Transcript UDZ Tax Allowance - city of Johannesburg

Presentation to Finance, Strategy & Economic Development Committee
7 June 2004
City of Johannesburg
Finance & Economic Development
Annex AA10: Presentation
to Committees
UDZ Tax Incentive – Application by Joburg
Background
• Budget Speech by Minister, 2003
• Meeting between EDU & NT to determine
location & size of UDZs
• Mayoral Comm recommendation in July 2003
– That, in order of priority, following be
recommended to National Treasury for inclusion in
UDZ Incentive: Inner City, R’burg CBD, R’poort
CBD & Lenasia CBD
– That, if National Treasury limits selection of
designated areas to one area only, Inner City be
recommended for UDZ incentive
• Legislation approved by President in
December 2003
What does the Legislation cover?
• Income Tax Act 58 of 1962, Revenue Laws
Amendment Act: Insertion of Clause 33,
Section 13quat
• Accelerated depreciation deductions for
construction & refurbishment (erection,
extension, addition, improvement) whereas
previous depreciation was zero, 2% or 5%
• UDZ Incentive/Tax Allowance
– Aims to support urban renewal efforts
– Targets inner cities in 16 LA areas, in UDZs
• Preparation of case for larger area being
finalised for 23 May
Structure of Inner City
Total Inner City is 1.1% of total
Joburg area (1,786 ha excluding
Zone 5); allowable UDZ is 690 ha
Zone 1- office & business:
28% of Inner City (502
ha) & 4,212 erven
Zone 3 – Fordsburg +:
7% of Inner City (118
ha) & 1,858 erven
Zone 4 – Residential +:
42% of Inner City (749
ha) & 8,856 erven
Zone 2 – Manufacturing & industrial: 23%
of Inner City (417 ha) & 2,489 erven
Residential Profile of the Inner City
• Nearly
208,000
people live in
Inner City
(+6.5% of all
population in
Joburg)
• Highest
number of
households
and people
live in Zone 4
(69%) & in
Zone 1 (27%)
Rationale for Extent of Application
• Complex area in transition
– Suffers from inner city decline like others in
world
– Impact of apartheid legacy being dealt with
– Crucible for new approaches
• Operational rationale
– Application deals with possible “shadow”
effect whereas smaller area will not
Rationale for Extent of Application, cont…
• Economic supra-national city
– Joburg contributes 16%, R163bn, of SA’s
GDP (over R30bn more than next largest
earner, Cape Town)
– Joburg’s 5-year economic growth rate from
1997-8 to 2000-1 was double the national
average (i.e. 5%)
– The Inner City contributes over 23% to city
GGP (Region 8 proxy)
– Largest concentration of infrastructure in
SA: infrastructure replacement costs are
+R30bn
Inner City Economic Structure
•
•
•
Highest concentration of
retail space is in Zone 1
Industrial space is located
throughout Inner City
reflective of its historic
mining & manufacturing
economy
Integrated urban economic
system
– Provides more jobs
than Sandton,
Woodmead/Rivonia &
Randburg combined
– Important anchor for EW corridor & N-S
Corridor (location of
Gautrain route)
– Location of corporate
HQs plus SMEs
Employment Profile of the Inner City
• Over 201,000 jobs
located here (+15%
of all jobs in
Joburg) (2001)
• Office based
workers are the
majority (57%)
• Most employment
(75%) located in
Zone 1, followed by
Zone 4 (16%)
• Unemployment at
32%
Rationale for Extent of Application, cont…
• Focus of transformation
– E.g. Better Buildings Programme
– Inner City Task Force
– Declining land values from 2000 to 2004
(e.g. Berea  41%, Braamfontein 18%,
Fordsburg  12%, CBD & Hillbrow 38%)
– 26% decline in assessment rates from
+R24m (July 2000) to R18m (Feb 2004)
(32% alone in Zone1)
Rationale for Extent of Application, cont…
• Institutional integration
– Inner City Office, 1998
– Adoption of Inner City by CoJ as priority
intervention area in 1999
– Inclusion as one of 6 Mayoral Priorities in 2000
– Creation of dedicated Inner City committees
– Role players, e.g. JDA, EDU, CJP, JICBC, Region 8,
POMA, working towards same goals
– Planning for Inner City as a single, integrated
entity
– Committed interventions, e.g. precinct projects,
BIDs, Better Buildings, ICDS, housing, rates
rebates, CCTV, etc, underway
Progress to Date
• Presented to Inner City Portfolio Committee
(19 May), Economic Development
Subcommittee (21 May), Finance, Strategy &
Economic Development Committee (7 June),
then Mayoral Committee (10 June), Council
thereafter
• Decision to be forwarded with application
(ready to go!) to National Treasury for
approval –No guarantees of success for entire
Inner City
• Latest notification rec’d from Treasury
Possible Impact of UDZ allowance
• Only Zone 1 showcased here today
• ‘Bad’ building: Massyn Court, corner
Kerk & Mooi Streets
– In Fashion District
– Worst building in Inner City
• Overcrowded
• Shacks on balconies
• No services, fire risk from candles (during
day)
• Sanitation buckets emptied into stairwells
– Valued at R600k in 1991, now 480k
– Next to high-value area – good
prospects for regeneration
Possible Impact of UDZ allowance
• ‘Good’ building: Carlton Centre,
Commissioner Street
– Biggest single development in SA
when built in 1973
•
•
•
•
•
Includes hotel,
Biggest parking garage in Inner City
Tower is 50 stories high
Replacement value of R1.3bn
Empty for +10 years
– Sold for R33m & now 98%
occupied
– Part of BID, CCTV
– Now shopping centre is also over
80% let, possible hotel reopening
Contact Details
Li Pernegger
Programme Manager
(Economic Area Regeneration)
Finance and Economic Development
City of Johannesburg
Cell: +27 (0)82 464 4287
Tel: +27 (0)11 407 7031/7141
Fax: +27 (0)11 403 4125
E-mail: [email protected]