MUNICIPAL PROPERTY RATES ACT BILL - 2013 PORTFOLIO COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS 28 JANUARY 2014 MUNICIPAL PROPERTY RATES ACT BILL - 2013 Ms. Louise Muller – IMFO President George van Schalkwyk – Chair IMFO Forum Christopher Gavor – Vice Chair IMFO Forum

Institute of Municipal Finance Officers The Institute A professional body for local government finance established in 1929 Registered as a Non-Profit Company A constructive role player in local government policy formulation processes Valuation and Rating Forum Institute of Municipal Finance Officers

Institute of Municipal Finance Officers Agenda Negative financial impact on municipalities Negative impact on municipal budgets Institute of Municipal Finance Officers

Negative Financial Impact (1) Definition of Agricultural Purposes Game farming is a business not food security Game farming is a lucrative business Should business be subsidised by residential ratepayers? Public Service Infrastructure A ratepayer’s legislative power reduces its rates No value added for the 4% to 5% rate increase Being subsidised by residential ratepayers Limited ability to pay subsidising ability to pay Payment ratio reducing from 100% to 90% - 95% Reduction in service level inevitable Clean audits project compromised Institute of Municipal Finance Officers

Negative Financial Impact (2) Differential rates Must take away before you can give away Rates Policy specific to local circumstances Need flexibility to manage local affairs Removing flexibility removes accountability Local administrative & legislative power lost Annual policy review sacrificed for an Act Rate ratio Rebates only to those who lack the ability to pay Should not be decided at a central level Should have a means test to ensure value add Institute of Municipal Finance Officers

NEGATIVE BUDGET IMPACT (1) Request to Minister to review rates Proposed 24 months too long, should be < 6 months Request to Minister after the Annual Audit Report Second financial year all but completed Third year’s rates and tariffs already approved Should not cause a retrospective loss of rates This will require a rebalancing of the budget Municipality cannot review rates for previous years Municipal Finance Management Act Cannot increase rates / tariffs during a year Minister’s notice only effective in fourth year Courts don’t determine budgets and tariffs Institute of Municipal Finance Officers

NEGATIVE BUDGET IMPACT (2) Compulsory review of objection result >10% Not a quality control process Quality control sample from all the valuations Council will detect a value too low Resident will appeal against a value too high Extra work for the Valuation Appeal Board Items submitted to VAB increase expenditure Unresolved appeals affects budgets and rates Appeals to be finalised ASAP Institute of Municipal Finance Officers

Institute of Municipal Finance Officers Way Forward IMFO Valuation and Rating Forum available To assist municipalities with challenges To assist with skills transfer to all To assist COGTA Any Questions www.imfo.co.za Institute of Municipal Finance Officers