Joburg’s school rates mess: Litigation continues

Despite her intervention and stated intention to limit the increase in property rates for schools to about 5%, it seems Joburg Mayor Dr Mpho Phalatse’s troubles are not yet over, with at least two parties to the litigation on the matter saying they will continue with their court applications.

Civil rights group AfriForum and ADvTech are proceeding with their applications, while Curro Holdings says 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.”

Read:
Cogta breaks silence, slams Joburg mayor’s blame game on school rates debacle
City of Joburg does a U-turn on school property rates

Moneyweb reported in June that the City of Joburg (CoJ) changed its property rates policy to no longer provide for a special “education” category that previously included public and private preschools, schools, colleges, and universities.

Property rates for these properties were calculated at a quarter of the rate for residential properties.

Following this change, public schools would from 1 July be taxed as “public service properties” at 1.5 times the residential rates and private schools as “business/commercial” properties at 2.5 times the residential rate.

Dire impact

Rates Watch director Christo Bokhorst, who first picked up that this change may have a dire impact on educational institutions, calculated that a private school valued at about R70.5 million that has been paying just over R12 000 per month in the current financial year, would pay more than R126 000 per month from July.

Even with the 25% rebate private schools could have applied for, the school in the example 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 the R12 000 per month to almost R76 000 per month, according to Bokhorst’s calculations.

Several stakeholders told Moneyweb that educational institutions would have to close if the increase was imposed.

They said it would have to be recovered through school fees, and that parents wouldn’t be able to afford it.

Blame game

When Moneyweb approached Joburg MMC for finance Julie Suddaby in June, she blamed the Department of Cooperative Governance and Traditional Affairs (Cogta), which earlier changed the Local Government: Municipal Property Rates Act to rationalise the property categories.

She said CoJ applied to the minister for the retention of the educational category, but this was not approved.

AfriForum, ADvTech and Curro approached the high court to have the CoJ’s decision reviewed and set aside.

The city indicated that it would oppose the applications and subsequently the parties reached an interim agreement that the matter would be heard in November and the city would refrain from credit control measures until then.

Read:
Joburg to defend drastic school rates increase in court
Temporary rates reprieve for Joburg schools

On Monday 22 August, almost two months after the increase was implemented, Phalatse did a U-turn and announced that she and her management team would intervene to limit the increase to 5%.

Phalatse painted a picture of a caring city that had no choice but to implement decisions forced upon them by national government.

Cogta responded with an angry statement on Thursday (25 August), pointing out that the CoJ decides on the cents per rand of the property valuation payable by property owners and also on the extent of any relief granted to specific groups of owners in the form of rebates or discounts.

Phalatse indicated that the intervention was dependent on a council decision that has not yet been taken and said the city’s “Legal and Contracts Department has requested a meeting with the legal counsel of the parties who have brought action against the City to put the proposal on the table for their clients to consider”.

Sceptical

The parties to the matter are clearly sceptical.

In a letter from ADvTech’s attorneys dated 24 August, they say their client has noted the “change of opinion” by the city.

ADvTech’s attorneys say the litigation is still pending and has not become academic and lists a number of problems with the CoJ’s approach.

These include that further debts arising from the increase “are problematic for the purposes of proper functioning and operation of our clients”, being a public company.

They further accuse the city of proceeding with credit control in violation of the earlier agreement and express their doubt about the city’s ability to implement its proposals.

AfriForum said it noted Phalatse’s statement as a move in the right direction, but “it is unclear how the process will work, what the impact will be on the budget and what measures the City will take to protect schools” against credit control measures.

“AfriForum continues with the litigation against the metro in relation to property rates and … served its replying documents on the City [last] week,” according to Morné Mostert, AfriForum head of local government affairs.

“Until there is clarity on the way the City plans to rectify the situation, we must continue with the legal process,” says Mostert.

Suddaby subsequently told Moneyweb that the affected educational institutions will receive a credit on their municipal bills.

The process will start immediately without any need for them to apply and a credit will be given for the billed amounts for July, August and September. Thereafter a credit for subsequent amounts will be given monthly.

She further stated that the city never included the revenue related to the increase in its budget and the revenue loss, estimated at R27 million per month, will therefore have no impact on service delivery.