Addressing rates increase

Ian Neilson, Mayco member for finance, City of Cape Town

The City of Cape Town’s General Valuation Roll 2018 is currently open for public inspection and objection.

I would like to take this opportunity to address some of the questions we have received about the relationship between property value increases and the rates increases that will come into effect on July 1.

First, it must be emphasised that the percentage growth in property value does not mean that rates will increase by the same percentage.

Rates increases are determined once we have ascertained what needs to be spent on providing public services, rebates and indigent support.

The City then calculates the rate-in-the-rand (the number of cents in each rand of a property’s value) required to fund those services and support contributions. The City does not make any profit from rates.

Given the overall 34% increase in property values across the City, the cent/rand rate for this valuation cycle will be significantly reduced.

The mayor will announce the new rate when the draft budget is tabled at the end of this month.

We have also noted some confusion around the distinction between property rates (a tax) and service charges. The City charges for services on a broadly consumptive base.

These services include water, sanitation, electricity and refuse removal, which are supplied directly to a particular property and can therefore be measured. Other services, such as streets, street lights, parks, libraries, beaches, law enforcement, area cleansing, administration, planning, environmental health, and stormwater management are public goods that can only be funded via a tax mechanism such as the property rates tax.

The City is required by law to charge rates, based on a regular valuation of property at market value, in order to obtain the income it needs to deliver services.

We seek to limit rates and tariffs to only cover the costs of delivering these services.

There is little fat in our budgets, and we are constantly seeking to improve efficiencies in delivering services to our residents.