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
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
Agenda
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Negative financial impact on municipalities
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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
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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
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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%
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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
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