Municipal Property Rates Bill: deliberations

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Cooperative Governance and Traditional Affairs

03 February 2004
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Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
4 February 2004
MUNICIPAL PROPERTY RATES BILL: DELIBERATIONS

Chairperson:
Mr Y Carrim (ANC)

Relevant Documents
Working draft of the Municipal Property Rates Bill (2 February 2004)
Local Government: Property Rates Bill [B19 - 2003 as originally tabled]

SUMMARY
The decision on rating public service infrastructure was still outstanding the Committee is moving towards the option of non-exclusion. The Committee plan to retain the provision about exemptions, reductions and rebates for indigent owners but in a far more circumscribed format. In reference to Clause 15(3) took the view that the relief offered in the form of petitions to the Minister should not have the effect of opening the floodgates.

MINUTES
The Chair clarified that the issue of rating public service infrastructure was still outstanding and that no firm decision has been taken on the matter. He was disturbed by reports in the media that suggest that the Committee had finalised the issue. The Committee has met with public sector infrastructure stakeholders on numerous occasions and their case has been given a high degree of consideration. The question of rating public sector infrastructure was a difficult one and it had been submitted to the subcommittee for further detailed consultations.

The Chair outlined some of the salient matters that would guide the Committee in arriving at a decision on the vexed question of rating the public service infrastructure:
- what is the current practice
- how do provincial authorities value public service infrastructure
- what is the international best practice
- the relevance of specialised and non-specialised properties
- the difference between state owned and non-state owned public service infrastructure
- relationship between core and non-core public service infrastructure
- why public sector infrastructure deserves an exclusion when all departments are subject to rating
- whether property rates is tax deductible
- the ANC policy on public sector infrastructure
- where the difficulty lies in cases dealing with public sector infrastructure
- what compromises is the Department prepared to make.

The Chair said that as matters stand now the Committee is moving towards the option of non-exclusion. A constitutional question has been raised on the process of valuing properties at the national level.

Ms Jackie Manche, Deputy Director General, explained that valuation processes at the national level are undertaken merely for administrative purposes whilst rating takes place at the provincial sphere.

Deliberations on the Bill
Clause 14 Exemptions, reductions and rebates
Adv. Grove said that 14(1A)(e) would be deleted since it amounts to a repetition of what has already been referred to at 14(1A).

Mr Mbongeni (ANC) said that the term 'indigent' at Clause (1A)(a) should not be left open-ended the way it currently is.

Ms Manche said that the terminology is standard practice since some municipalities apply it in their by-laws. The Chair said where there is an established standard practice it would be better not to disturb the status quo.

Mr Grobler warned that the Committee should guard against exploitation in such instances while Mr Solo (ANC) said that the question of lack of income is an equally essential consideration.

The Chair proposed that the matter would be better promulgated by the Minister in regulations.

Ms Manche objected to this and made the point that such a move would not resolve the issue. The section only outlines various categories but there were numerous challenges in its implementation.

The Chair said it is the wish of the Committee to retain the provision but in a far more circumscribed format.

Adv. Grove offered that once one complies with the national framework other matters can be handled on individual basis.

Mr Mzilikazi Manyike (Director: Municipal Finance Policy) proposed an amendment to Clause 14(IA)(d)(i) to replace the word 'adverse' with 'serious' social conditions. Adv. Grove and the Chair agreed but added that it should read 'any other serious condition'. The Chair sought to know the serious social conditions contemplated here.

Mr Manyike gave the example of areas ravaged by the HIV/AIDS pandemic.

In reply to the Chair asking about the fate of other categories not listed here, Adv. Grove explained that Clause 8 caters for such other matters.

The Committee then accepted 14(!A) with the proposed amendments.

Clause 14(2) was deferred for further consultations.

At Clause 14(3) the Chair queried how one is able to determine a specific limit where there is no set rate in the first place.

Adv. Grove acknowledged the possibility that the provision may bear unintended consequences.

Ms Manche explained that the provision was necessitated by a constitutional requirement.

Clause 15 Constitutionally [constraints] impermissible rates
Clause 15 (1)(a)-(c) was accepted.

The Chair referred to Clause 15(3) and noted that organised agriculture wanted to make representation to the Minister even now in order to influence the legislation but the Committee felt that other stakeholders would demand the same leeway. No one desires such a floodgate of petitions to happen.

Mr Manyike clarified that rating issues are a provincial and local government matter and that there is no obligation on the national government to intervene in this instance.

Mr Mbongeni agreed with the Chair that it would be setting a bad precedent to allow people to make petitions to the Minister as this would open up the floodgates for complaints. It might be desirable to build in a provision that obligates petitioners to first lodge their case with municipalities before heading for the Minister. Mr Grobler was also in agreement that it would be foolhardy to overstep municipal structures and head straight to the national government.

The Chair proposed that the word 'representation' should be used instead of 'petition' which appears to convey a negative scenario.

Adv. Grove disagreed and pointed out that the term 'petition' was more appropriate since it connotes some seriousness in the matters raised.

The Chair said that since these issues relate to municipalities SALGA should be involved at one stage or before the Minister responds to the petition, he should consult SALGA..

Mr Mbongeni suggested that the grievances should be localised so that such matters relate to a given municipality.

Adv. Grove objected to the suggestion that the matter be localised since the rate in question relates to a category of property which is a general item that could criss-cross municipal borders. The Chair agreed with Advocate Grove that rates affect a particular sector which might or might not fall within the locality of a particular municipality.

The Chair ruled that the issue of petitions should be held in abeyance on the understanding that:
- all sectors should be free to petition the Minister
- this relief should, however not have the effect of opening floodgates of petitions
- municipalities should be taken aboard the process
- SALGA should be involved as well

Clause 15A Other impermissible rates
Clauses 15(1)(a), (e) and (h) were deferred for further consultation.

At Clause15(hA) the Chair revisited the question of the exemption of residential houses for the clergy and inquired what happens where a particular church has many priests.

Ms Manche said that it is an accepted fact that some churches have many officials whilst others have very few. All should be able to benefit equally within the law.

The Chair noted that in any case it would be not amount to much cost to grant churches with many priest such a relief. Adv. Grove said where people try to circumvent the law in order to avoid paying rates, this would amount to a punishable criminal offence. Mr Manyike said that since the provision requires that the property must be registered in the name of the church it would be difficult to circumvent the law in this instance.

The Chair noted that Clause 12(1)(a) needed to be simplified for better understanding. Adv. Grove undertook to simplify Clause 12(1)(a) as requested by the Committee. The clause was accepted with the proposed amendments. Clause 12(1)(b) was deferred for further consultations but 12(2) was accepted. Clause (13) and (14) was also accepted. Clause (15) was accepted save for 15(3A), which was deferred for further consultations. Clause (15)(A) was also accepted without amendments.

Mr Mbongeni referred to 15(hA) and proposed that the church issue should feature in the Committee's Report to Parliament. The Chair agreed and undertook to incorporate that item in the Report.

At Clause (15)(C) the Chair asked the Department to explain the policy reasoning behind this provision.

Mr Manyike explained that it is expected that poor rural municipalities may not be able to sustain certain exemptions since this would severely erode their tax base hence the need for the intervention by the national government. The Chair agreed and noted that the reasoning is sound on policy save that the practical reality may present some problem. Mr Dorfling added that the Minister would make subsidies available for poor rural municipalities.

The following clauses were informally accepted without amendments: Clause 16, Clause 17, Clause 18 and Clause 19

Mr Dorfling (SALGA) expressed worry that the phasing-in period is too wide to the extent that some newly rateable properties would not pay rates for the next eight years.

Adv. Grove explained that this deficit would be cured by a transitional arrangement that would shorten the phase-in period.

Ms Manche said that the Department had all along anticipated this length of phase-in period and that it had factored the possibility of an eight-year implementation period in its policy document.

The Chair expressed worry that newly rateable properties would escape rate payment for the next eight years.

Ms Manche explained that not all ratepayers are affected but that the full impact of the new dispensation would be felt in a period of eight years.

Mr Dorfling said it would be necessary in the interim to open a supplementary roll to cater for the new measures.

Ms Manche clarified that as from 1 July 2004 the new Act becomes operational and all rateable properties would be subject to it. There would be no need for a supplementary roll.

Adv. Grove expressed concern at the huge gap that exists between the phasing-in and implementation period. He suggested that transitional mechanisms should be crafted to curtail the phase-in period.

The Chair ruled that the matter should be deferred until the next day since it touched on implementation. He announced that the subcommittee to consider the public service infrastructure issue. Members of the public are not welcome at the subcommittee stage. The Committee would resume normal session at 2.00pm on 5 February.

The meeting was adjourned.

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