South Africans may have to pay municipalities millions more rands every year if the Municipal Property Rates Act is amended, exempting rates on infrastructure like roads, railways and runways. The amendment proposes that any public service infrastructure which serves a "developmental role" - such as road infrastructure, dams, railway lines and any conduits for international trade and travel - should not be subject to municipal rates because doing so could hamper growth.
If the change goes ahead, roads, railways, airport aprons and runways, breakwaters and dams are some of the entities that will no longer be taxed.
"When such PSI (public service infrastructure) is rated, such imposition of rates may serve to prevent or undermine the attainment of developmental goals, for example the building of roads or the extension of water and sanitation to all," a guide to the draft amendments explains.
The City of Cape Town says it will "have to increase the rates of others" to compensate for any loss of income should the amendment go ahead.
It has slammed the proposed exemptions, saying that, if anything, such entities should pay more than they are currently charged.
The City of Cape Town's mayoral committee (Mayco) member for finance, Ian Neilson, says there are 37 such PSI entities in Cape Town which are already receiving huge discounts.
At the moment these entities are contributing only R18 million a year to the city's purse.
However, if they paid full commercial rates, they would contribute R200m a year to the city and, if they paid full residential rates, they would pay R100m a year.
However, by law the city must first give a 30 percent discount to their property values and then charge them at only 25 percent of residential rates.
"Those economic entities are creating costs for the city and the sense that they must be free (from paying municipal taxes) is problematic," said Neilson.
He said the entities' operations created, for example, traffic on the city's roads or required storm water to be routed, which represented real costs to the city.
"Is it appropriate for those costs to become the burden of all ratepayers?" he questioned
He said the city would make representations during the public participation phase after the bill is tabled in Parliament, which the Department of Co-operative Governance and Traditional Affairs aims to do by September.
"All local authorities are being squeezed step by step - a little bit here, a little bit there," Neilson said. adding that eventually there would not be enough money left to run the city.
As an example, he listed the possibility that the city could, from July, lose traffic fine income as part of a centralisation move.
It also faced the possibility of losing money from electricity sales, if the Regional Electricity Distributors scheme was implemented, he said.
And the loss of rates income from PSI entities, "in the interest of a few strong organisations", did not mean the costs went away. Instead, costs were recouped elsewhere.
"If (the city) loses income, it will have to increase the rates of others (to compensate)," Neilson said.
He also questioned the logic of exempting institutions on the grounds that they existed for public benefit, saying that the city should then equally receive free electricity from Eskom and free water from the water board, because the city was also a public service entity.
"Costs must be covered by users. (The PSIs) should pay their fair share," Neilson said.
The proposed amendment was raised during a public hearing at Parliament on Friday.
At the hearing, Eskom lobbied to be exempt from paying municipal rates.
Henk Landman, making representations on behalf of the parastatal, urged the department to recognise Eskom's developmental role, because failure to do so would "undermine the attainment of national developmental goals".
However, a senior official in the Department of Co-operative Governance and Traditional Affairs, Veronica Mafoko, said Eskom would have to make a submission to convince the department that it, too, should be exempted.
She said Eskom would have to explain why it should not have to pay rates while future "independent players" would still be liable.
Also at the hearing, a host of ratepayers associations, agricultural representatives and individuals expressed their concern about the property valuations process.
