November 8, 2007
By Emily Visser
THE City of Johannesburg has announced an indicative rate of 0,005, or half a cent in the rand, for the calculation of rates on residential properties.
The figures was released at a special press briefing in the mayoral chambers on Thursday, 8 November.
The rate in the rand previously used to calculate property rates will fall away and each category of property will now have its own tariff. Categories are identified and detailed in the draft rates policy.
Speaking at the presentation, Executive Mayor Amos Masondo said the City did not take the changes to the rates policy lightly and the draft valuation roll and rates policy came only after extensive consultation and engagement with the community. In total, the City received over 700 comments from residents.
The City's team: director of valuation, Werner Sarvari, executive director of finance, Mankodi Moitse, mayoral committee member for finance and economic development, Parks Tau, and the director for rates and taxes, Erika Naude
(Photo: Enoch Lehung, City of Johannesburg)
Masondo; the member of the mayoral committee for finance and economic development, Parks Tau; and officials from the departments of finance and revenue and customer relations, presented the proposed indicative rate.
The Municipal Properties Rates Act, which came into effect in 2004, requires that municipalities group properties by category and that an individual rates tariff be levied for each of these.
"There will be a rate for business and a rate for residential, and we are considering a rate for sectional titles," Tau confirmed. In all likelihood sectional title tariffs would be lower than the residential rate.
Sectional title owners can still discuss the effects of the new valuation process with City officials during meetings to be held on 8 November in Yeoville, 13 November in Mondeor and 19 November in Orange Grove. Property owners of sectional titles will now be levied individually.
The rate in the rand for business, industrial and commercial properties is still to be determined but the tariff will be higher. Also, "the City proposes higher tariffs for vacant properties to encourage development and discourage speculation", Tau said.
It was looking at various models to determine the effects of various rates on businesses as the City's overall aim was to encourage development.
Tau stressed that the new tariffs would have to be "revenue neutral, meaning there is no increase in the revenue base for the City as a result of this [new rates policy]". The revenue neutral rate is determined by the current revenue base of R3,4-billion and the rate of inflation.
The rate in the rand (previously 0,1273 cents in the rand) has been substantially reduced as a result of the huge increase in the rates base, from R50-billion when calculations were based on land value only to R613-billion after the improved valuations process of properties, Masondo pointed out.
Properties are now valued on the land plus improvements and according to current market values. In the past residential properties all paid one tariff. The implication is, therefore, that some residents will pay more and others will pay less as there is no general rate payable per area any more. Neighbours may end up paying different rates.
Method of valuation
In coming to its conclusions, the City used the Comparable Method of Valuation, the most acceptable local and international method for calculations. Information on properties was gleaned from a number of sources, including title deeds, building plans, on-site inspections and communication with owners and tenants.
The property sales in a specific area were also analysed. A vast number of factors could influence the value of a property, but key factors taken into consideration were the location and stand size, accommodation set-up, the age of improvements as well as the quality of construction.
The value of all properties is calculated as at the date of valuation in July 2007.
Calculations are based on two main pillars, the rates policy and the general valuation roll, both of which are in draft form and available for comment from Johannesburg residents.
The calculations are done as follows:
Property value multiplied by 0,005 equals the annual rate. Divide the annual rate by 12 to get the monthly tariff.
| Market value of property
| Residential Tariff
| Annual Rates
| Monthly Rates
|
| R300 000
|
0.005
|
R1 500
|
R125
|
| R800 000
|
0.005
|
R4 000
|
R333.33
|
| R1 200 000
|
0.005
|
R6 000
|
R500
|
| R2 000 000
|
0.005
|
R10 000
|
R833.33
|
| R3 000 000
|
0.005
|
R15 000
|
R1 250
|
"The final rates will only be known in March or April next year," Masondo confirmed. The valuation roll will be made available for public inspection for a period of 90 days from February to April 2008. The new rates policy will come into effect in July 2008.
Rebates
Residents and qualifying organisations must apply to the City for rebates as this these were no longer automatically instituted, confirmed Erika Naude, the director for rates and taxes in the City.
Provisions for rebates provided for in the policy would apply to individual owners. These included limited income owners; pensioners earning R5 000 or less and/or owning property valued at R500 000 or less; and public benefit organisations such as a church.
For instance, "there is a 100 percent rebate on religious sites", Tau said. All schools would now be treated the same and could apply for a 50 percent rebate, confirmed the executive director for finance, Mankodi Moitse.
The City announces an estimated preliminary indicative rate of 0,005, or half a cent in the rand, for the calculation of rates on residential properties
(Photo: Enoch Lehung, City of Johannesburg)
The draft rates policy states that a rebate is granted for a maximum of two years, provided that the status of the beneficiary does not change within this period.
The valuation roll would be supplemented every year to take into account fluctuations in the property market, said Werner Sarvari, the director for valuations in the City. A full valuation roll review will take place every four years but the City is working towards doing this on a yearly basis as soon as the valuation process is running smoothly.
A total of 826 000 properties have been registered with the City. Currently, residential property made up over 81 percent of this figure, but generated only 32 percent of the City's total rates income. Commercial property, on the other hand, made up over 7 percent of the total number of registered properties, but brought in 46 percent of the total rates income received by the City, the revenue and customer relations department confirmed.
The budgetary requirements for the next financial year are yet to be formulated.
"We do not anticipate substantial changes but the numbers will have to be modified to support the funding requirements of the City as well as any further changes to the draft provisional valuation roll," Tau said in conclusion.
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