Audit of CCT Jul '06 General Valuation

Ratepayers' / Residents' Audit of CCT Jul '06 General Valuation (GV)
- Prepared by the Greater Cape Town Civic Alliance (GCTCA)

In February 2007, The City of Cape Town published its new provisional Valuation Roll for Ratepayers’ responses / objections in preparation for the new rates bills it proposed sending to ratepayers in July 2007.

The new valuations were based on the City’s assessed market values of all types of properties as at 1 July 2006, and sample sales properties were used to interpolate the comparative values of unsold properties. Ratepayers were given 30 days within which to object, which period the GCTCA managed to increase to sixty days.

Various information centres were established to assist ratepayers in the compilation of their objections, the only information available being the sales prices and erven areas of properties which had been sold around that time. Resulting from the widely differing and seemingly inconsistent valuations and rates bills which ratepayers eventually received the GCTCA embarked upon an audit of the City’s 2006 General Valuation (GV).

This audit has taken over two years to complete, submit, reply to the City’s answers and meet with City officials in an attempt to ascertain how the City compiled its 2006 GV and what it has learned from its last two GVs it has executed and what it has learned from the extensive GCTCA audit and the critical audit which was carried out by IPTI (the Canadian International Property Tax Institute).

At the same time it examined the City’s 2007 rates policy which was accompanying the valuations in order to establish a holistic impression as to how the end result of the rates formula (property valuation times the Rate in the Rand thereupon) would affect all ratepayers regardless of where they lived in the Unicity.

The above audit was prepared because there had been a widespread impression amongst ratepayers, residents and property owners generally that the quality and accuracy of the City’s 2006 GV left much to be desired. The GCTCA submitted its audit on 21 February 2008 to Mayor Helen Zille and her officials, Ian Neilson (MAYCO Finance), Mike Richardson (City Financial Officer) and Chris Gavor (City Valuer).

The City’s inadequate (in the GCTCA’s opinion) written reply to the audit was dated on 10 April 2008. The GCTCA submitted further questions and a response to the last mentioned document on 2 June 2008, at the same time requesting further meetings / workshops etc. and ongoing discussions.

A meeting was eventually granted to the GCTCA in November 2008, at which the majority of the GCTCA’s concerns were discussed with Messrs. Richardson and Gavor. Areas of concern contained in the GCTCA audit included the uneven experience of ratepayers in different areas, regardless of the economic levels of the areas concerned.

For example, the City claimed that its 2006 GV had been a successful valuation because there had only been about 5% objections. The true analysis of this claim showed that of about 750 000 properties valued, 16% received reduced valuations, 50% received increased valuations by not exceeding 15%, 27% increased by between 15% and 39%, 5% increased between 305 and 40%. And 2% increased by more than 40% some even up to 325%! Assuming that nobody whose valuations had increased by more than 15% would object, only about one third of the above total valuations would be objected to, ie ±255 000 divided by ± 35 000 actual objections = ± 18%, which was far in excess of the City’s claimed 5%.

The above high increases did not only occur in wealthy areas – the Bokaap being an example of such a situation where real hardship has resulted from the 2006 GV revised valuations. Other concerns included a difference of opinion with the City as to the proper interpretation of the basic component of the rates formula, the definition of “market value” as defined by the 2004 Municipal Property Rates Act, the unwillingness of the City to adopt a ‘‘banding” valuation system and the lack of bigger rebates for indigent ratepayers at the bottom income earning levels.

It is regrettable for the GCTCA to have to state that, following the foregoing exchange of correspondence and discussions between the City and the GCTCA, the extensive efforts put into the audit achieved very little of note which could convince the GCTCA that the City had benefited or learnt anything which it considered would improve the quality of its next GV.

The City, having only recently completed its objection process (although Valuation Court appeals are still continuing over two years after the last GV roll was published), has now chosen to execute its next GV to be valid as at 1 July 2009 – one whole year earlier than is permitted in terms of the 2004 Municipal Property Rates Act (2004 MPRA).

In its discussions with the City, the GCTCA has not heard of any sound reasons as to why the City is executing this next GV so prematurely and GCTCA pleas against this happening have been ignored. This concern is compounded by the fact that the GCTCA is not convinced that the valuations methods which will be used in this forthcoming GV are going to be any better than the allegedly inadequate methods used in the 2006 GV.

The City was proud of the audit executed by IPTI on the 2006 GV, but when it, after considerable pressure from the GCTCA, eventually gave the GCTCA a copy, it was obvious that , in actual fact, the IPTI report was critical of the GV in many aspects.

The objection adjudication process is still continuing in the Valuation Courts at present, three years after the publishing of the 2006 GV Valuation Roll. And yet, the City is determined for reasons which the GCTCA cannot understand to bring the next GV forward by a year to 1 July 2009, for billing to ratepayers in July 2010. The GCTCA remains to be convinced that the City’s valuation resources are adequate for this self-imposed shortened valuation process which will assuredly impinge upon its ability to improve on its last GV achievements which left a lot of room for improvements.

The essence of the GCTCA’s problems is that every Ratepayer acknowledges that he / she will pay increased rates to help run the Unicity each year. However, every Ratepayer wants to be treated equally in this matter – ie, everyone should be increased by the same percentage every year. Whereas this happens in the years between GVs, this does not happen with new rates resulting from a new GV. It is completely unacceptable and inequitable that on these occasions, , because of the flawed valuation methodologies used, that some people subsequently receive reduced rates, some receive slightly increased rates and some receive massive increases, regardless of the economic levels of the areas in which they reside.

The GCTCA is sure that the City Valuation Department is indeed seeking ways to improve the quality of its 2006 GV and would welcome the opportunity to continue with the dialogue which it initiated by means of its audit with he City officials for the benefit of the City and all ratepayers.

Philip Bam
John Powell
For GCTCA