Payment of Property Rates by Government SALGA AND DPW Engagements PC CoGTA 25 October 2011

Introduction Change in Government Policy Operational Challenges Minmec outcomes Way Forward Overview

Municipal revenues comprise: grants and own revenues (made up of government and consumers) Revenue trends in Municipalities declining over past few years due to a number of factors: –Increase in government grants –Declining own revenues –Global economic crisis –Service delivery pressures Factors have placed burden on financial viability of municipalities and their financial performance Context for payment of government rates and services has been evolving over a number of years Introduction

Change in Government Policy (2008) The current policy on treatment of government owned properties in respect of municipal bills is as follows: –Property rates and service charges have to be billed separately –Property rates is the responsibility of National and Provincial DPW –Property rates have to be billed annually and is paid for though a national grant –Service charges are to be billed monthly and is paid via general expenses of the line departments –Service charges is the responsibility of the respective National or Provincial line departments

Property Municipal Billing System Line Department NationalProvincial Department of Public works NationalProvincial

Factors affecting government payments of rates and services –Transformation of national and provincial governments –Transformation of local government not synchronised with national and provincial –Change in policy of how government treats payments for rates and services –Fragmented municipal policies in treatment of national and provincial government properties – consequences – e.g. limits to rates ratios Introduction

Operational Challenges The ability for municipalities to split the bills vary across the country Municipalities unaware of transformation of national and provincial government post elections and changes not effected into billing systems Timing of billing and payments in relation to financial years of government Asset registers no updated within government and therefore not aligned to municipal property valuation rolls Lack of coordination and alignment of national government in municipal valuation rolls No effective system of communication between National/Provincial and Local Government Insufficient funds in the Grants to pay municipalities for property rates (especially when assets registers are updated)

Minmec on 27 May 2010 agreed on a joint action plan with Salga: –Provincial DPW need to conduct an audit of all properties in the provinces to enable informed projections –Reconcile with municipal valuation rolls –DPW to inform Salga on all municipalities who have not been successful in splitting of bills –Conduct an awareness campaign on new billing and payment policy with all correct departmental contact details –Identify low capacity municipalities and develop an action plan to support them –Salga and DPW to take a joint proposal for additional funding to the Budget Forum and Budget Council Minmec Outcomes

1.Devolution 2.Invoicing and payment schedules 3.Land audit 4.Interest Operational challenges identified with cities

Devolution Old verified debts before and after devolution is identified & reflected as national and Provincial outstanding debts: (National DPW convene the Forums/Meetings) - Outcome Signed Agreement of outstanding amount  Breakdown of debt with supporting documents  Province to reply & request statement  Sign off by Provincial and National DPW  Single submission to NT Unverified/Disputed Properties: Municipalities to submit list of unverified properties to National DPW for verification by 31 August 2010 Outcomes of 2010 Engagement

Invoicing & Payment Schedules Annual Schedule including monthly /annual invoices per property will be delivered and signed-off by National DPW & Provincial DPW: (Disc) One Point for delivery of Invoice: National DPW & Provincial DPW Municipalities to reflect advanced payment on their account Payment Schedule don’t reconcile with amount transferred Outcomes of 2010 Engagement

Land Audit Schools on municipal land not paying rate: Municipalities and Province must sign a deed of donation –Municipality must submit list of properties Transfer of properties during township establishment Outcomes of 2010 Engagement

Interest Issue of interest must be covered in municipal credit control policy Reasonableness must prevail through process of negotiation Outcomes of 2010 Engagement

Can municipalities waiver payment of interest charges? Especially on properties identified during an audit process. Can we investigate options for rating of schools and health facilities as essential services? Extend period for objections to valuations for state properties to be increased (due to lack of national capacity – state largest property owner) Establish a forum with representatives of the key metros and 3 large cities to: –Unpack key challenges –Agree on protocols –Mediation on disagreements Can municipalities consider retrospective billing to be limited to 3 years? OTHER AREAS FOR IMPROVEMENTS !!! Specific policy issues for consideration

Implementation of Minmec resolutions –Land audit and verification with municipalities –Support to municipalities –Funding for property rates –Awareness campaign on current system SALGA concern about the continuing reform of the rates grant –Accountability –Baselines Conclusion