News24.com | Joburg ratepayers could cough up three times inflation rate with proposed property tariff hikes

It is still just a draft, and there is still a period within which to comment.

• The City of Johannesburg says the total value of its new property valuation roll is 12% more than the current roll.
• According to the city's draft medium-term budget, its income from a 5.3% increase in the property rates tariffs, based on the new higher valuation of properties, will increase the revenue from property rates by 15.8%.
• This could lead to ratepayers, in effect, paying three times the rate of inflation more, according to the director of valuations at a rates specialist consultancy.
• For more financial news, go to the News24 Business front page.

If the City of Johannesburg goes ahead with its proposed tariff hikes based on new property valuations, ratepayers could, in effect, be coughing up three times the rate of inflation more, according to Ben Espach, director of valuations at rates specialist consultancy Rates Watch.

"If the City of Johannesburg wants to act responsibly towards its ratepayers, it should ensure that its planned increase in property rates is in line with inflation and not way above that due to basing the hike on new increased property valuations," Espach told News24. "The city should use an inflation-linked increase in the revenue from property rates and then calculate the tariff 'backward'."

The city announced that the total value of its new property valuation roll is 12% more than the current roll. According to the city's draft medium-term budget, its income from a 5.3% increase in the property rates tariffs, based on the new higher valuation of properties, will increase the revenue from property rates by 15.8%. 

"In these tough economic times a municipality cannot draft a budget which, in effect, implements a property tariff increase for property owners of three times that of inflation. It seems the City of Johannesburg did not consider the effect of the new higher property valuations to determine the new tariffs. It did not [base it on] an inflation-related revenue increase from property rates. If they did, they would have seen that they could have reduced the rates tariffs."

Espach points out that the city indicates in its draft budget that its income from water and electricity is under pressure.

"It would, therefore, seem as if the city sees property rates as a cash cow, which is not fair to property owners," says Espach.

DA ward councillor Tim Truluck tells News24 that when one averages something out - like the total value increase of 12% of the city's new property valuation roll - it does not mean everyone's rates went up. He says he is running workshops to inform ratepayers about the new valuations and the process to object if need be.

According to him, the tariff increase was likely pitched at a higher level to fill a funding gap. 

"If the city does not get (enough) money, there will be more potholes and a downward slide. City Power is losing money because people are installing solar," says Truluck.

"Remember, this is still just a draft, and there is still a period within which to comment. So, there might still be changes made," he adds.

Julie Suddaby, the DA's spokesperson on finance for the City of Johannesburg, points out that if there is an increase in the rate on the rand at the time of a general valuation hike, there is an argument for what is called "double dipping". 

"However, that is not necessarily the case because a general property valuation is usually done only every four years. Overall, the total value of the new property valuation roll might be 12% more than the current roll, but not every property value has increased by 12%," she says.

"Keep in mind that Eskom and Rand Water are passing on increases to City Power and Joburg Water, respectively, which these entities have no choice but to pass on as increases to consumers as the City of Johannesburg does not have a surplus to absorb these increases."

She says ratepayers must understand that this is a draft budget and draft rates increases. 

"I advise home and business owners to participate in the formal integrated development plan process and lodge objections to proposals they disagree with. They can only change it by getting involved," says Suddaby.

* News24 reached out to the City of Johannesburg for comment and this article will be updated if a response is received.