The SA Property Owners Association (SAPOA) have blasted City of Cape Town’s Mayor Geordin Hill-Lewis, accusing him of unfairly portraying property owners as being wealthy enough not to feel the impact of the tariffs.

SAPOA filed a replying affidavit in response to Hill-Lewis’ court papers.

At the centre of the dispute, SAPOA is challenging the City’s fixed tariffs and their decision to link certain fixed charges to property values.

In its court application, SAPOA is asking for the three tariffs in the Budget, namely the Cleaning Tariff, the Fixed Water Charge, and the Fixed Sanitation Charge be declared unconstitutional and invalid.

SAPOA’s membership currently comprises more than 90% of the country’s commercial and retail property industry, including some of the largest property-owning companies in South Africa.

Initially, Hill-Lewis, in response to SAPOA’s court action, said that if they got their way, it would lead to a R4.2bn budgetary shortfall if all three fixed tariffs were set aside.

SAPOA CEO Nilesh “Neil” Gopal, in his replying affidavit, said that “substantial portions of the answering affidavit (if not the bulk of the answering affidavit) are devoted to matters which are not remotely relevant” and that “SAPOA is not prepared to follow the City down into irrelevant rabbit holes”.

Gopal refuted the breakdown included in the City’s answering affidavit, which detailed the costs of delivering services. In their papers, the City detailed the total expenditure for debt impairment, depreciation and asset repairment, and employee-related costs, among other things.

Gopal said this breakdown does not fall in line with Section 74 of the Systems Act, which states “tariffs must reflect the costs reasonably associated with rendering the service, including capital, operating, maintenance, administration and replacement costs, and interest charges”.

“…The breakdown provided is for other categories of costs, namely employees; debt impairment; depreciation; general expenses; repairs and maintenance; bulk refuse; insurance; contracted services; activity-based recoveries; support charges; and other costs. This already shows that the City cannot justify the overall costs with reference to the categories listed in section 74(2)(d).”

He contends that, “Commercial properties got exempt (for a year at least) from the Cleaning Tariff and their contribution is now made through electricity surcharges imposed and added to the rates account, from where it presumably goes to pay for City-wide cleaning”.

“The City’s own 2007 Tariff By-law also does not make provision for differentiation based on property band values. That By-law merely reiterates what section 75(2) of the Systems Act provides, namely that the tariff policy may differentiate between different categories of users, debtors, service providers, services, service standards and geographical long as such differentiation does not amount to unfair discrimination. This does not provide for differentiation on the basis of property value bands.”

Gopal said that it is further “fallacious to equate property value to economic means: the mere fact that a property is valued by the City (which compiles its general valuation roll once every five years) for a specific amount, does not mean that such valuation is actually achievable by the owner, or that the property owners has access to substantial free cash flow”.

“For many property owners, their properties are bonded, with the result that the City’s valuation does not necessarily reflect the net asset value of that property.”

Gopal also states that the City’s argument for water tariffs actually ends up supporting their case, as they have, for several years, made use of “a system of stepped tariffs”, which means that different tariffs apply per kilolitre of water consumed, depending on how much water is consumed by a specific property owner.

“Differently put, even if one assumes that properties of a higher value statistically use more water, then the owners of those properties are already paying exponentially more for their water, per litre used, than owners who use water sparingly. This is a source of valuable additional income for the City, which then becomes available to help subsidise poorer households.”

Gopal also argued that the City’s claim of a shortfall and that if its budget were unfunded, the resultant breaching of its legislated obligations as “alarmist and exaggerated”.

The case was initially set down to be heard over two days in September in the Western Cape High Court, but has been postponed to early December.

Lobby group AfriForum has also subsequently taken similar action against the City.

At the centre of their application is the City’s imposition of a tariff and charges, and AfriForum’s contention that the City does not have the power to use the value of property to do so.

theolin.tembo@inl.co.za

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