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By Roy Cokayne

Moneyweb: Freelance journalist

Joburg proposes steep tariff hikes

All pensioners older than 70 will not pay rates on the first R2 000 000 of the value of their property.

Residents of the City of Joburg will see a substantial increase in the cost of municipal services from 1 July, if the draft medium-term budget tabled in council last week is anything to go by.

With the exception of property rates, the tariffs for all main services increase by a rate equal to or more than that of inflation, which is currently at seven percent. The increase in property rates of 5.3%, however, comes on the back of a new general valuation roll that is valued at 12% more.

But the city has extended the 31 March deadline for objections to the new valuation roll to 5 May.

In addition, the draft budget contains a proposal to decrease the discount on the rebate for residential property from R350 000 to R300 000.

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This, according to Ben Espach, director for valuations at Rates Watch, may result in a considerably higher effective increase for individual property owners.

“According to the draft budget, the projected increase in the city’s revenue from property rates is 15.8%. Although the increase in the tariff [5.3%] is below the CPI [consumer price index], the effect of the new valuation roll was not considered when the new tariffs were determined.

“Property rates tariffs should have been based on an inflation-related increase in the revenue from property rates,” he said.

Tariffs for pensioners

“There is good and bad news for pensioners. The good news is that all pensioners will now qualify for the rebate, but it is limited to the first R1 500 000 of the value [of the property]. All pensioners older than 70 will not pay rates on the first R2 000 000 of the value of their property.”

The downside, said Espach, is that some of the pensioners who paid no rates before, will be paying rates from July.

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Ward councillor Tim Truluck said the way pensioner rebates will be applied from July can be difficult to understand.

While stressing that this is still an “emerging issue”, Truluck has simplified several key points:

  • The over-70s rebate is not income-based and anyone over the age of 70 can apply (they will get R2 million off their property value, so if their property is valued at below R2 million, they will not pay any rates, and if it is over R2 million they will pay rates on the amount over R2 million);
  • The rebates for those aged 60 to 69 are income-related and applicants will need to provide proof of income (the zero rating is capped at R1.5 million);
  • The new rebates should be viewed as zero-rating a portion of the property valuation that will reduce the monthly rates bill;
  • Pensioners will pay about R75 a month for every R100 000 by which their property exceeds the rebate threshold;
  • If the property is jointly owned, the age of the oldest owner will determine which rebate is applied;
  • Property owners who receive a pensioner rebate seem set to see the R300 000 residential rebate off their valuation fall away; and
  • Pensioners on the expanded social package (ESP) will need to apply for a pensioner rebate separately to their ESP application.

Truluck said a pensioner in their 70s whose property is valued at R2.5 million will pay rates on the R500 000 by which their property value exceeds the R2 million threshold.

“This means they will pay R378.17 a month in rates.”

Those aged 60 to 69, whose income is under R11 904 a month, will qualify for a 100% rebate up to R1.5 million of their property valuation. The owner of a R2.5 million house will therefore pay rates on R1 million (R756.33 a month, according to Truluck).

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In motivating the new tariffs, the city said the grants received from national and provincial government are declining, forcing it to find its own sources of funding. In addition, there are some structural changes that further impact municipal revenue.

“With innovations and technological developments, the traditional notion of utilities as ultimate monopolies that can generate excessive revenue is eroding,” it said.

This article originally appeared on Moneyweb and was republished with permission. Read the original article here