Cape Town Rates policy will test DA

Posted On Tuesday, 23 April 2002 09:32 Published by
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Rates issues testing political parties
THE Democratic Alliance (DA), as part of its strategy to broaden its support base, sought to reimage itself at its inaugural congress this month as a 'people's party'.

Creating the image is all very well, and the media have received the effort with less scepticism than the party might have feared.

However, the DA now faces a tough challenge to substantiate that image in the next couple of months, not least as it puts in place a new rates policy in Cape Town the one major centre in SA where it holds majority power.

A new rates policy is in the offing as officials have, more or less, done the first general property valuation in more than 20 years in many parts of what is now the unicity.

After some political armwrestling between the DA and African National Congress (ANC), the council established a multiparty task team earlier this year, headed by a neutral chairman.

The team produced a document setting out a list of policy choices to be made. It has spent two weeks hearing submissions from a host of interest groups, individual rate payers and political parties. It now has the task of seeing whether it can reach consensus on a rates policy. It will not be easy.

Interestingly, the DA made no submission, though the ANC did. That is perhaps because the DA faces more difficult policy decisions.

The party's challenge lies in the fact that its traditional well-to-do supporters living around the Atlantic seaboard, the mountain suburbs and the upmarket, mainly Afrikaner, sections of the northern suburbs have very different interests to the other rump of support.

The other half of the support base is the far less well-off coloured population of the Cape Flats that entered the DA when the ill-fated merger with the New National Party (NNP) took place 18-months ago, the representatives of which, headed by mayor Gerald Morkel, have mostly remained in the DA.

But the opposition ANC faces an interesting challenge too. Under normal circumstances, ANC councillors would be able to use the rates debate as a political football, advocating exaggeratedly populist positions that could drive a wedge between the two DA interest groups.

However, ANC officials say they are having to approach the issue very carefully, given their hope that, when new floor-crossing legislation comes into effect, they could find themselves back in power in the city if enough DA councillors cross back into an NNP caucus.

There are two main policy choices to be made, and a host of minor ones. The first main one is: should the new policy be phased in, or implemented immediately in full?

The way this question is answered will make a substantial difference to the wallets of every Cape Town home owner. The reason is that property values in the upmarket suburbs have risen rapidly in the past decade thanks largely to burgeoning demand from foreigners and Gautengers far faster than house prices on the Cape Flats where there is no such demand. Now, rates bills could come to reflect this new value pattern.

So even if the city's total rates revenues stay more or less constant in real terms, upmarket home owners can expect to bear a far larger proportion of that total. No financial modelling exercises have as yet been done on the exact effect. But it would not be unexpected if, say, some home owners in Bishops Court and Camps Bay find their rates bills doubling, while those in Lavender Hills see theirs fall a third.

The phasing-in option would, for a period, ease the pain of the owners of more valuable properties. But it would leave the poorer home owners subsidising the wealthy what they have effectively been doing for many years for longer. As it happens, until it was beaten in the 2000 election, the ANC city government began a phasing in process by lifting rates in the wealthier suburbs by a higher percentage than the poorer areas with each city budget.

However, that came to an abrupt halt last year when the then new DA council implemented a simple across-the-board rates increase.

The ANC has firmly opposed any further phasing in, saying it is time that all city residents bear their fair share of the rates burden. Publicly, the DA has so far been silent.

Now the 'people's party' will have to decide whether it can convince its suburban support base to accept large rates hikes for the July 1 due date, or ask its poorer Cape Flats constituents to continue subsidising the better-off suburbs.

Similar considerations will apply to the policy adopted for the second set of options. The issue here is: what services should be covered by rates, and what should be charged according to tariffs?

It is generally accepted that water and electricity should be tariff charged, especially since a limited quantity of free water and electricity is available to every resident. But should the owner of a R3m Bishops Court home pay 30 times as much for refuse removal as the owner of a R100000 Mitchell's Plain home?

One prominent suburban rate payers' association argues that this hardly seems fair.

Those who say it is fair including the ANC argue that refuse removal and sewage services are public goods. If the council were to cut off those services to a resident who failed to pay the bill, it would cause a public health hazard. Besides, while you can meter water and electricity and charge according to a set tariff, you can hardly do so for refuse and sewage.

The council also faces other difficult questions. These include balancing the rates burden between commercial and residential property, relief for the elderly, the rates status of different sports and recreation facilities, and so on.

There will doubtless also be those who remind the council of the Sandton rates revolt of the mid1990s, when Johannesburg went through a partly similar process.

It is an issue that is going to trigger far more public emotion than Morkel's relationship with a German fugitive businessman.

Business Day


Publisher: Business Day
Source: Business Day

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