Municipalities are required to review their rates policies annually, Municipal Property Rates Act, 6 of 2004: Section 5(1). Any amendments must accompany the municipal budget when it is tabled, Municipal Finance Management
Act: Section 16(2), that is at least 60 days (no later than 31st May) ahead of the start of the new municipal financial year, 1st July. A municipality must also adopt and publish rates by laws to give effect to its rates policy in terms of sections 12 and 13 of the Municipal Systems Act.
The MPRA allows municipalities to impose differential rating, that is different rating tariffs for different categories of properties. The market value is multiplied by the tariff to calculate the total rates payable and then divided into the number of payment instalments for each municipality. Property categories are discretionary up until 1st July 2021, section 93(B) MPRA provides for the prescribed categories, section 8, MPRA, within 7 years of the date of the
commencement of the act, Act 29 of 2014.
Additional categories are permitted provided these do not circumvent the prescribed categories, Section 8.
Typically municipalities add ‘vacant land’, places of public worship and the other impermissible categories detailed in section 17, MPRA. Another emerging favourite is ‘un-authorised use’. There is adequate case law to test the bona fides of this additional category that is used by municipalities to regularise the unauthorised use of properties. The imposition of high tariffs prompts the defaulting ratepayers to come forward to regularise the zoning or acquire the necessary special contents. Given the limited time frames between now and the effective date of the prescribed categories it is recommended that the discretionary categories are re-mapped, and properties are re-assigned to the limited prescribed categories.
Municipalities have the discretion to extend rates relief to categories of properties and categories of owners. Examples of these are categories of vulnerable owners (registered indigent households or pensioners who qualify for rates relief) or properties which fall below an annually determined market value, eg all residential properties below R100,000 in market value. These discretionary criteria must be included within the rates policies together with details of the
application mechanism, supporting documentation and time frames.
Municipalities need to be responsible about their discretionary rates relief strategies so that these eligibility
criteria are genuinely pro-poor. In the table below we compare the impact on the rates payable for the owners of the
2 properties: Property 1 is valued at R1million, Property 2 is valued at R200,000. A rebate or discount realises rates relief which benefits the more valuable property more than the less valuable one. The recommendation is to use a reduction. Through this strategy the municipality genuinely assists the poorer property owners while maintaining the principle of equitable treatment of ratepayers. The income forgone through extending a reduction rather than a rebate is less and the poor are supported.
PART B - Municipal register of properties, section 23(3), MPRA must specify both the discretionary rates relief and the impermissible rates referred to in section 17, MPRA. The Part B must be published annually for inspection. Part B of the municipal register of properties discloses the equitable application of the rates policy and the alignment of the rates tariffs to the correct property record. This is an important, though often overlooked, compliance report for sustainable local government.
Closing comments - The rates policy is the ‘recipe’ for the valuation roll and the rates revenue.
The entire workflow is informed and driven by the municipal rates policy and its accompanying bylaws.
Please don’t hesitate to contact MetGovis for support in developing a pro-poor rates policy strategy.
Author: Janet Channing - Director MetGovis