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”
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’
(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
constitutionally protected revenue source
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
Reductions (reduction of property value)
Exemptions
Rebates (reduction of rates liability)
Discounts
Special rating areas
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.
Practice: preliminary findings
Most popular: widen the general residential exemption
Policy innovation with rebates
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?
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
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