Property Rates Bill: deliberations

Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
19 November 2003
PROPERTY RATES BILL: DELIBERATIONS

Chairperson: Mr Y Carrim

Relevant Documents
Working draft of the Property Rates Bill (15 November version)
Summary of submissions

SUMMARY
The Committee looked at the changes made to Clauses 3 to 11 in the revised draft of the Bill.
each clause of the Bill. It emerged that the Department and SALGA differed on the interpretation of rating farming property. The Department said that the whole farm property would be rated and then rebates given for different other activities present such as schools and employees' homes. SALGA said that this was not the way rating should be done, but that each section would be rated according to the activity. Thus different rates could apply to different components of the property Rebates are then given to each section. They will meet to reach consensus.

MINUTES
Part 1 Rates policy
Clause 3 Adoption of rates policy
Clause 3 (2)
Adv G Grove, the drafter of the Bill, began the discussion by saying that he had looked at Clause 3 (2)(b)(ii) again and felt that instead of "category of properties" it might be better to say "category of owners". In this way one could be more specific about who was eligible for a rebate.

Mr Dorfling (SALGA) agreed and this should be changed in 3(2)(b)(i) as well.

The Chair was uncertain and wanted to know what the consequences for the definitions would be.

Adv Grove said that this would also make Clause 8 easier to understand which dealt with differential rates.

The Chair said that this was not a policy issue but more about legal certainty. He understood what was being said but was concerned that people might not understand it. The definition of "category of owners" would therefore have to be included so that there could be a distinction made between it and "category of properties".

Mr P Vaz (Department Legal Advisor) said it would work if there was a clause which identified what categories of owners were.

The Chair wanted some examples of categories of owners.

Mr Vaz mentioned pensioners and indigent people.

Mr Dorfling said that if this was done it would make it easier for municipalities.

The Chair agreed to the change although he felt that at some stage another word for category might be used.

Clause 3 (3)
The Chair asked for clarification from the Department why the changes were done.

Mr Vaz said that the Committee had wanted the "may" to be changed to "must".

Adv Grove added that it explained the terms better.

Mr Komphela (ANC) said that on previous occasions, members where told that "must" should not be used in legislation, yet it was possible now.

Adv Grove replied that in this context it was relevant and necessary unless one spelt out clearly what the contents of the framework was.

The Chair added however that it was important that a national framework be in place to prevent problems in the implementation of the Bill.

Clause 4 Process of community participation
The Chair felt that it was not necessary to change the whole clause as the Department had done. He suggested that the original text be kept since South Africa was an emerging democracy and things had to be spelt out clearly.

Mr Dorfling felt that the 60 days, mentioned in the changed version, was not in compliance with Section 16(2) of the Municipal Finance Management Bill which stated 90 days.

The Chair pointed out that the original text was being kept, but that they could include the 90 days so that it was in agreement with the MFM Bill.

The Chair noted that at the public hearings some people had suggested that the 14 days in Clause 4(2)(a) be changed to 30 days. It was agreed that this would be done. He also suggested that this clause be cross referenced with Section 21A of the Municipal Systems Act. This should be done as there were concerns that the phrase "as he or she may determine" might be too narrow and might lead to abuse by the municipal manager. Section 21A of the Municipal Systems Act however prescribed clearly where these notices would be displayed.

Referring to Clause 4(2)(b)(bb), the Chair said that some submissions had suggested that the draft policy be available for inspection outside of office hours as well.

Mr Manyike said that this was unreasonable as it would incur extra expenses by municipalities.

The Chair agreed and said that it would also be impractical. He suggested that a clause be included that the rates policy be put on the website as well, where one exists.

The Department agreed to do this.

Referring to Clause 4(2)(b) the said that instead of limiting the publishing to newspapers, the subclause should read that the municipality would advertise in the media that its rates policy was available. This was agreed to.

Clause 5 Annual review of rates policy
The Chair pointed out to the drafters that the reference made to Section 16 (2) of the MFM Act in Clause 5(1) be checked once the MFM Bill was passed as the number of the section might change.

Clause 6 By-laws to give effect to property rates policy
Referring to Clause 6(1), Mr Dorflling (SALGA) said that the by-laws must come into effect before the new financial year. He suggested that this be included in the clause. After much discussion, it was also agreed to remove "enforcement" from the clause and retain "implementation". It was felt that the word was repetitive and since it was referring to by-laws, only "implementation" was necessary.

The Chair asked why Clause 6(3) was included.

Adv Grove replied that this was to eradicate any kind of discrimination being practiced. Mr Manyike added that it was to prevent some properties being rated unfairly.

Mr Ngubeni (ANC) felt that the clause was too open-ended even if the intention was good. It was also possible that it could be interpreted to suit a certain category of owners. He felt that this should not be included and that "unfair discrimination" was covered by the Constitution. Ms Makotoko (SALGA)agreed as did Mr Manyike who said that this was covered by Clause 16(1).

The Committee agreed to remove the subclause.

Part 2 Levying of rates
Clause 7 Rates to be levied on all rateable property
The Chair questioned the meaning of Clause 7(2)(a)(i).

Mr Dorfling (SALGA) said that he felt that a municipality must value it own property and rate its different departments with regard to its assets. Johannesburg and Durban municipalities were doing this already. Ms Makotoko (SALGA) disagreed and asked that SALGA be allowed to obtain more information on this.

The Chair felt that this was absurd and more time should be given to investigate this.

Mr Manyike said that the clause does not oblige municipalities to do this. He did feel however that it did not make sense for municipalities to rate themselves. This served no purpose.

Mr Ngubeni felt that it was important for municipalities to do this as it would serve to inform what municipalities had.

The Chair said that there was the issue of rating and of valuing which was different. He felt that it should be left to municipalities to decide.

Mr Komphela felt that that it would make municipalities accountable for what they had and this made business sense.

Mr Vaz said that the Department was not opposed to municipalities valuing all its properties but did not feel it was necessary to rate them.

Mr Dorflling added that at present, municipalities were charging their different departments for water and electricity. Rates should also be charged then. This would also make good business sense.

Mr Lyle (ANC) said that water and electricity were consumables whereas rates were different.

The Chair said that it should be left open as it was in the Bill. He asked for more explanation regarding 7(2)(a)(ii).

Adv Grove said that this was to prevent the double taxation on a property. It also did not oblige the municipality to rate a right on a property. The owner of the property would be charged and not the lessee where a property is leased. In the cases of servitudes however, the lessee is charged.

The Chair said that since more information was needed about this clause, it should be dealt with outside of the committee.

Clause 8 Differential rates
Mr Vaz pointed out that the term "unfair discrimination" in Clause 8(1) needed to be removed or changed to come into line with 6(3) which had been removed.

The Chair raised the issue about the criteria used in Clause 8(2).

Mr Vaz said that there were some properties such as state trust land which did not seem to fit into any of the three.

It was then agreed to change the wording to make the criteria wider by deleting "according to" and inserting "which includes the following criteria".

Referring to Clause 8(3)(c) the Chair pointed out that they had agreed at an earlier meeting to change it to read "business and commercial use". He also wanted clarity on farm property which was for "non-commercial purposes".

Mr Manyike replied that this would be areas where farm workers would be housed.

Mr Dorfling felt that it should be non-agricultural purpose.

Adv Grove suggested that it read " useful purposes other than (i) and (ii)". Everyone agreed to this.

The Chair suggested that "non-formal settlements" in 8(3)(h) be changed to "informal settlements". This was agreed to.

Ms Makotoko (SALGA) asked that a definition be given for "unused property".

Mr Vaz said that that this would not help.

Adv Grove then suggested that the wording be changed to "farm property not used for any purpose".

Mr Dorfling felt that this would not cover the case where farmers have property that they claim is being used for game farming.

It was then agreed that 8(3)(d)(i) would say "excluding game farming" and that game farming would be a sub-clause on its own.

SALGA asked that residential farming also be included as a separate category.

Mr Manyike did not see the necessity for this.

Ms Makotoko said that this was for rating purposes.

Mr Vaz pointed out that the whole farm property would be rated and then rebates given for different other activities present such as schools and employees' homes.

Mr Dorfling said that this was not the way rating should be done, but that each section would be rated according to the activity. Rebates are then given to each section.

Mr Vaz and Mr Manyike said that this was not the way the Bill was drafted.

Mr Dorfling replied that the Bill must be crafted in this way.

Adv Grove said that the Bill does not allow for this kind of rating system.

SALGA said that one would not use the categories then.

Mr Vaz said that the rating is done according to the dominant use of the property and then rebates given for different use.

The Chair said that if the practice is as SALGA has pointed out, then it must continue to happen this way or the Department would have to provide a reason why it should be done differently.

Adv Grove referred to Clause 10 which explained how the rate had to be done on the whole property. It did not allow for different rates to apply to different components of the property. If this were the case, each section would have to valued separately.

The Chair said that he found it strange that this fundamental issue had only arisen now in the process. This was a fundamental issue which went to the heart of the Bill.

Ms Makotoko said that SALGA had assumed that they and the Department were seeing things in the same way.

Mr Vaz said that the Department would confer again on this and come back with clarity.

Clause 9 Levying of rates on property in sectional title schemes
Clause 9 was accepted as is.

Mr Komphela (ANC) commended the Department for this clause as it prevented body corporates from exploiting owners.

Clause 10 Amount of rates
Adv Grove explained that Clause 10(1) and (2) had been altered to bring about more clarity.

The Chair asked for clarity on 10(3).

Adv Grove said that he would work through it and try to simplify it further.

Clause 11 Period for which rates may be levied
Mr Manyike explained that Clause 11(1)(b) ensured that municipalities did not project and keep the same rate for more that one year as this could clause municipalities to run into financial problems later. The rate could be kept the same but had to go through the proper budget process at the beginning of the financial year.

The Chair pointed out that the way it was written did not make this clear and asked for it to be altered.

Adv Grove said that it could be added that the rate levied for the year would cease at the end of that financial year. This was agreed to.

At this point the meeting was adjourned.