• Background on the Bill:
• Process to Date
• Constitutional Power to Levy Rates
• Objectives of the Bill
• What are Property Rates Revenues used for?
• Key Aspects of the Bill
• Constitutional Issues
• Limitations on Levying of Rates
• Uniform Rates Base
• Impact on Property Owners
• Rating Issues
• Community Participation
• Valuation Criteria
• Valuation Rolls
• Objections and Appeals Process
• Credit Control
• Implementation Issues

• Bill was published on 4 August 2000
• Comments received from individuals, professional organizations, government agencies and NGOs
• Cabinet approved revised Bill on 20 November 2002 for introduction into Parliament
• Bill was tabled in Parliament on 27 March 2003
• Public hearings were held in May 2003
• Bill was voted by the Portfolio Committee on Provincial and Local Government on February 17,2004

• The Bill does not empower municipalities to levy property rates-this is an original power granted to them by Section 229(1) (a) of the Constitution.
• Section 229(2) of the Constitution provides for national regulation of municipal power to levy rates
• The Bill affirms the powers of Category A, B and C municipalities to levy rates
• The Bill divides the power to levy rates between Category B and C municipalities in terms of Section 229 (3) –Bs can rate in the district management areas

• Objectives of the Bill stem from overall objective of thoroughly reforming the current system of property rating (White Paper on Local Government)

Four key issues in White Paper :

• Extend rates base to previously unrated areas
• Should there be a uniform national system or local choice in rates base, rating and valuation method?
• Frequency of valuation periods
• Relief to those who are genuinely too poor to pay for rates
• Supporting development of sustainable local government
• Regulating the discretionary power of municipal council to raise revenues
• Providing uniform national rules regarding :
• Rates base
• Rating policy
• Valuation method
• Objections and appeals process

• Fund services that benefit the community as a whole as opposed to individual households
• Fund municipal administration such as computer equipment and stationery
• Fund costs of governance such as community and council meetings

• The Bill mandates uniform rates base-the improved value ( land plus buildings) of the property
• Currently municipalities use different rates bases ( land only, land and improvements at same or different rates)
• Would make it easier to determine fiscal capacity of municipalities that could then influence their equitable share
• Broadens the rates base so that it would be possible to have a lower cent amount in the Rand if the municipality’s revenue needs do not change
• Likely to be more progressive than land or improvements alone
• Promotes transparency because total property value is a concept most property owners understand
• Likely to be more progressive than land or improvements alone
• Promotes transparency because total property value is a concept most property owners understand
• Guarantees everyone receives the same treatment with regard to their property
• Two-thirds of municipalities have historically included improvement their rates base so administrative compliance will not be prohibitive

• The Bill does not change the total revenue needs of property owners nor does it set the cent amount in the Rand
• Any increase or decrease in what property owners pay will result not from the Bill but from actual cent amount in the Rand municipalities set
• Some property owners may actually see a reduction in the amount they pay as the rates base is broadened and property valuations updated
• Rates on newly rateable property will be phased in over three years (may be extended by MEC for local government)

• A rate levied on property must be
• A rate based on the market value of the property; or
• A fixed amount within a specified valuation band (that is below a prescribed valuation limit)
• A municipality may levy different rates for different categories of rateable property
• Each municipality needs to determine these categories

• The Bill requires each municipal council to adopt and annually review a rates policy and adopt by-laws to give effect to its implementation and enforcement
• Before adopting its rates policy, each municipality must follow a process of community participation in accordance with Chapter 4 of the Municipal Systems Act
• The rates policy must:
• treat persons liable for rates equitably
• determine criteria to be applied by a municipality if it:

-differentiates between rates for different categories of property; or

-exempts or grants reductions or rebates Quantify costs and benefits of exemptions, rebates and reductions

• The rates policy must also:
• provide for appropriate measures to alleviate rates burden on poor individuals;
• take into account effect of rates public benefit organizations;
• take into account effect of rates service infrastructure;
• take into account effect of rates on agriculture; and
• allow a municipality to promote local, social and economic development;

• Is there any constitutional basis for the exclusion of property from the municipal rates base?
• Can Section 229 (2) of the Constitution be used to exclude property rather than to regulate it?
• Section 229 (2) (b) of the Constitution provides the constitutional basis for exclusion since the term "regulate" includes the power to describe circumstances under which a municipality would not be entitled to impose property rates
• The constitutionality of this power to exclude would depend on whether or not such a limit or restriction violates Section 151(4) of the Constitution:

"The national or a provincial government may not compromise or impede a municipality's ability or right to exercise its powers or perform its functions."

• Impact would vary from one municipality to another so must be very careful when specifying exclusions
• Section 229 (2) (a) of the Constitution cannot be used to exclude property - only when a municipality has exercised its power can a question arise as to whether or not it has violated Section 229 (2) (a)

• The Bill therefore excludes the following kinds of properties from rating:
• The first RI 5 000 in value of each residential property
• Land reform beneficiaries' property for the first 10 years after receipt of title provided title does not change hands
• The first 30% of the market value of public service infrastructure as defined in the Bill

• Exclusions (contd.):
• Property registered in the name of a religious community and used primarily as a place of worship and official residences of office-bearers
• Parts of special nature reserves, national parks, nature reserves or botanical gardens except for commercial activities within them
• The Bill contains checks and balances to protect property owners
• The Minister for PLG, with the concurrence of the Minister of Finance, can limit the rate and/or its growth
• The Ministers can also regulate the ratio between residential and non-residential rates
• These mechanisms protect key economic sectors such as agriculture and mining and prevent municipalities from taking undue advantage of properties that happen to be located within their boundaries

• Valuation must be done in accordance with generally recognized valuation practices, methods and standards
• Physical inspection of the property is optional
• .Other techniques may be used such as aerial photography, computer assisted mass appraisal systems, and property banding
• Basis of Valuation:
• The market value of the property is the amount the property would have realized if sold on the date of valuation in the open market by a willing seller to a willing buyer
• Bill provides for clarity on what must be considered and disregarded in determining market value

• A valuation roll must list all rateable property that the municipality intends to levy a rate on
• The municipality must publish a notice in the Provincial Gazette stating that the valuation roll is open for public inspection for a specified period
• The municipal manager must provide every owner liable for rates with a copy of the notice and an extract of the valuation roll pertaining to the owner's property
• The valuation roll is valid for four years (could be extended for one more year by the MEC for local government on request)

• The Bill prescribes a uniform objections and appeals process across the country
• Objections must be lodged with the municipal manager in relation to a specific individual property and not against the valuation roll in general
• Objections must be submitted to the municipal valuer for decision and disposition
• The municipal valuer must furnish to the objector written notification of the decision and any adjustment made to the valuation roll
• An objector has the right to appeal against any decision to a valuation appeal board +Valuation appeal boards must be established by the MEC for local government in each province
• At least one appeal board in each district and metropolitan municipality
• Lodging of objections and appeals does not defer an objector's liability for payment of rates

• The Bill contains provisions on:
• Method and time of payment of rates:

- in a single amount annually or in periodic instalments

• Obligation of a municipality to furnish written accounts
• Obligation of a ratepayer to request account if municipality does not furnish written account
• Recovery of arrears from tenants, occupiers and/or agents:

- limited to the amount of rent due by tenant or occupier or received by the agent on behalf of the owner

• Municipalities have a maximum of four years from effective date of legislation to comprehensively revalue properties - they can use existing valuation rolls until then
• Municipalities must ensure that individual unit owners in clusters are registered with them because they will no longer be able to rate the body corporate
• Municipalities will need to implement the following administrative changes;
• Bringing previously unrated areas into valuation roll
• Updating existing information, billing and collection systems
• Updating and expanding valuation tools and
• processes
• Developing monitoring capabilities