2009-02-27: Clarifying the Municipal Property Rates Act (MPRA)
THE MPRA is national legislation aimed at creating a standard, equal and fair system of rating for all municipalities in the country. All Councils are bound by this legislation.
Previously some Councils like Cape Town already rated on market values, Johannesburg valued and rated the site values only and eThekwini implemented a composite system valuing site and improvements separately and then applying various rating to site and improvement. Cape Town probably did not experience such a huge impact due to the fact that they were on the market value system prior to the MPRA.
It should also be noted most developed countries where there is an active property market have used this system for many years and therefore this is international best practice.
The MPRA was approved in 2004 and then signed by the Minister in 2005. Extensive public consultation took place in the drafting of the legislation and due to the huge response of comments received and input from various stakeholders the bill was re-drafted 17 times before it was finally approved.
The Act provided municipalities a 4year period to implement with July 2009 being the last year to comply. Since the introduction of the Bill, municipalities had to prepare for the implementation of the Act and each municipality had to consider its own state of readiness. Municipalities that were on the market value system such as Cape Town thus did not need as much time to implement and implemented the MPRA on 1 July 2006.
Other metros such as Johannesburg, Tshwane and eThekwini all implemented on 1 July 2008. The remainder of the municipalities have to implement by no later than July 2009. The decision on when to implement has nothing to do with politics but rather the state of readiness of the municipality.
The legislation also requires that there be a fixed date of valuations. This date is one year before the implementation of the valuation roll that is valid for four years. After four years an updated valuation roll needs to be implemented. This causes that there are shifts within the property market during the four-year period even though the values stay fixed on that date.
The opposite could also be true in that the property values increase drastically during this time and the City may not adjust the values at that time to increase revenue.
Section 31 (1) of the MPRA defines the date of valuation and I quote, "For the purpose of a general valuation, a municipality must determine a date that may not be more than 12 months before the start of the financial year in which the valuation roll is to be first implemented."
Section 32 (1) (b), "remains valid for that financial year or for one or more subsequent financial years as the municipality may decide on...". This makes it quite clear that a valuation date is for the term of the valuation roll. The above is no different from previous legislation in Gauteng where the same rules applied. The only difference was that the rating was done on the site (land) value of the property only.
Even if we do revalue a property section 78(3)(a) determines that we have to value the property with the market conditions that applied as at the date of valuation.
Property rates revenue is a factor of the budget requirements to fund the operations of the City stipulated and regulated by legislation. Thus the tariff is determined considering the total revenue required and the total value of properties, i.e. very simplistically, value x tariff = revenue. It therefore is clear that the revenue requirements in the year the roll is implemented is static.
If the values are lower, the tariff to collect the same amount will be higher. The fact that the property values were determined at a time when the property market was high resulted in much lower tariffs. In a reverse market, the tariff would have been much higher.
In order to ensure transparency and participation by all the legislation requires that there be an objection period where property owners can object to the municipal value as indicated in the draft valuation roll. The Act prescribes a 30-day period, but the City of Johannesburg allowed a three-month (90 day) period for property owners to object. If any property owner believed that the proposed value was unrealistic, opportunity was afforded to object.
It should be very clear that the values are determined for a four-year period. The property prices may not have grown at the same rate as the previous year, but it does not show negative growth thus the investment of the person in the form of property has not declined. No refunds or changes can be made to the values until the next valuation roll and date of valuation. The valuation roll is also only used for the purposes to determine property rates for the City and does not impact on the selling price an owner can demand when a property is sold or the ability to borrow against the property.
Issued on behalf of:
Councillor Parks Tau
Member of the Mayoral Committee for Finance and Economic Development
Issued by:
Virgil James
Spokesperson
City of Joburg
011 407 7226
virgilj@joburg.org.za
