Property Rates Bill: deliberations
Cooperative Governance and Traditional Affairs
20 November 2003
Meeting Summary
A summary of this committee meeting is not yet available.
Meeting report
PROVINCIAL AND
LOCAL GOVERNMENT PORTFOLIO COMMITTEE
20 November 2003
MUNICIPAL PROPERTY RATES BILL: DELIBERATIONS
Chairperson: Mr Y Carim
(ANC)
Relevant Documents
Working draft of the Property Rates Bill (15 November
version)
Summary of submissions
SUMMARY
The Committee discussed public submissions dealing with Clauses 12 to 15.
The following issues were discussed at length:
- Commencement of rates
- Promulgation of resolutions levying rates
- Exemptions, reductions, rebates and grant-in-aid.
- Impermissible rates
MINUTES
Clause 12Â Commencement of rates
There were no problems with 12(a)(i). The Chair asked what the significance
was of 12(a)(ii).
Mr Gerrit Grove (Department Legal Drafter) replied that this related to Clause
26 because municipalities did not approve the budget and this was in response
to the imposition.
The Chair wanted to know what the significance was prior to putting the clause
in.
Mr Grove explained that previously they had provided for a different date as in
the Municipal Finance Mangement Bill. The resolution was part of the approval.
The Chair asked under what circumstances 12(a)(ii) would be applied. What did
they have in mind?
Mr Mzilikazi Manyike (Director: Municipal Finance Policy) said for MEC
intervention.
The Chair said that on the issue 'rates taking effect from' the Committee had
agreed to adopt the whole section. There were no amendments suggested from the
ODA. He asked what was being said in 12(b).
Mr Peter Vaz (Department Law Advisor) replied that it referred to supplementary
valuation. If there had been incorrect valuation then this would allow for the
correct valuation to be put in and in particular instances retrospectively. Mr
Grove added that this was linked to the provision on supplementary roles.
The Chair said that it should be cross-referenced.
Mr J Ngubeni (ANC) pointed out there was a problem if the mistake was the fault
of a municipality. How did 'retrospectively' affect the person involved. How
could they limit this as they could not penalise people if they were not party
to a mistake. They had to be sensitive.
Mr Vaz agreed. The onus was on the municipality and not on the ratepayer. In
certain instances decisions were taken on back payments otherwise the
municipality had to pay the ratepayer back. If the municipality had made a
mistake then the rate payer should not be penalised - for example, payment
through instalments should be used. He suggested that a sub clause should be
added.
The Chair asked for a wordier clause to be included.
Mr Grove said that Clause 12(b) would conflict with 64(4) because if a word was
inserted it would be subject to 69(4). Clause 69(4) discussed the valuers'
process in 48(a). They needed a reference from 69(4) to 48(a). In 2(b) it
should be added that in the repayment to the ratepayer, municipalities must pay
an interest rate. This was dependent on the committee but the issue should be
flagged for later discussion.
Mr Ben Dorfling (South African Local Government Association) pointed out that
property rates was a yearly rate. It was the choice of the municipality to levy
once a year or have 12 levy payments. If not municipalities, work up to the
time that rates are paid in terms of Clause 26. Under normal circumstances if
municipalities use rate in the rand then how could they override and make a yearly
rate.
In reply to Mr Grove asking if it was a legal or practical problem, Mr Dorfling
said that it was both.
If municipalities did not do promulgate by 1 July they lost out for the whole
year. They must stop municipalities from doing their work. If Clause 26 was put
in what did that mean, for example, three months after the financial year. How
would you rate then?
Mr Vaz said that retrospectivity only applied in cases of supplementary
valuation.
Mr Dorfling said that if you have a yearly rate you could not say that three
months had gone by and then rate based on the nine months.
Mr Manyike explained that the practical problem could be worked out
arithmetically.
Ms S Kesaobaka Makotoko (SALGA) said that the way the whole/original amount
would be taxed you might not be able to recover it. If it were only applied to
supplementary valuation when would it come into effect? What were the implications of the amount
forgone?
The Chair said that there would be no money forgone unless there was supplementary
valuation. He said that the word 'retrospectivity' was useless.
Mr Vaz pointed out that 23(1)(a) was not specifying any rate, it said 'either
or'. He said that Mr Dorfling was looking at the practical issues.
Mr Dorfling stressed that one had to understand a monthly versus yearly levy.
Property rates were the randage over a period of a year. It was part of the law
to promulgate. If they were three months behind would the yearly rate stay the
same rate? The phrase 'may not be
levied' until processed was a problem. Would they be able to recover? What were municipalities going to tell the
ratepayers?
Mr Vaz said that it was the rate valid for a year versus a yearly rate. He said
that a legal opinion was needed because they were referring to a rate valid for
a year.
Mr Dorfling explained that 2c times the value of the property was charged
either once a year or monthly. The rate that was promulgated was the rate for a
year and not for a month. Therefore they would divide the amount into twelve
monthly payments or into a single amount. What would happen if three months had
gone by because there would be a problem taking the yearly rate?
The Chair said that he did not understand what the issue was. The matter was
flagged and would be sorted out at a later stage.
Clause 13Â Promulgation of resolutions
levying rates
The Chair asked why when promulgating the municipality had to publish in
the provincial gazette.
Mr Grove said that there was a lot of confusion over the purpose of the clause.
He understood the municipalities had to give notice to the local community to
ensure community participation. How to make a resolution law was made clear
through this. Subclause 2 explained that a resolution to levy rates had to be
promulgated in order to become law because it was only effective once it was
law. Subclause 3 gave an alternative to publishing in the provincial gazette.
The Chair said 13(1) was straightforward. He asked why the “a� had been changed
to “the�.
Mr Grove explained that it did not mean any council thus the use of “the� was
more appropriate.
The Chair questioned if this was not the type of work that the State Law
Advisors did.
Mr Manyike said that he could not say whether it was an error committed by the
Department or the State Law Advisors. It would be unfair to point fingers.
The Chair declared 13(1) accepted.
Mr Dorfling pointed out that Clause 5 said that municipalities had to review
their rates policy annually. Clause 13 said that tariffs were part of the rates
policy. He asked for consistency. He
pointed out that the rates policy had to be promulgated. It was a serious
problem if advertising and other ways and means were being given. It was not
legal if it was not promulgated and municipalities could not just advertise
because they would not be legally covered.
To pass a resolution was to advertise the total rates policy including tariffs
and then promulgation would occur if it is gazetted.
The Chair asked why the Department was giving an option. Why was it not
possible to both gazette and advertise?
Mr Joe Dube (Senior Legal Administration Officer - DPLG) said that current
practice was to publish and gazette.
Mr Grove said that the way that the clause had been drafted was because of how
did people viewed the resolution if it was not published in the gazette. It is
simply said in subclause 2 that publishing in a gazette led to promulgation.
They had to provide other ways to promulgate which are outlined in subclause 3.
Mr W Doman (DA) brought up the issue of how many people read the gazette. Thus
the word “and� should be added.
Mr Ngubeni asked if the process was slow in the case of promulgation. The Chair
asked if municipalities could gazette overnight.
Mr Dube explained that it was gazetted provincially because some owners of
property did not live in the town. It was better promulgated in the provincial
gazette based on the issue of access. Those that lived in the town could read
the advert at the municipal offices on a monthly basis.
The Chair asked that in order to allow for promulgation was there a deadline to
gazette.
Mr Dube replied that when promulgation occurred they had to display on the same
day.
The Chair pointed out that his question had not been answered. He asked again
if promulgation took longer if it was gazetted. Was there a practical
problem? If they opted for the display
route, would it be quicker? Was it a practical problem and how long did it take
to promulgate?
Mr Dube replied that there was a gazette every Friday together with a special
gazette.
The Chair said on that basis could be losing seven days. A significant majority
promulgated and displayed not 'either or'. He asked for a strong reason for
gazetting alone.
Mr Manyke raised a concern that some municipalities did not have the legal
capacity to deal with the by-laws and the expenses.
The Chair asked what the cost was.
Mr Grove replied that it was enormously expensive. It was standard practice not
to publish but rather to display.
Mr Dorfling pointed out that the law said that one had to promulgate through
gazetting.
The Chair asked how many people did it through gazetting.
Mr Dorfling pointed out that if municipalities did not, they lost their
tariffs.
Mr Grove said that tariffs had to appear in by-laws.
Mr Dorfling said that by-laws, tariffs and policy was something else. The rates
policy including tariffs had to become by-laws otherwise municipalities would
appear in court every day.
The Chair asked the Department to obtain more facts and then return to the
Committee on the issue. They could make the obvious change to 13(3)(b) from
'newspapers' to 'advertise in the media'. There was also the website issue. He
said that one of the submissions had motivated for 21 days. The Committee had
agreed that they did not want to name a time period. He asked about Clause 13
contradicting Clause 76(5).
Mr Dorfling said that promulgation in ATB started in Clause 75(a)
Mr Grove said that Clause 75 had nothing to do with rates.
Mr Dorfling asked what section ATB was. It was the provision of services.
The Chair agreed that 13(2)(b)(i) as suggested by the professional valuers
could be changed to 'to levy'.
Mr Vaz pointed out that levying was a legal thing. He agreed that it was more
appropriate to say 'to levy'.
The Chair said that it was not important. On the issue of the resolution being
taken at the start of the financial year, what was the problem?
Mr Grove replied that perhaps the Municipal Systems Amendment Bill would not be
completed yet.
Clause 14Â Exemptions, reductions and
rebates
The Chair asked if it was reasonable to leave Clause 14(1) and 14(1)(a)
reasonable as it was or not.
Mr Grove suggested that the clause be restored to its original provision.
The Chair asked why the Department was not keen on definitions. Was it not
possible in (b) to make the categories clearer. He asked whether it was clear
that a rebate was like a discount like a percentage discount. If words were
used a distinction could be made. A reduction was for example a discount on
valuation. He asked for explanations.
Mr Vaz noted that as it was stated at the previous meeting that some people
used the term 'rebates' and 'reductions' interchangeably.
Mr Dorfling believed that there should be some clarity.
Mr Vaz explained that a reduction in the amount payable was not a rebate and
then did not have to be put in the rates policy. Municipalities could get
around these things.
The Chair asked if he was saying that a rebate provided for the amount forgone
but for a reduction they did not have to include it.
Mr Vaz replied that according to the Bill they did not have to account for the
amount payable they only had to account for the reduction of valuation.
The Chair stated that surely a definition was needed. If the sole reason not to
define was to prevent the interchangeable use of the term, that was not enough.
Couldn't they use terms because that would not be a definition? Municipalities could find other ways to
provide rebates and reductions therefore they had to mean the same thing. Could
they not define it reasonably wide? There
was flexibility on the play on words. Was it a legal issue? He asked Mr Vaz how
the Department wanted to use the word if it was not defined. By defining how
did that restrict the possibilities?
Mr Vaz explained that the issue was the variety of forms that rebates and
reductions could take. In addition it was also expressed in different ways.
Municipalities could call things reductions so that they could be taken out of
the budget and not reflected. He said the wide usage covered all the different
uses of the words and municipalities could not run away.
The Chair asked for more clarity because everything that had been said pointed
to having a definition.
Rev A Goosen (ANC) motivated that a definition was needed to facilitate
municipalities and residents. There had to be no confusion with what was being
applied.
Mr Manyike said that the problem could be addressed in Clause 3(3) because all
things being discussed were relief measures.
Mr Grove referred to Clause 3. The policy should cover all issues under relief
measures. Technical definitions were bound to limit the terms rebates and
reductions. He said that it was news to him that it was linked to value and not
amount. Municipalities could come up with other relief measures to fall outside
the policy. Based on this point some things could fall outside the net. It was
better not to have definitions and broaden it instead. All things should be
covered under the rates policy. Municipalities would claim that they only dealt
with rebates and reductions under the policy.
The Chair said that things should be kept loose. It was agreed for now not to
give a definition but Mr Vaz and Mr Manyike were mandated to do research on
this.
Mr Dorfling said the issue was more serious because there were more relief measures.
The Chair said that they did have grant-in-aid.
Mr Dorfling explained that in the old ordinance, Ordinance 11 of 77,
grant-in-aid was the only way to grant certain exemptions. Every municipality
did its own thing because there was no guide. No vote of grant-in-aid should be
brought in here because it had nothing to do with property rates. It was
upsetting rebates, reductions and exemptions and now grant-in-aid.
Mr Manyike said that Clause 3(3) was not clear. It talked about
"exemptions, rebates and reductions"
 which was dangerous because
sophisticated municipal lawyers would make claims that it referred to relief.
It must be clear that relief measures had to be limited to these three, which
could be defined here.
Mr Dorfling said that relief measures were in the rates policy where the
tariffs were and not in grant-in-aid. That was why it was defined in the bill.
The sentence had to be changed.
Mr Ngubeni said that if the Committee defined them but this did not affect the
ultimate result of what they wanted to achieve, then they should not define
them.
The Chair asked what the solution was because SALGA was repeatedly claiming
that things were done differently to what the Department was claiming. Why
should the Committee believe SALGA? The Department and SALGA were constantly at
odds and it was hard for the Committee to make decisions without the facts. The
gap between the Department and SALGA was worrying. Compromises would have to be
found. They would not define and they would not add the words 'relief
measures'. His own view was that there should be definitions but the issue
would be left for now and discussed at a later state. The Department wanted to
continue grant-in-aid but the terms of the Bill ruled out grant-in-aid.
Mr Manyike said that grant-in-aid amounted to a relief measure. He raised the
issue of 3(3) because they needed to make it clear. Examples of relief measures
were there.
Rev Goosen asked how grant-in-aid applied in terms of rates
The Chair replied that it was not a case of how grant-in-aid operated. For
example, if an organisation were paying rates of R10 then they would be given a
grant of R5 and this could be paid towards rates and the organisation would
have to find the other R5 to pay the municipality. There was a circular
movement of cash. Where did this concept come from, how did it work and how was
it different to a rebate? Why were they giving money that they would get back?
Grant-in-aid was nonsense because the organisation was paying back the money
given by the municipality. He asked who in the Committee thought it was
nonsensical. He asked SALGA to explain why.
Ms Kesaobaka Makotoko said that they were not using grant-in-aid, that was the
old system.
The Chair said that in his municipality they were still using grant-in-aid. He
wanted to understand the rationale.
Mr Dorfling explained that grant-in-aid was a phrase. It was money used for any
purpose at that stage. Municipalities could use it for whatever they wanted. It
had been used under the auspices of welfare. It was not used for the payment of
rates. In the old ordinances there were not enough relief measures and
basically they were giving money to pay where there was a tariff.
The Chair clarified that if they gave R5 it could be used for whatever that
organisation wanted. He said that the Department was saying that grant-in-aid
was given to help people pay their rates.
Mr Manyike asked why the provincial ordinances discussed grant-in-aid in
relation to rates. The Chair asked SALGA to explain why grant-in-aid was in the
provincial ordinances.
Mr Dorfling explained that the old ordinances were very descriptive when
describing rebates and exemptions. The reason for grant-in-aid in the
provincial ordinances was because of the inflexibility. The old ordinances when
written only had one rate applicable. There were not any relief measures so
they had to look for opportunities, ways and means to give grants.
The Chair said that there was no reason to accommodate grant-in-aid. What other
relief measures were there beyond rebates, reductions and exemptions?
Mr Doman explained that grant-in-aid in the old regime was a public relations
exercise for the Mayor. He noted that they had spent a lot of time on rebates,
reductions and exemptions and the Committee would have to do something to close
the loopholes.
The Chair said that the issue would have to be pursued when the Deputy
Director-General, Ms Jackie Manche, was present because the Department was not
providing compelling arguments. Beyond rebates, reductions and exemptions what
else was there?
Mr Ngubeni said that they could not ignore grant-in-aid because municipalities
would keep doing it as it was standard practice. The Committee had to think of
ways to close the loopholes.
Mr Grove said that the Department's argument was more practical. In 3(2)(b) if
they defined the term in narrow technical ways municipalities, would come up
with many terms for relief to get around
it. However, if they added another clause saying that there were no other
relief measures except these three they would solve the problem.
The Chair asked about 14(2) and the concern raised by Venn Diagnostics about
public service infrastructure.
Mr Vaz explained that the concern was linked to public service infrastructure
and portioning out, which belonged to Clause 15
The Chair said that in 14(1) the concern of the Western Cape Department of
Local Government had been dealt with because it was not the total sum of
categories. Clause 8(3) gave municipalities the power to add to the list of
categories of rateable property. The
suggestion from the Legal Resource Centre motivated that municipalities should
be required to give explanations.
Mr Vaz referred to 3(2)(c) "identify and quantify all exemptions, rebates and reductions in terms
of costs to a municipality and benefit to the local community; " but the
Chair said that this did not explain the reason.
The Chair summarised the decisions on 14(1):
- The 'a' was removed from 14(1) as suggested to correct the grammatical error.
- They did not agree to the deletion of 14(1)(a) and (b).
- Clause 14(1) [c] had already been dealt with.
Regarding Clause 14(3), Mr Vaz explained that municipalities were going to be
projecting therefore they had to make it clear that the figures were purely
projections.
The Chair commented that was it really necessary.
Part 3: Limitations on levying rates
Clause 15Â Constitutionally impermissible
rates
The Chair said that 15(1)(a), (b) and (c) were fine. He asked for a
comment and a summary of all the concerns raised.
Mr Manyike said that when the Bill went to Cabinet, a big issue raised had been
the international conventions that South Africa had signed and had to comply
with. For example South Africa would not rate foreign embassies and Foreign
Affairs wanted to prohibit municipalities from rating embassies as per the
convention.
The Chair asked if the Committee should burden Cape Town with the property
rates of the US for example.
Mr Ngubeni asked what the situation was with embassies in the US. There had to
be consistency in other countries. There was no problem if Foreign Affairs and
Treasury paid for them. This figure amounted to R8 million.
Mr Manyike said that based on the international convention, foreign embassies
did not pay the South African government. South African embassies elsewhere
were treated the same as far as he knew.
The Chair said that if the status quo was that embassies did not pay and
Foreign Affairs paid on their behalf, the Committee needed to decide if this
should continue. Mr Vaz was mandated to set up a meeting to explain why they
were not changing the status quo.
They dismissed
the concern raised by the Professional Valuers in 15(1) regarding agriculture.
The concern raised by Professor Franzsen had already been covered in redrafting
15(2) so that it was a stand-alone subclause. The concern raised by the South
African Council of Churches had also been dealt with elsewhere.
The Committee agreed to come back to subclause 3. They agreed on subclauses 4
and 5.
Mr Vaz pointed out that the submission by Venn Diagnostics wanted to exempt
public service infrastructure which had been moved from 15(2) to 15A(a).
The Committee agreed to come back to public service infrastructure in 15A(a).
The error with the wording of Prince Edward Island was noted in 15A(d).
The Committee agreed to (e), (f) and (g).
The Committee had not found agreement on (h) previously and this policy issue
was discussed.
Mr Vaz said that the policy was based on R15 000 in order to account for RDP
houses. RDP houses were less than R23 500 but they did not want to raise R15
000 to R23 500 as it would apply across the board.
The Chair said that instead of giving R15 000 across the board this could be
restricted only to the poor. Then it would be the first R23 500 of the
market value. The Minister could alter the figures. He thought it was a
good idea to give this only to the poor thus making the problem smaller. He
acknowledged that there were some municipalities that had many housing areas
below the R15 000 mark and with not many affluent people. National Treasury had
to seriously consider the amount being given to these municipalities. If they
were making national exclusions, the national fiscus had to make up the money
municipalities were losing. There were practical problems and it was hard to
arrive at a decision.
Mr Ngubeni said that it would be a difficulty for small municipalities to
identify the poor. The Committee should look into the question of amending the
Act and leaving municipalities to decide for themselves.
Mr A Lyle (ANC) asked if they were applying it to certain categories of citizens
or to value. It was extremely tricky.
The Chair said that it was both.
Mr Lyle said that one could be a millionaire and have R5000 house.
The Chair pointed out that the question raised was a philosophical one because
there were very few people like that. He suggested that they use Ngubeni's
criteria.
Mr Solo said that Mr Ngubeni's approach should be noted because it was a fair
approach. Small municipalities especially rural ones had more RDP houses
springing up. There was a new dimension in the Eastern Cape where the market
value was increasing substantially but he did not know how this would impact on
the R15 000.
Mr Goosen agreed with Mr Solo because whatever the value of RDP houses, that
should be the minimal amount that should be paid.
The Chair asked SALGA to comment.
Ms Kesaobaka Makotoko said that it was generally in line with their view. She
asked what the intention was of the proposed clause. Who was it favouring? She
understood the focus on the poor and in a sense it was forcing municipalities
to assess their profit base.
Mr Dorfling said that the problem would be the blanket reduction or deduction.
The problem of flats and hostels was not specified. He suggested that the words
'units of' be included to keep this kind of reduction specific and fair.
Mr Manyike said that it was included because the clause catered for residential
properties. Part of the motivations had been to limit it not to RDP houses but
rather to all the people at that level. He said that the Department would have
to meet with SALGA about their concerns and they would report back to the
Committee.
The Chair repeated that Mr Ngubeni's suggestion was a good one because it was
moving away from the notion of everyone being exempted. It appeared that the
Committee was saying that not everyone who had a house below R15 000 was poor.
Mr Ngubeni brought in the issue of houses not being worth as much because they
were in a rural area.
The Chair said that they were moving in that direction. SALGA could help. They
needed to know more about the impact on small municipalities particularly rural
ones - so they were not going to exempt now.
[The PMG monitor left at 5pm and the meeting continued until approximately
6.30pm]
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