With planned property tariff increase, Johannesburg ratepayers might pay three times the inflation rate

According to Ben Espach, director of valuations at rates expert firm Rates Watch, if the City of Johannesburg follows forward with its proposed tariff rises based on updated property assessments, ratepayers might end up paying three times the rate of inflation more.

“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 entire value of the city’s new property valuation roll is 12% more than the present roll, according to the city. According to the city’s draught medium-term budget, a 5.3% rise in property rates tariffs based on the new higher valuation of properties will raise property rate revenue 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 reminds out that the city’s draught budget suggests that its revenue from water and energy is under strain.

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

According to DA ward councillor Tim Truluck, when something is averaged out, such as the overall value rise of 12% of the city’s new property valuation roll, it does not indicate that everyone’s rates got higher. He claims to be holding workshops to educate ratepayers on the revised assessments and the mechanism for objecting if necessary.

He believes the tariff rise was likely pitched at a higher level to close a financing deficit.

“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 finance spokeswoman for the City of Johannesburg, points out that if the rand appreciates during a general value rise, there is a justification for “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.”

Ratepayers, she argues, must recognise that this is a draught budget with draught rate hikes.

“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.