RATES POLICY FOR THE CITY OF
JOHANNESBURG
Background on Valuations Roll process and
compilation
12 October 2007
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.
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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
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•Avoid approach that is time consuming in Appeals and reduce
billing difficulties
The Process of Community Participation
• Draft Rates Policy : Community
Participation Sessions
• Written comments may be
submitted to Council until 31
October 2007.
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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.
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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.
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• Council to consider objections to tariffs during
May of each year.
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.
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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.
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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
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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
% PROPERTIES
% VALUE OF
PROPERTIES
% CURRENT
RATES PAYABLE
Residential
81,6%
56%
32,4%
Commercial
7,4%
29,8%
46,1%
Vacant
8,8%
9,9%
15,3%
Other
2.2%
4,3%
6,2%
CATEGORY
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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:
Financial
Year
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Land Value
R000
Property Rates
Income
Rate in the Rand
(cents)
2002/2003 not available
R2 212 324 000
8,88
2003/2004
40 045 436
R2 478 632 000
10,03
2004/2005
41 150 565
R2 698 218 000
10,88
2005/2006
42 025 939
R2 918 647 000
11,32
2006/2007
44 591 704
R3 096 389 000
11,89
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;
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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.
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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
Residential with consent 1:2
Business / industrial
Vacant land
1:4
Government
1:1,2
Public Worship
Public Service Infrastructure
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1
1:3
Exempt
Exempt
Minister to publish regulations to regulate ratios
and capping on rates increases
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
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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
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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
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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
Social Support Organisations
• Provision is also made in the policy for rebates to
CBO’s and NGO’s 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
23 - Educational and Development Services
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
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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
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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.
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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
30 new tariffs
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 Policy
Due 31 October 2007
City Manager
PO Box 1450
Johannesburg
2000
RE: COMMENTS ON RATES POLICY
Fax: 011 381 9642
Email: ratespolicy@joburg.org.za
www.joburg.org.za/rates
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