International Union for Land Value Taxation

To

Portfolio Committee, DPLG

Property Rating Bill 2003

On the 14 May 2003 by GRA Dunkley

General Comments on Hearings

(12th to 28th May 2003 )

 

 

Contents

1. Definitions (Chapter 1: Interpretations, point 1) *

2. Power to Levy rates (Chapter 2: Rating, point 2(1)) *

3. Annual review of rates policy 5. (1) *

4. Rates to be levied on all rateable property (Chapter 2: Rating, Part 2, point 7(1)) *

5. Differential rates (Chapter 2: Rating, Part 2, point 8(1)) *

6. Amount of rate (Chapter 2: Rating, Part 2, point 10(1)) *

7. Rates to be levied by resolution (Chapter 2: Rating, Part 2, point 13 (2)) *

8. Constitutional Constraints(Chapter 2: Rating, Part 3, point 15(2) (a)) *

9. Limits on annual increase of rates(Chapter 2: Rating, Part 3, point 17(1)) *

10. Special rating areas(Chapter 2: Rating, Part 4, point 19(1)) *

11. Register of properties (Chapter 2: Rating, Part 5, point 20) *

12. Register of properties (Chapter 2: Rating, point 20(2).) *

13. General Valuation of Rateable Property (Chapter 4: Valuation Roles, point 27(1).) *

14. General Valuation of Rateable Property (Chapter 4: Date of Valuation, point 28(1).) *

15. General Valuation of Rateable Property (Chapter 4: Commencement and Validity of Valuation Roll, point 29(1) (b).) *

16. Municipal Valuers (Chapter 4: Part 2. Appointment of municipal valuers, point 30.(1).) *

17. Municipal Valuers (Chapter 4: Part 2. Functions of municipal valuers, point 31.(1) ( c).) *

18. Valuation Criteria (Chapter 5: Valuation, point 38(3).) *

19. Valuation Criteria (Chapter 5: General basis of valuation, point 39(1).) *

20. Contents of Valuation Roll (Chapter 6: Valuation Roles, point 41(2)f.) *

21. Contents of Valuation Roll (Chapter 6: Valuation Roles, point 42(b).) *

22. Inspection of, and objections to Valuation Roll (Chapter 6: Valuation Roles, point 43(2).) *

23. Processing of objections (Chapter 6: Valuation Roles, point 44(2).) *

24. Compulsory review of decision of municipal valuer. *

(Chapter 6: Valuation Roles, point 46) *

25. Right of appeal (Chapter 6: Valuation Roles, point 48) *

26. (Chapter 8: Supplementary Valuations, point 69) *

27. Previous Submissions and Supplementary Material *

Submission dated 2003-04-15 *

Submission and Verbal Presentation dated 2003-05-14 *

Emailed Portfolio Comm2.doc dated 2003-05-28 *

 

Not Edited

Point By Point Discussion

  1. Definitions (Chapter 1: Interpretations, point 1)
  2. Definitions can only be completed when policies have been finalised. Many definitions that were in earlier drafts of the bill have been removed and need to be brought back into consideration.

  3. Power to Levy rates (Chapter 2: Rating, point 2(1))
  4. 2 (1) A metropolitan or local municipality may levy rates …..? Surely this should be MUST levy rates . . . , except where there is a divisional authority.

    This is their main source of revenue. Any other source of revenue results in an additional work load both for the local authority and for business and taxpayers. Wage and turnover taxes are disincentives to expand business.

    MUST appears in 3. (1) and should appear in 7. (1) as well. Consistency!

  5. Annual review of rates policy 5. (1)
  6. A municipal council must annually review and adjust its rates policy when applying a new or supplementary valuation roll prior to implementing the annual budget.

     

  7. Rates to be levied on all rateable property (Chapter 2: Rating, Part 2, point 7(1))
  8. Change wording from ‘If’ to - "A municipality must, subject to subsection (2), levy rates on all rateable property in its area, etc.

    Add to 7.(2) (a) iii provided the market value is estimated to be below the agreed amount in terms of 15. (2) h.

  9. Differential rates (Chapter 2: Rating, Part 2, point 8(1))
  10. A municipality may levy different rates – for different categories of rateable property or special rating areas.

    In 8. (2) provision should be made for temporary relief of disaster areas.

    Add (2) (d) a temporary area can be created to allow for rates exemption following a declared disaster area.

    Also add 8. (2) (e) a special rating area may be created in which additional rates may be charged to amortise new infrastructure that adds considerably to the value of land. An example would be a new mass transport system or free Central Area Transport (CAT) system.

  11. Amount of rate (Chapter 2: Rating, Part 2, point 10(1))

  1. (1) A rate levied on (ALL) property must be –

a rate based on the { change ( improved ) to SITE Value } of the property

Note: Both history and a vast amount of evidence point to the wisdom of Site Value Rating. See evidence previously submitted. Little if any evidence is available to promote total value rating, other than theory, mainly from USA.

10. (1) (b) The following is recommended as a replacement of this clause:

(b) newly constructed residential properties, in terms of the National Housing programme, may be banded together as "Not Rateable" provided their estimated value is below the rebate sum set out in 15. (2) (h)

10.(2) becomes unnecessary and should be replaced by the following.

The amount of rate levied in terms of 10. (1) should be expressed as cents in the Rand of the applicable valuation roll or suplimentary roll and established by dividing the Budget amount by the total value of rateable property excluding exemptions and rebates.

Note on Banding. With market value used to arrive at the rateable value of sites and/or improvements, the valuers aim at an error of less than 10% on either side.

Banding of properties, other than at the lower end as shown above, results in an error of 50% to !00% depending on how the ratios are taken. This is contrary to the intent of the Rating Bill that aims at equity and justice, particularly for the poorer people.

COMMENT: In the interest of uniformity throughout the country it would be useful to state a minimum rate of say 2 cents / Rand but subject to rebates and exemptions as shown in this Bill.

A highly successful precedent to this was in the Transvaal Rating Ordinance of 1916 that stated a minimum amount on site values.

  1. Rates to be levied by resolution (Chapter 2: Rating, Part 2, point 13 (2))
  2. Please add a new item as follows:

    13(2)(b), iii the amount of the rate expressed as cents in the Rand for different categories of property.

  3. Constitutional Constraints(Chapter 2: Rating, Part 3, point 15(2) (a))
  4. 15. (2) (a) public service infrastructure provided it is not privatised. Rating on Land or SVR should be allowed for.

    15. (2) (g) Add ‘provided the individual parcels of land are valued below the specified limit shown in the following point namely (h).

    15. (2) ( h) The amount should be increased to at least R20 000 so as to cover all properties supplied under the National Housing scheme and to give meaning to the suggested revision of 10. (1) (b)

    If rates are to be based on SVR the rebate amount would be approximately one third as much to achieve the came effect.

  5. Limits on annual increase of rates(Chapter 2: Rating, Part 3, point 17(1))
  6. This could be a dangerous practice particularly when property prices rise rapidly because of new infrastructure supplied by the municipality. Ref. Comments in 1 above relating to point

    Change of consent use can send land values up by thousands of percentage points.

  7. Special rating areas(Chapter 2: Rating, Part 4, point 19(1))
  8. Special rating areas should be welcomed by trades unions as they encourage additional spending into the economy that would not otherwise take place. This leads to additional employment. Normally this improvement spending results in higher land values and increased revenue for the municipality in future years

  9. Register of properties (Chapter 2: Rating, Part 5, point 20)
  10. The register of properties should include an accurate record of who owns what share of the property. In all cases, irrespective of private ownership, partnership, Closed Corporation, Private Company etc., the individual ownership should be recorded together with Identity Number and percentage ownership. Transparency is required.

  11. Register of properties (Chapter 2: Rating, point 20(2).)
  12. Part A of the register consists of the valuation roll including ownership in detail in terms of section 41

  13. General Valuation of Rateable Property (Chapter 4: Valuation Roles, point 27(1).)
  14. A municipality (intending to levy a rate on property) should be replaced by:

    A municipality must in accordance with this Act cause –

    Regarding 27. (2) Surely a general exemption is not advisable as registration is required for other purposes such as billing of electricity, water etc. It is also necessary to record as much information as possible to simplify future updating of the roll which is an ongoing process.

    There should also be provision for a category of un-surveyed properties provided they are below a certain value, i.e. as per Chapter 2: Rating, Part 3, point 15(2) ( h)), say R20 000

  15. General Valuation of Rateable Property (Chapter 4: Date of Valuation, point 28(1).)
  16. 28. (1) As this stands it becomes a point of dissension and open to legal action. Replace with:

    A municipality must fix a date by which the new valuation roll, or supplementary valuation roll, must be completed in order for the finance department to establish applicable rates for the new Budget Year.

    Ref. 69. (1)

     

  17. General Valuation of Rateable Property (Chapter 4: Commencement and Validity of Valuation Roll, point 29(1) (b).)
  18. 29.(1)(b) A valuation roll remains valid for one year and thereafter a Supplementary Valuation Roll may be used for each of the next two years.

    29.(1)© A supplementary valuation roll shall meet the requirements set out in clause 69.

    29.(2) Five years should be changed to four. With modern methods, once the valuation roll has been established it is easy to update it annually and therefore become more meaningful, resulting in user-friendliness and far less objections or litigation.

  19. Municipal Valuers (Chapter 4: Part 2. Appointment of municipal valuers, point 30.(1).)

30. (1). A municipality, before the valuation date, must appoint a responsible

municipal valuer, either as a member of municipal staff or by contract

30. (2) A person who is not an official of a municipality:

  1. may be appointed as the responsible municipal valuer or

(ii) an outside company may be appointed as a Contract municipal valuer,

by tender or an open, competitive and transparent process.

30. (3). Comment: In practice the municipality would advertise the position, open to own staff or outsiders, select their choice and then submit it to the MEC for approval. This is in the interest of transparency, to prevent nepotism and unconstitutional appointments.

 

 

  1. Municipal Valuers (Chapter 4: Part 2. Functions of municipal valuers, point 31.(1) ( c).)
  2. 31.(1) c. submit the valuation roll to the municipality within a prescribed period as set out in 28 (1)

    31. (3). And (4), Change to the following:

    A contract city valuer may appoint one or more valuers to assist in valuations as part of his contractual arrangements.

     

  3. Valuation Criteria (Chapter 5: Valuation, point 38(3).)
  4. 38.(3) . . . . . . . . . . . including a valuation system or technique based on a predetermined band of property values provided the value is below that given in 15. (2) (h)

     

     

  5. Valuation Criteria (Chapter 5: General basis of valuation, point 39(1).)
  6. 39.(1) . . . the (improved) value of property must be the mount the property would have realised if sold on the date of valuation in the open market by a willing seller to a willing buyer.

    39.(2) (b) Note: This clause is not necessary with SVR which simplifies the rating process.

    Note: This Bill would be considerably reduced in both size and complexity if the decision is taken for SVR. Complexity arises with improvement rating and the opportunity for litigation is increased.

     

     

  7. Contents of Valuation Roll (Chapter 6: Valuation Roles, point 41(2)f.)
  8. Name of owner should include details of all owners, including partners, members of Closed Corporations and major shareholders of Private Companies and Pty. Companies, together with percentage holding and Identity Numbers.

     

  9. Contents of Valuation Roll (Chapter 6: Valuation Roles, point 42(b).)
  10. 42. (b) serve on every owner of property, normally by post to the registered address, a copy

  11. Inspection of, and objections to Valuation Roll (Chapter 6: Valuation Roles, point 43(2).)
  12. 43. (2) An objection in terms of subsection (1) (b) must be in relation to specific properties and not against the valuation roll as such nor against the rating system.

    43. (7) Add: Unresolved objections may not prevent the implementation of the valuation roll on due date. Resolved changes in value will be retroactive to the date of implementing the roll and monetary adjustments made accordingly.

     

  13. Processing of objections (Chapter 6: Valuation Roles, point 44(2).)
  14. 44. A municipal valuer must promptly

     

  15. Compulsory review of decision of municipal valuer.
  16. (Chapter 6: Valuation Roles, point 46)

    The question was asked "Why?"

    Comment: Small mistakes are easy to make and easy to correct. Large mistakes can indicate something wrong with the system, lack of experience of valuers or some other cause for investigation.

  17. Right of appeal (Chapter 6: Valuation Roles, point 48)
  18. Change 14 days to 30 days.

    48. (2) (b) An appeal by – an owner must be lodged, under normal conditions, within 30 days of the date . . . .

  19. (Chapter 8: Supplementary Valuations, point 69)
  20. 69.(1) A municipality (may) must, whenever necessary, but at least once a year in terms of 28.(1), cause a supplementary valuation to be made and a supplementary valuation roll to be prepared in respect of any rateable property –

  21. Previous Submissions and Supplementary Material

 

Submission dated 2003-04-15

Submission and Verbal Presentation dated 2003-05-14

Emailed Portfolio Comm2.doc dated 2003-05-28

 

Not Edited