MUNICIPAL PROPERTY RATES ACT BILL - 2013

1. MUNICIPAL PROPERTY RATES ACT BILL - 2013 PORTFOLIO COMMITTEE ON CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS 28 JANUARY 2014 Ms. Louise Muller – IMFO President George van Schalkwyk – Chair IMFO Forum Christopher Gavor – Vice Chair IMFO Forum

2. 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

3. Agenda • Negative financial impact on municipalities • Negative impact on municipal budgets Institute of Municipal Finance Officers

4. 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

5. Negative Financial Impact (2) • Differential rates • 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

6. NEGATIVE BUDGET IMPACT (1) • Request to Minister to review rates • 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

7. NEGATIVE BUDGET IMPACT (2) • Compulsory review of objection result >10% • 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

8. 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