Local Government: Municipal Property Rates Amendment Bill [B33-2013]: deliberations

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Cooperative Governance and Traditional Affairs

11 February 2014
Chairperson: Ms D Nhlengethwa (ANC)
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Meeting Summary

The Department of Cooperative Governance and legal advisers took the Committee through proposed amendments that had been made in response to the public hearings and deliberations up to that point.

The preparation of new valuation rolls provoked discussion. Metropolitan municipalities had more capacity and could prepare new valuation rolls more frequently.

The definition of agricultural property again provoked interest. An IFP Member pointed out that the definition was still too exclusively linked to food production. Also there should be more clarity about the exclusion of hospitality for commercial purposes, from rebates.

There was further discussion about the position of the official residence of the office bearer of a religious community.

In a discussion of amendments to 'public service purposes', the position of universities received attention. A Committee Member pointed out that a university town like Grahamstown could collapse if universities received rate exemption.

The promotion of associate valuers through a once-off special dispensation again promoted interest. A DA Member reiterated a previous concern that associate valuers on valuation boards would be reviewing decisions made by better qualified people. An ANC Member felt that it could promote development of scarce skills.

There was a discussion on additional amendments suggested in public hearings. It was concluded that additional amendments would have to be deferred.

A motion of desirability was read out and adopted. Those clauses with the amendments incorporated, were read through by the Parliamentary Law Adviser for correctness. The Committee will formally adopt the Bill on 12 February 2014.

Meeting report

Proposed Amendments to Local Government: Municipal Property Rates Amendment Bill [B33-2013]
Clause 3 amending Section 3
Ms Veronica Mafoko, Department of Cooperative Governance and Traditional Affairs (COGTA) Senior Manager: Municipal Finance Policy, noted that the initial proposal in the introduced Bill was to delete section 3(4)(a) and (b). It was then suggested that (c) and (d) also be removed. It had been decided to remove the whole clause. Rates policy had to give effect to agricultural property.

Clause 6 amending Section 8 Differential rates
The Department had added s8(4)(a), as a compromise. It granted authorisation for municipalities to determine other categories than the prescribed ones. As municipalities had sometimes determined too many sub-categories, the Department wanted to minimise that process. But in terms of s8(4)(a) a municipality could send a written motivated application to the Minister to authorise sub-categorisation. It had to be demonstrated that it did not contravene section 19.

Mr P Smith (IFP) remarked that after hearing all arguments he accepted the amendments to section 8 as valid. His only concern was that of empirical proof of abuse regarding the determination of sub-categories. He referred to the phrasing of subsection 4(a). Good cause had first to be demonstrated. It had to be clear what was being authorised. He suggested that the phrasing include “one or more sub-categories”.

Ms Mafoko replied that there were periodic assessments to check if municipalities were complying to state policy. Such assessments did point to abuse of the system at Kokstad, Mafikeng, Sol Plaatjie, Nelson Mandela and even at Johannesburg City.

Mr G Boinamo (DA) remarked that the Minister had been perceived as abusing power by discriminating against property owners. There had to be recourse for property owners to appeal.

The Chairperson asked if Mr Boinamo wanted to make a proposal.

Mr Boinamo replied that space had to be created for property owners to appeal.

The Chairperson responded that there was an appeal board.

Mr Boinamo said that municipalities had to be given an option.

Ms Mafoko replied that s8(4)(a) dealt with administration. Property owners did not feature in it. Municipalities published rates policies. Property owners could engage about it, even about Cents to the Rand. Valuation was an objective process. Section 16 allowed property owners to write to the Minister. There were checks and balances in the Act.

Clause 34 amending section 93A
Mr Mzilikazi Manyike, COGTA Deputy Director General: Governance and Intergovernmental Relations, noted that Clause 34 amending section 93A (see page 37 of the Working Draft of the Bill) was included to allow a transitional arrangement, during which the prohibition on the levying of rates on public service infrastructure had to be phased in over a period of five municipal finance years, with effect from the date of commencement of the Act. Time had to be allowed for a new valuation roll.

Mr Smith remarked with reference to section 93A, that the Minister formerly had discretion, but now it was a blanket prescription. The phrasing was too neutral, it had to be established who the actor was.

Mr Manyike agreed that it had to be linked to the valuation roll.

Ms Mafoko referred to an insertion into the Preamble to the effect that the validity of a valuation roll was four years for metro municipalities and five years for local municipalities (draft Bill, page 3). Clause 19 stated that the MEC for local government could extend the period to six years for a metropolitan municipality, and seven years for a local municipality. In the case of section 139 intervention, the period could be extended to five years for a metropolitan municipality, and seven years for a local municipality (draft Bill, pages 21 and 22).
The Chairperson asked about section 154 interventions at municipalities.

Ms Mafoko replied that such could be done in a shorter period. The extension only applied to section 139 interventions. Provinces could lend support in terms of section 154.

Mr Smith asked if “exceptional circumstance” could refer to the inability to find a professional valuer.

Mr Manyike replied that it might mean that the budget process had been messed up. The problem was that a municipality could not regulate without a valuation roll. National government did not bail out municipalities with big budgets.

Ms Mafoko added that it had to do with adjusting the period. Metros generally had more capacity and did not need extensions. Some produced new valuation rolls every year.

Mr Boinamo asked why local municipalities were granted a longer extension period. Metros had larger populations to deal with.

Ms Mafoko replied that the issue was capacity. Metros could adjust faster, although they dealt with larger populations.

Mr Manyike agreed that metros were vibrant. Cape Town prepared a new valuation roll every three years. Local municipalities also had to collect revenue.

Clause 1
agricultural property

Ms Mafoko referred to the discussion about the definition of agricultural property the previous week.

Mr Smith remarked that it could be problematic to associate agriculture too exclusively with food production. Sheep farming for wool production was agriculture that did not fit into a definition linked to food production. Warthogs and giraffes could be used for food production although they were not domestic livestock. There were ambiguities in the phrasing that referred to land used primarily for agriculture, for example where 50% of a farm would be used to grow maize, and 50% for game farming. “Hospitality” had to be shown to be for commercial purposes.

Ms Mafoko agreed that the phrase “any portion thereof that is used commercially for the hospitality of guests” could be inserted.

Ms Mafoko moved to clause 1(h). Official residence of the office bearer of a religious community had been changed to indicate that it referred to only one residence. There was a link to the amendment of section 17, where official residence was also referred to (draft Bill, page 17).

Mr Boinamo asked what would happen if there were four Lutheran churches in an area, with four pastors.

Ms Mafoko replied that municipalities looked at individual properties related to the church.

Mr Smith remarked that a residence on church property was differently defined to elsewhere. The church and the property was religious property. It excluded a situation where there was a pastorage in the same place as the church.

Ms Mafoko replied that there was the intention to include that situation, but the problem was how to draft it.

Mr J Steenhuizen (DA) suggested that it be included in the definition of religious community, to prevent a situation where a house used for prayer meetings could apply for lower rates.

The Chairperson remarked that it had been agreed that large church buildings were referred to.
Mr Boinamo remarked that it was a conventional approach.

Mr Steenhuizen wondered what a conventional church might be. A loophole was being left for fly by nights to apply as religious communities.

Ms Mafoko replied that amendments were based on observed practice. There had not been opportunism of the kind referred to. Municipalities could use their discretion to inspect. Places of public worship had to be registered. The Department did not want to micro manage the issue. Municipalities had to decide. No complaints had been received, but there was concern over the number of properties. It could be written in a way that would encompass the notion of a single residential property.

Ms Dakshe Kassan, Parliamentary Legal Adviser, agreed that the question of the official residence being on or off church property, had not been covered.

Mr Smith said that there was a problem with the word “property”.

Ms Nelson wondered what would happen if that word was removed.

Ms Mafoko suggested “portion used for residential purpose” in stead of “property”.

Mr Manyike said that the Department would sit with legal advisers as a team after the meeting to decide.

Ms Mafoko again suggested that the phrasing of a “portion used for residential purposes” be introduced, regardless of whether it was at the church or not.

"public service purposes"
Ms Mafoko noted that the list referred not to services, but to properties.

Mr Smith asked why universities were not included as organs of state, like schools and pre-schools. He noted that “prisons” should be changed to “correctional facilities”.

Mr Manyike replied that universities paid rates. They were treated differently. It would have been an overkill to include them in that section. There had to be tighter monitoring as a budget related process.

The Chairperson remarked that some universities had residents on the inside and the outside. There could not be a one size fits all approach. Discretion had to be left to municipalities.

Ms Mafoko agreed that municipalities had discretion to categorise. There could be a number of activities on university property. Some municipalities treated them under the category of multiple use. Municipalities were convinced that the Department wanted to protect universities.

Mr Smith asked why universities were different, and not like FET institutions. Libraries were mostly municipal. Universities also had libraries.

Ms Mafoko replied that it was not municipal libraries that were referred to. Archives were owned by national and province. Universities were not in the category because it had already been said that they were owned by the State.

Mr Smith asked why FET institutions were not named.

Ms Mafoko said that further education and training had not been capitalised because it was meant to include other higher education institutions.

Mr Steenhuizen said that he was uncomfortable. A town like Grahamstown was structured around the university. Exemption from rates could force the town to collapse.

Mr Manyike said that municipalities were not prohibited from rating the categories listed under (a) to (f).

Ms M Segale-Diswai said that municipalities could come up with their own categories. If universities were excluded, they could not be exempted by the municipality.

Ms W Nelson (ANC) suggested that things remain as they were. Municipalities would deal with the matter in some way. There was leeway for university towns like Stellenbosch and Potchefstroom to levy.

The Chairperson suggested that reference be made to national and provincial libraries and archives.

“Ratio” and “residential property”
Ms Mafoko moved to the clarification of “ratio” and “residential property”

Mr Smith referred to multiple use of properties. Multiple use meant that more than one rate could be applicable on a property. Yet the Amendment Bill attempted to avoid sub-categories with different rates applicable.

Ms Mafoko replied that multiple use was usually applied to accommodate mixed uses for business and residential purposes. There was the choice of rating according to multiple use or dominant use.

Clause 4
Ms Mafoko noted that municipal by-laws had to be adopted and published as well.

Clause 10
Ms Mafoko noted that a resolution levying rates in a municipality had to be annually promulgated within 60 days of the date of resolution. The period in the Act had been 30 days.

Clause 12
Ms Mafoko noted that the Minister could give notice to a municipality that a rate had to be limited to an amount in the Rand specified in the notice. There had been the removal of “and if necessary, adjust its budget for the next financial year accordingly”.

Mr Smith asked how retrospective payment would be dealt with.

Ms Mafoko replied that there were interpretation challenges. Adjustment of the budget implied paying back retrospectively.

Mr Smith remarked that the current wording was forward looking. He asked if it could provide guidance. Municipalities would ask if they had to make retrospective payment.

Mr Manyike suggested that it be added that effect had to be given to the notice from the start of the financial year or the date determined by the Minister in the notice, which would avoid the implication of retrospective payment.

Clause 28
Ms Mafoko noted that sections 82A and 82B was inserted in the principal Act after section 82. In section 82A(e), “exemptions” was added to “total revenue in respect of any properties subject to partial exclusions, rebates and reductions”.

Mr Manyike referred to sections dealing with valuation rolls in 82B. MECs were struggling to get professional valuers appointed to valuation boards. There was a once-off concession to promote associate valuers to professional valuers. But a board needed one professional valuer. There was not enough justification to take them into the current Bill.

Mr Steenhuizen said that he was in support of that. The concession to associate valuers would result in a situation where the weak would be judging the strong, because associate valuers would review decisions made by better qualified people.

Mr Smith remarked that the matter was contingent on the supply of valuers. Enough people graduated to professional valuer from associate valuer. There was not a supply problem.

Ms Nelson felt that the issue of scarce skills was addressed by the amendment, and that it had to be left in.

Mr Manyike replied that if no professional valuer could be found, the MEC could appoint an associate valuer.

Clause 32
Ms Mafoko noted that the section was substituted for section 90 of the principal Act. It referred to the redetermination of a municipal boundary in terms of the Local Government: Municipal Demarcation Act (No 27 of 1998).

Clause 34
Ms Mafoko noted that a compromise had been made regarding a transitional arrangement for public service infrastructure. The prohibition on the levying of rates on public service infrastructure had to be phased in over a period of five years, with effect from the date of commencement of the Act.

Clause 37 Short title and commencement
The Act was called the Local Government: Municipal Property Rates Amendment Act, 2014, and would come into operation on a date to be determined by the President by proclamation in the Gazette.

Additional issues
Mr Smith remarked that the Chairperson had said the previous week that the Committee researchers would audit the public hearings and prepare a document on additional issues.

The Chairperson answered that additional considerations were pointed out in a confidential document circulated to Members.

Mr Steenhuizen remarked that there were still additional proposals for amendments, for instance those proposed by Ethekwini municipality.

Mr Manyike drew attention to an input from the public hearings worth considering. Municipalities had expressed discontent about the requirement that  adjustments in rates of 10%, had to be referred back to the valuation board.

Mr Steenhuizen asked what made the grade for amendment.

Ms Mafoko replied that there had to be a convincing argument. Municipalities could not merely say that they did not like something. A Bill was published for public comment and then there were submissions.

Mr Steenhuizen said that municipalities saw the issue of adjustments in rates as problematic.

The Chairperson asked if there had been submissions.

Mr Steenhuizen replied that he had flagged the issue.

Mr Manyike said that the threshold had been raised to 20%. But that was not in the Bill when it was introduced. The Department was not willing to remove it. Reasons were asked for.

Mr Steenhuizen said that prior to the introduced Bill, there had been no proposal that the threshold be raised.

Ms Mafoko said that municipalities wanted it removed.

Mr Smith suggested that additional issues be parked for the next amendment Bill.

Motion of desirability
Ms Nelson read the motion of desirability, which included a read through of the preamble to the Bill.

The motion of desirability was adopted.

The Chairperson said that the Department had to draft and work in the suggestions of the day.

Ms Kassan noted that there would be a complete A list on the day following, and a final revised Bill.

Ms Kassan read through the amendments.

The Chairperson noted that there would be a read-through of the finalised documents on the following day, and the Bill would be adopted.

The Chairperson adjourned the meeting.


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