Cape Town New Rates Policy 2002/2003
[9 June, 2002]
New Valuation Roll
A largely extended Cape Town area has been incorporated into a Mega
City. At the IU Brighton Conference in 1995 Bill Stibbe and Douglas
Milne showed how 39 different local authority areas had been pooled
together and then split into six major municipal areas. These together
with a few extra towns have now been brought together as a Mega City
called Cape Town.
Within the new Cape Town there were a number of different valuation
rolls of different ages, types and accuracy or lack thereof. Some
areas had never been valued before. The former Cape Town had a
valuation roll that was well over twenty years out of date. Although
Cape Town and South Peninsula had almost completed new valuation rolls
some two years ago and based on Site Values only, these rolls were
disregarded because of technicalities and the threat of legal action
on the part of a Rates Action Group of wealthy landlords.
The new Valuation Roll just completed and approved, in spite of some
serious errors, will be applied from 1st July 2002. This has been
prepared by CAMA and a team of "off-the street" data
collectors whose input was highly questionable and subject of numerous
appeals. Dr. Richard Ward of USA, who is consultant to the
introduction of the CAMA system, claims that 80% of valuations are
within 10% above or below actual market values. There are many serious
errors that are being investigated.
Errors and all, the new roll is highly efficient compared to values
that were used in the past and loaded rates paid by low value
properties compared to those in affluent suburbs. Naturally, those
whose properties have been over valued will complain whilst those with
under valued properties will be stricken by silence. However the
qualified city valuers will be searching for under valuations and
appealing on behalf of the city.
In general, land has been under valued and improvements over valued.
An empty site, near my home, West facing onto water, was sold for R300
000 within two weeks of valuation date. Yet it appears on the new roll
at R117 000. Most sites in the vicinity have fairly similar land
values, varying with size rather than with natural attributes. It is
well known that here in the Marina values are much higher for those
properties North facing onto the water than South facing onto the
water: they in turn are a lot more valuable than those with no view of
water. This has not been taken into account but should be corrected by
the next general valuation.
Totally New Thinking
There have been a considerable number of new ideas on the method of
rating in the new Mega City. A Draft Rates Policy Framework was widely
published inviting discussion and participation from groups and
Individuals. Seven issues were set out, each with two or more options.
Five days of open hearings were held by the Panel of councillors,
selected from all political parties. I was fortunate to be able to
make a presentation and to sit in for the three most important days of
hearings. What was of particular interest was the divergence of
opinions coming from different sections of the community.
Both the Valuation Roll and the Rating Policy have now been approved
by Council and are to be implemented from 1St July 2002. The valuation
roll is still subject to appeal from individual property owners who
feel that their properties have been over valued. I will be amongst
Rates Policy and Calculations
Council agreed to:
* A 30%rebate for residential properties. (Business
properties can claim a cost against Income Tax)
* Giving all improved residential properties the first R50 000 of
value free of rates. This means that properties valued at R50 000 or
less will pay no rates and that everyone will benefit to some
* Rates are based on improved or total value less R50 000 and then
charged at 0.98% or R0.0098 in the Rand of rateable value. This
value should bear a fairly near comparison to actual free market
Refuse (Solid waste)
There are two components;
1. Cents in the rand charge. Take the improved value less R50 000 and
multiply by R0.00038. This is an annual amount, divided by 12 to give
a monthly payment.
2. Every household will pay R38.60 per month for a wheelie bin. This
amount is subsidised. If the property is worth less than R50 000 there
is no charge, ie. 100% subsidy. If the property is worth less than
R100 000 they pay half, ie. R19.30
There are two components;
1. There is a basic charge of R38 per property per month with rebates
according to value of the property. These are on a sliding scale from
100% below R50 000 to zero above R1.5M.
2. There is also a sewage charge based on consumption of water. This
is based on 70% of consumption up to 55 kilolitres.
The total of all these charges is then subject to Value Added Tax
(VAT) presently at 14%.
The new rates system is heavily biased in favour of the poor who are
mainly very much in need of this assistance. Naturally there is going
to be an outcry from some of the affluent suburbs, particularly those
that have been heavily subsidised by either an outdated valuation roll
or in some cases no rates at all.
As much as it is a great pity that rates will be based on total
value, even where they may have been much higher on land than
improvements, it may be a blessing in disguise. It could well be
better for the rage to be against the new system of wealth
distribution rather than against a change to site value rating.
The National, Local Government Rating Bill, due to go before
Parliament soon calls for Improved Value Rating, (i.e., Total Value)
with not other options. That will be a national disaster, but subject
of some further discussion. A lot of work is being done with little
results. They say it is better to try and fail than not to try at all.