

• Community participation into the Draft Rates
  Policy intense media campaign to follow to make
  public aware of the changes and the
  implementation of new legislation
• Awareness and education campaign around the
  reasons property owners pay rates to ensure those
  paying for the first time have an understanding
  of need
• Community Participation in confirming the
  property information recorded in the Provisional
  Valuation Roll
• Community Participation in commenting on the
  proposed new tariffs

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Conclusion

• Property rates are the key source of local
  government revenue and are enshrined as such in
  the Constitution (Section 229). Have to be used
  to fulfil developmental needs of the municipality.

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Written Comments On Draft Rates PolicyDue 31
October 2007
City Manager PO Box 1450 Johannesburg 2000 RE
COMMENTS ON RATES POLICY
Fax [phone] Email ratespolicy_at_joburg.org.z
a www.joburg.org.za/rates