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SCI LIBRARY

Cape Town New Rates Policy 2002/2003

Godfrey Dunkley



[9 June, 2002]


New Valuation Roll


A largely extended Cape Town area has been incorporated into a Mega City. At the IU Brighton Conference in 1995 Bill Stibbe and Douglas Milne showed how 39 different local authority areas had been pooled together and then split into six major municipal areas. These together with a few extra towns have now been brought together as a Mega City called Cape Town.

Within the new Cape Town there were a number of different valuation rolls of different ages, types and accuracy or lack thereof. Some areas had never been valued before. The former Cape Town had a valuation roll that was well over twenty years out of date. Although Cape Town and South Peninsula had almost completed new valuation rolls some two years ago and based on Site Values only, these rolls were disregarded because of technicalities and the threat of legal action on the part of a Rates Action Group of wealthy landlords.

The new Valuation Roll just completed and approved, in spite of some serious errors, will be applied from 1st July 2002. This has been prepared by CAMA and a team of "off-the street" data collectors whose input was highly questionable and subject of numerous appeals. Dr. Richard Ward of USA, who is consultant to the introduction of the CAMA system, claims that 80% of valuations are within 10% above or below actual market values. There are many serious errors that are being investigated.

Errors and all, the new roll is highly efficient compared to values that were used in the past and loaded rates paid by low value properties compared to those in affluent suburbs. Naturally, those whose properties have been over valued will complain whilst those with under valued properties will be stricken by silence. However the qualified city valuers will be searching for under valuations and appealing on behalf of the city.

In general, land has been under valued and improvements over valued. An empty site, near my home, West facing onto water, was sold for R300 000 within two weeks of valuation date. Yet it appears on the new roll at R117 000. Most sites in the vicinity have fairly similar land values, varying with size rather than with natural attributes. It is well known that here in the Marina values are much higher for those properties North facing onto the water than South facing onto the water: they in turn are a lot more valuable than those with no view of water. This has not been taken into account but should be corrected by the next general valuation.


Totally New Thinking



There have been a considerable number of new ideas on the method of rating in the new Mega City. A Draft Rates Policy Framework was widely published inviting discussion and participation from groups and Individuals. Seven issues were set out, each with two or more options.

Five days of open hearings were held by the Panel of councillors, selected from all political parties. I was fortunate to be able to make a presentation and to sit in for the three most important days of hearings. What was of particular interest was the divergence of opinions coming from different sections of the community.

Both the Valuation Roll and the Rating Policy have now been approved by Council and are to be implemented from 1St July 2002. The valuation roll is still subject to appeal from individual property owners who feel that their properties have been over valued. I will be amongst them.


Rates Policy and Calculations


Council agreed to:

* A 30%rebate for residential properties. (Business properties can claim a cost against Income Tax)

* Giving all improved residential properties the first R50 000 of value free of rates. This means that properties valued at R50 000 or less will pay no rates and that everyone will benefit to some extent.

* Rates are based on improved or total value less R50 000 and then charged at 0.98% or R0.0098 in the Rand of rateable value. This value should bear a fairly near comparison to actual free market value.


Refuse (Solid waste)

There are two components;

1. Cents in the rand charge. Take the improved value less R50 000 and multiply by R0.00038. This is an annual amount, divided by 12 to give a monthly payment.

2. Every household will pay R38.60 per month for a wheelie bin. This amount is subsidised. If the property is worth less than R50 000 there is no charge, ie. 100% subsidy. If the property is worth less than R100 000 they pay half, ie. R19.30

Sewage

There are two components;

1. There is a basic charge of R38 per property per month with rebates according to value of the property. These are on a sliding scale from 100% below R50 000 to zero above R1.5M.

2. There is also a sewage charge based on consumption of water. This is based on 70% of consumption up to 55 kilolitres.

The total of all these charges is then subject to Value Added Tax (VAT) presently at 14%.

NOTE

The new rates system is heavily biased in favour of the poor who are mainly very much in need of this assistance. Naturally there is going to be an outcry from some of the affluent suburbs, particularly those that have been heavily subsidised by either an outdated valuation roll or in some cases no rates at all.

As much as it is a great pity that rates will be based on total value, even where they may have been much higher on land than improvements, it may be a blessing in disguise. It could well be better for the rage to be against the new system of wealth distribution rather than against a change to site value rating.

The National, Local Government Rating Bill, due to go before Parliament soon calls for Improved Value Rating, (i.e., Total Value) with not other options. That will be a national disaster, but subject of some further discussion. A lot of work is being done with little results. They say it is better to try and fail than not to try at all.