Transcript Title

Use of property
rates policies and
by-laws as a tool
for development
Jaap de Visser
[email protected]
Developmental use of property
rates

Property rates as tax to –
 generate
revenue, balance LG budget; but
also
 influence behaviour (densification, property
speculation)?
 redistribute resources?

Using property rates as an instrument to:
 pursue
local economic development;
 provide access to opportunities.
Context: ‘developmental local
government’ in distress

ANC government: “developmental state”

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infrastructure-led growth
social welfare schemes
‘Developmental local government” =
constitutional objective of local government
 Given content to in 1998 White Paper,
legislation and policy
 18 May 2011: 3rd LG election
 2009: local government is ‘in distress’


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(violent) community protests
ratepayers’ associations withholding rates in
organised fashion

Challenges:
 capability
to implement developmental
mandate
 lack of ‘professionalism’
 financial stress: billions of debt owed to
municipalities, high dependency on grants
etc.
Constitutional framework for
property rates

property rates traditionally a critical revenue
source for local government
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constitutionally protected revenue source
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E.g. six biggest cities 2005/2006 budget: 20% of
revenue
2001/2002 - 2004/2005: growth 21%
Constitutional Court in Robertson: original power
Supreme Court of Appeal in CDA Boerdery: no
approval for setting rate
National framework: Municipal Property Rates
Act, implemented in 2009
Rating of land + improvement
 Professional valuation based on
market value
Policy/decision making:
 Municipal Property Rates Policy
 Municipal By-law
 Annual setting of rate (cents in the
rand)
 Debt collection policy

Instruments

Statutory exemptions
 E.g.
first R 15 000 of value may not be
rated
 Places of worship etc.

Differential rating
 Different
categories of property different
rate
 Municipality determines category
(location, ownership, use)
Instruments

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Reductions (reduction of property value)
Exemptions
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Rebates (reduction of rates liability)
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Discounts
Special rating areas

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Municipality may exempt categories
Municipality identifies geographical area for
higher service levels in return for extra
levies
Credit Control and debt collection policy:
special provision for indigent etc.
Regulatory context
Tight financial regulation
 Municipalities must disclose revenue
foregone as result of rebates etc.
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Practice: preliminary findings
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Most popular: widen the general residential exemption
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Policy innovation with rebates
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Little or no administration costs
Evidence suggests redistributive effect
Context: payment rate is low in any event
rebate for “business that makes substantial contribution to
job creation”
Rebate for “farmer who pays farm worker a reasonable
salary”
Rebate for “farmer who provides basic services to farm
workers”
Slow uptake
Successful use of special rating area but only for levying
additional rates (CBDs) – other types of use?
Challenges

Is property rates adequate mechanism for
redistribution / economic development?

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National Treasury’s ‘Urban Development Zones’  via
national income / company taxation
How important is property rates in
economic/household decision making?

General municipal tax/service fee burden: 12% of
household income
Capability question: inadequate use of two critical
instruments: municipal policy and municipal by-law
 Inadequate data inhibits evidence-based policy
making
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E.g. payment rates at lower incomes critical
IGR system: very little (provincial) support for
municipalities in developing property rates policies
In summary
Constitutional/policy context
encourages
 Careful interest on part of municipalities
 Legal framework is brand new, preoccupation with transitional issues for
now
 Limits (public finance argument) must be
defined and acknowledged
 Context: serious capability problems
outside of cities
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