2007 Budget and city fiscal space Philip van Ryneveld on behalf of Cities Network 23 rd February 2007

Outline Determination of fiscal space –Finance and functions Options for fiscal space –Grants versus own revenues Conclusion

Functions of city governments Minister uses the term ‘built environment’ Built environment also includes management of space and flows across a city Devolution of transport and housing to cities Public Transport Infrastructure Fund to cities

Two Public Transport Initiatives Gautrain Rea Vaya

Options for sourcing revenue Own taxes versus grants Three arguments for preferring own revenues –Accountability –Assurance of revenue –Creates incentives to grow the tax base by acting in ways that grow the economy Tax base should be related to economic growth Abolition of RSC levies has been a serious blow to the metros

Johannesburg 03/04 levy 04/05 levy 05/06 levy 06/07 grant Revenue (Rm) Change on previous year+18%+22%-15% Property tax in 2004/ RSC levies/Property tax (04/05)58% 2006/07 levies assuming 15% rise2214 Shortfall compared with imputed tax578 Benefit from zero-rating VAT125

Cape Town 03/04 levy 04/05 levy 05/06 levy 06/07 grant Revenue (Rm) Change on previous year15%13%-5% Property tax in 2004/ RSC levies/Property tax (04/05)43% 2006/07 levies assuming 15% rise1168 Shortfall compared with imputed tax199 Benefit from zero-rating VAT13

Property tax 04/05 RSC levies 04/05 RSC levies/ Property tax Increase Property tax 03/04 to 04/05 Increase RSC levies 03/04 to 04/05 Johannesburg %12%14% Cape Town %2%15% Tshwane %2%27% eThekwini %13%16% Ekurhuleni %16%10% Nelson Mandela %11%17%

What are we doing to our city governments?