City of Joburg does a U-turn on school property rates

The City of Joburg on Monday announced that it will limit the increase in property rates for institutions formerly categorised as “educational” in terms of the rates policy to 5% from 1 July this year.

The city earlier indicated that it would defend court applications to review and set aside a council decision that resulted in increases of between six and 10 times the amounts billed for such institutions in the previous financial year.

Moneyweb reported late in June that the council approved a change in its rates policy to remove the “education” category, taxed at a rate of 0.25% of the rate for residential properties.

This meant that public schools would be taxed as “Public Service Purpose” properties and have to pay 1.5 x the amounts paid by residential property owners. Private schools would be rated as businesses at 2.5 x the residential rate.

The recategorisation took effect on 1 July and schools have already started getting their hugely increased bills.

Christo Bokhorst, a director at Rates Watch, said at the time that a private school valued at about R70.5 million that had been paying just over R12 000 per month in the previous financial year would have to pay more than R126 000 per month when classified as businesses. Even if it qualified for the 25% rebate the city offered, it would still be liable for almost R95 000 per month in property rates.

The rates bill of a public school with the same valuation would increase from R12 000 per month to almost R76 000 per month, according to Bokhorst’s calculations.

City says it was simply complying

Joburg member of the mayoral committee Julie Suddaby at the time said the council decision was in compliance with a legislative amendment that limited the number of rates categories and did not provide for a special category for educational institutions.

She said the council did apply to the Minister of Cooperative Governance and Traditional Affairs (Cogta) for the retention of the category, but did not get the necessary approval.

It has been pointed out that while the department gave instructions about the rates categories, it was the city that determined the quantum of the rates.

It was also open to the city to limit the increase by providing for a large rebate.

The minister failed to respond to Moneyweb’s enquiry about the matter.

Legal action

Civil rights group AfriForum approached the court, as did listed educational groups ADvTech and Curro Holdings.

Curro indicated that its properties had been taxed as businesses even before the change in categories and would also approach the court on this long-standing matter.

ADvTech argued in court papers that the City of Joburg and the minister misunderstood the Local Government: Municipal Property Rates Act (MRA) and that it was in fact open to the city to retain the category.

Read: City of Joburg misunderstands Property Rates Act – ADvTech

In response to the court applications the city indicated that it would oppose the matter.

The parties later reached an agreement to postpone the hearing of the matter until October and, pending that, to suspend all credit control on affected institutions until November.

On Sunday (21 August) the city however sent out a press release stating that it “is taking active steps to correct national Cogta rates and tariffs for affected educational institutions”.

On Monday Joburg mayor Mpho Phalatse said the city “has been contending with the results of a decision taken by National Government, particularly the Department of Cooperative Governance and traditional Affairs (CoGTA) to amend the property categories” in the MRA.

“Despite attempts to retain the education category, National CoGTA advised the City that it had to align with the amendments made,” she said.

City wants a ‘workable solution’

Phalatse said the city has been dealing with queries, complaints and court cases by stakeholders and “the mayoral committee and City, particularly the MMC for Finance and the revenue department as well as the department of legal and contracts, have been working around the clock to find a workable solution that does not unduly penalise ratepayers or place the City on the wrong side of the law or [the] Auditor-General”.

Phalatse said the city has found a solution.

She did however not go into any detail, save to say that the rates increase for both public and private schools will be limited to 5%, equal to the general increase, and that it will apply from 1 July.

“The process and finer details are being worked on to ensure that the changes are executed seamlessly,” Phalatse said.

In a radio interview on 702 Suddaby said the rates accounts of affected early childhood development centres, schools and tertiary institutions will be credited.

City’s win-win proposal

According to Phalatse the city’s legal and contracts department has requested a meeting with the legal counsel of the parties that have brought the court applications and will put forward a proposal for their consideration.

“The City hopes that in reaching out with a win-win solution, an end can be brought to the matter, along with a commitment from the City to address the issue more permanently in the next fiscal year.”

Phalatse added that some educational institutions had been historically categorised as “business and commercial” and have therefore not been affected by the recent category change.

She did not expand on this, and Suddaby did not respond to a question from Moneyweb whether the disputes lodged by Curro in this regard will also be addressed now.

Curro said it “has noted the media statement issued by the City of Johannesburg surrounding the disputed municipal rates matter for education institutions”.

“Curro’s legal team has taken the notice under review and will engage with the City of Johannesburg accordingly.”

AfriForum was consulting its legal team when approached by Moneyweb. Its comment will be added once it has been received.